The Week ahead – Debt ceiling deal, NFP and Aussie CPI – charts to watch

News over the weekend of a tentative debt ceiling deal had been achieved should see investors in the week ahead return to their usual programming of trying to predict the next move from the Federal Reserve, which this week’s jobs data will be a critical component.

Late Saturday, the White House and Republican negotiators announced a debt ceiling deal “in principle” set to last two years with a vote on Wednesday in the House to finalise it, all going to plan , we should see the overhang from this fade this week (until next time anyway) and focus turn back to this weeks scheduled data.

US – Hike odds climbing

Interest rate expectations have shifted decidedly hawkish since the last Fed meeting on May 3^rd. The market interpreted the Fed statement as signaling that there was a high hurdle to getting any further rate hikes. However, since then, strong job numbers, sticky inflation and a raft of hawkish Fed speak have seen hike odds jump to 66.5%. This weeks NFP figure on Friday will go a long way to shoring up those odds and will be one to watch for FX traders looking for volatility.

Australia – Inflation looking sticky

Australia’s April inflation is forecast to increase from the previous month. The headline Year on year figure expected to come in at 6.4%, up from 6.3% in March. With inflation remaining stubborn and far outside the RBA’s target range it certainly is creating a headache for the Reserve Bank of Australia. This could be an interesting one, futures markets are pricing in only a 2.5% chance of a hike from the RBA next week, with such a one-sided trade, a big figure here would put the heat on the RBA and possibly see some significant re-pricing of those odds with the accompanying volatility in the AUD.

Charts to watch this week:

Nasdaq 100 (NDX100)

Tech stocks have been on a tear lately, with an AI inspired boom seeing names like Nvidia (NVDA) rise to all time highs. With a debt ceiling deal now seemingly done and AI optimism still firmly in investors minds, the Nasdaq is looking to outperform again this week.

A strong break of the 13720 resistance see’s the next level to test at 15270 with 13270 now possibly acting as support.

AUDUSD

The Aussie has had a horror run lately, breaking down through support after support level to hit 2023 lows in the last week. AUDUSD has found some good support though at the big figure major level of 0.6500, also a lot of this weakness was driven by USD strength as risk off dominated the market during the debt ceiling impasse.

With a debt ceiling deal done and high inflation figures expected out of Australia this week, we could be setting up for a bounce here if the market risk sentiment stays positive.

Full calendar of this week’s major announcements below: