The Good and the Bad The information presented in this publication is communicated for informational purposes only and does not constitute investment advice, a sale offer, or a purchase solicitation, and should not be used as a basis or considered as an incitement to engage in any investment. The macro point The Good and the BadMacro PointIt remains as difficult as ever to see clearly regarding the direction of inflation. The past week was dominated by inflation figures in the United States. Let's start with the good surprise. The producer price index came in below consensus, at 0.5% for the month of September compared to 0.6% expected. The foreign exchange market welcomed this announcement with a renewed appetite for risk which temporarily benefited the euro, for example. The bad surprise is the very strong increase in the consumer price index over the same period. The rise reached 5.4% over one year, compared to 5.3% expected by consensus. Excluding the most volatile components, inflation remains uncomfortably high at 4.0% over one year. The base effect partly explains the price increase. But structural factors must also be taken into account. The rise in real estate prices is increasingly perceived by analysts as a significant risk factor for the American economy.The summary of the latest meeting of the American Federal Reserve has been instructive. It confirmed that the central bank is ready to initiate a monetary policy shift towards 'mid-November or mid-December' which will result in a reduction of asset purchases (also called tapering in English). This was expected. Moreover, several members of the FOMC, the central bank's decision-making body, seem to be moving away from the officially presented 'transitory' inflation thesis. They question or even worry about the risk of a lasting surge in inflation in the United States. This was not anticipated. This has strengthened the expectations of foreign exchange market operators for a first interest rate hike. Now, the central scenario is based on a rate hike in December 2022. If inflation remains persistently high, which is a real risk, the timeline could accelerate. In the medium term, the US dollar should be the primary beneficiary of the monetary tightening policy that will begin in the coming weeks across the Atlantic.Last week, we mentioned the carry trade strategies that involve taking advantage of interest rate differentials. They will come back into fashion. That's certain. Emerging countries are engaged in a sometimes aggressive process of raising interest rates. In Chile, the central bank increased its main policy rate by 125 basis points (!) in one go, raising it from 1.50% to 2.75% to fight inflationary pressures. The national currency, the Chilean peso, immediately increased as a result. A significant resurgence of volatility in emerging market currencies is to be expected, in the short and medium term. The currencies of developed countries will not be spared by the return of volatility either. Technical point On the forex market, the EUR/USD made a technical rebound (up 0.30% over the last five sessions). But the underlying trend is still bearish. This is validated by both fundamentals and technical analysis. In the short term, the psychological zone of 1.15 will be watched. In the longer term, traders are already discussing the possibility that the euro could plunge towards 1.13 in the coming months. The increased likelihood of a rate hike by the U.S. Federal Reserve would be the main driver of the dollar's rise and consequently of the decline of the European common currency. The playing field for the pair is known. The EUR/CAD, which we have not discussed much in recent weeks, is in free fall. On a monthly variation, the decline is almost 4%. The movement should continue immediately. The Canadian dollar is buoyed by the impressive rise in energy prices. In one month, WTI oil (for North America) has jumped by nearly 12.5%. Experts are unanimous. The rise in energy prices will not stop anytime soon. The supports and resistances shown below indicate respectively the low and high points within which the prices should evolve during the week.SUPPORTSWEEKLYRESISTANCESWEEKLYS2S1R1R2EUR/USD1.14701.15001.16921.1803EUR/GBP0.83130.84170.86180.8646EUR/CHF1.05451.06001.08001.0846EUR/CAD1.39621.42001.46081.4781EUR/JPY127.77128.82133.01133.55For personalized advice on currency trends and hedging, contact our trading room: Announcements to follow This week should not reserve major surprises. Inflation figures in the United Kingdom, the eurozone, and Canada will be watched as closely as the U.S. figures last week. Inflation in the United Kingdom is expected to fall in September to 2.9% year-on-year against 3.2% in August. If confirmed, this could reduce expectations of a rate hike across the Channel. Finally, the first estimate of PMI trends in the eurozone and the United States for October will be published in the coming days. The growth peak is behind us. The challenge is to determine the deceleration rate of activity in services, and especially in the manufacturing sector. The latter is still hindered by supply chain issues and the sharp rise in energy prices - two ostensibly cyclical factors. Below you will find the publications and events that should have a major impact on currency trends.DAYTIMECOUNTRYINDICATOREXPECTATION?18/1015:15Industrial production (September)Increase of only 0.2% against 0.4% previously.20/1008:00CPI (September)Increase of 2.9% year-on-year versus 3.2% in August.10:00CPI (September)Increase to 3.4% year-on-year (a very high level that may increase tensions within the ECB).14:30CPI (September)Rise of 0.1% month-on-month against 0.2% previously.21/1014:30Philadelphia Fed manufacturing index (October)Decrease to 26.00 - probably due to supply issues and rising costs.22/1016:00Markit Composite PMI Index (October)The consensus expects an increase to 58.5 from 56.2 previously. To be confirmed.15:45Markit Composite PMI Index (October)The manufacturing sector is expected to continue to be hindered by price increases.Did you like this content? Share it!