CAC 40: American inflation tomorrow will be a major event

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The Parisian market ended its week on a negative note, degrading the final appearance of the weekly candle 45, in the wake of an intervention deemed restrictive by the head of the Fed.

Thursday evening, Jerome Powell put an end to the procrastination on so-called “terminal” rates, namely whether or not a peak on Fed Funds has already been reached. The Fed president clarified that his members were not convinced that key rates were high enough to fight inflation.

“The Fed is committed to implementing a sufficiently restrictive monetary policy to bring inflation down to 2% over time,” said Jerome Powell, who said he was not convinced “of having reached such a position.”

As for the European Central Bank, its president Christine Lagarde declared on Friday that the drop in rates was “not something that will happen in the coming quarters”, but added that maintaining key rates “should be enough to control inflation.”

Operators are therefore digesting the information that the fight against inflation through monetary policy tools is starting to bear fruit, but that it is far too early to declare victory.

The CAC 40 index lost 0.96% to 7,045 points, largely penalized by the luxury sector. L’Oréal lost 1.13%, Hermès 1.56%, Kering 3.33% and LVMH 3.82%.

In terms of statistics, note the publication, below expectations, of the American consumer confidence index (U-Mich), at 60.4 points in preliminary data.

On the other side of the Atlantic, the main equity indices ended sharply higher, with the main driver being the Magnificent 7 (FANGAM+Tesla). The Dow Jones gained 1.15% on Friday to 34,283 points and the Nasdaq Composite rose more than 2% to 13,798 points. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 1.56% to 4,415 points.

An update on other risky asset classes: around 8:00 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0690. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $76.50.

On the agenda this Monday, no sharp statistical figures to report. Tomorrow’s US inflation figures will mark the real start of the statistical week.

KEY GRAPHIC ELEMENTS

The technical situation on the CAC 40 is quite readable: the index came out of a flattened diamond (diamond) pattern on September 25, which pushed the market into the red. Two pullbacks later, it was the turn of the symbolic threshold of 7,000 points to suffer the threat of prices, a threat put into effect on October 18, 19 and 20 in increasing trading volumes.

After the formation of a congestion figure near 6,800, week 44 will have been the scene of a significant technical reaction, orchestrated and amplified by the values ​​which had initially been the most mistreated. This energy, exhausted early, should give way to a rapid filling of the gap of November 2, just below the key threshold of 7,000 points.

Immediately, a phase of lateralization takes place in the immediate vicinity of this threshold.

FORECAST

Considering the key graphical factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.

We will take care to note that crossing 7200.00 points would revive the buying tension. While a break of 6948.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart