official Market Update by Solidecn.com

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EURUSD Technical Analysis

The euro has been moving sideways and has had trouble getting past the 1.0700 mark. People are waiting for the FOMC statement today. The cost of living in the Eurozone has dropped a little, from 5.3% to 5.2%, which might mean inflation is slowing down. This could make the euro weaker. People think the Fed will stop increasing interest rates in September, but some believe there might be one more increase this year. This is helping the dollar.

 

 

The EURUSD is trading above a level that it's been below for a long time; if it goes above 1.0700, that's a good sign for the euro. The MAACD and RSI indicators suggest the trend might be changing.

 

The levels to watch are:

• Resistance (where it might have trouble going higher): 1.0700, 1.0760.
• Support (where it might bounce back up): 1.0640, 1.0540.

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GBPUSD Analysis

The GBPUSD, also known as Cable, dropped to its lowest level since May 26 on Tuesday. This was due to the UK's inflation rate in August being lower than expected.

 

The yearly CPI (Consumer Price Index) fell to 6.7%, which is the lowest it's been since February 2022. This was a drop from 6.8% in July and was lower than the predicted increase of 7.0%. The core inflation rate, which doesn't include fluctuating components, also fell to 6.2% in August. This was lower than the predicted 6.8% and the 6.9% from the previous month.

 

Even though inflation is still high (more than three times the target of 2%), the data from August gives some hope. It also gives some relief to the Bank of England, which was expected to raise interest rates for the 15th time in a row at a policy meeting on Thursday. Now, there's a 50-50 chance that they might not raise rates this time.

 

However, there's still a risk of inflation increasing again. This is because oil and food prices are still going up, which keeps adding to inflation and might lead to more policy tightening.

 

 

The daily chart shows a bearish trend. However, the price is nearing a key short-term support level at 1.2307 (the lowest point on May 25), and this could slow down the downward trend because the market is oversold.

 

Any increase in price is likely to be limited by the broken 200-day moving average (1.2432) to keep the overall downward trend intact. If the price falls below the 1.2307 level, it could lead to a deeper correction of the larger uptrend from 1.0348 to 1.3141, and could potentially reach 1.2074 and 1.2000 (a key psychological level).

 

On the other hand, if the price consistently stays above the 200-day moving average, it could signal a stronger correction. A rise above the important 1.2500 level could indicate a possible trend reversal.

 

The market is waiting for the Federal Reserve's decision (expected later today and likely to remain unchanged) and a more important decision from the Bank of England on Thursday. The British pound could face more downward pressure if the Bank of England decides not to raise interest rates this time. However, if the central bank decides to raise rates again and maintains a hawkish stance, it could boost the currency.

 

Resistance levels: 1.2432; 1.2482; 1.2504; 1.2522.

Support levels: 1.2332; 1.2307; 1.2274; 1.2190.

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**Intraday Crude Oil Prices Dip Amid US Rate Hike Expectations**

Crude oil prices are experiencing a downward trend in today's trading session. This decline is largely due to the anticipation of a US rate hike, which has overshadowed the tight supply outlook. The recent dynamic rally has also triggered some profit-taking on the instrument.

**US EIA Data Influences Energy Markets**

Energy markets are responding to the latest data from the U.S. Energy Information Administration (EIA). The data revealed a decrease in oil inventories by 2.14 million barrels. ANZ analysts highlighted in their report that the unexpected drop in inventories encouraged investors to secure profits following a 10% increase since the start of the month.

**Brent Crude and OIL Quotes Show Decline**

Today's session sees Brent crude down by nearly 1%, while OIL quotes indicate a decline of approximately 2% after the most recent futures contract rollover.

**Potential Short-lived Decline Amid Tight Global Supply Concerns**

Despite the current decline, it's possible that this could be a temporary dip. There are ongoing concerns in the market about a tight global supply in Q4. Crude inventories at Cushing, the supply hub for WTI, are at their lowest since July 2022. Additionally, production cuts continue to be implemented by OPEC and its affiliated economies.

**BRENT Crude Oil Prices Eyeing Support Level**

Following the futures rollover, BRENT crude oil prices are moving towards a support level established by a consolidation zone near the $90 per barrel mark.

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USD 100 - Chart of the day

With the BoJ's decision, the cycle of publishing monetary decisions of major central banks this week comes to an end. The markets reacted volatile to them, but overall the indices recorded losses on a weekly basis. The relatively hawkish Fed and its published new dot-plot indicated the possibility of one more hike this year and the postponement of the first rate cuts. The overtones of this conference broadly affected sentiment around the US100 index and TNOTE. 

 

The US100 index has been recording declines, which have reached, from the perspective of technical analysis, important support zones set by the 100-day exponential moving average (purple curve), which, it is worth mentioning, have not been tested for nearly 6 months. Moreover, the declines themselves are directly driven by the sell-offs observed in the debt market, which has historically shown a correlation with the listings of technology companies.

 

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EURUSD Analysis

The German Ifo Institute, a research group that studies economic trends, released its latest indices today at 9:00 am BST. These indices are a measure of the business climate in Germany and are based on a survey of about 7,000 companies. 

 

The main index, known as the Business Climate Index, remained unchanged from last month, coming in at 85.7 for September. This was higher than the expected figure of 85.2, indicating a more positive business sentiment than anticipated.

 

Here's a breakdown of the Ifo indices for August:

 

• Business Climate: The index came in at 85.7, which was the same as the previous month and higher than the expected 85.2. This index measures the overall business sentiment in Germany.
• Current Conditions: This index, which assesses the current business conditions, was 88.7, slightly higher than the expected 88.0 but lower than the previous month's 89.0.
• Expectations: This index measures business expectations for the next six months. It came in at 82.9, slightly lower than the expected 83.0 but higher than the previous month's 82.6.

 

 

In summary, the indices suggest that the business climate in Germany is stable, with expectations for the future slightly improving.

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US30 - Chart of the day 

Investor confidence in the US stock market has been declining since the latter half of the third quarter. This is partly due to the Federal Reserve's aggressive stance and Chairman Powell's statements, which have led to a rise in bond yields. In fact, 10-year treasury yields have hit a 16-year high of 4.54%. If the economy remains stable, these yields could continue to rise. 

 

The stock market, including the Dow Jones Industrial Average (DJIIA or US30), is losing value as the risk-free rate increases and the economic growth outlook becomes uncertain. Major institutions like S&P and the Conference Board predict a slowdown in US GDP growth in 2024. 

 

 

There are also concerns about China's real estate market, particularly the default of Evergrande, and potential political crises in the US over the federal budget. A government shutdown, which has happened 18 times since 1977, could slow economic growth and delay the release of economic data. Credit rating agency Moody's warns that such events could lead to a downgrade of the US credit rating. 

 

Looking at the US30 chart, the price is close to the 200-day Simple Moving Average (SMA200) level, which is around 33,932 points. The price has also fallen below the 100-day Simple Moving Average (SMA100) for the first time since May. If the price doesn't rebound, it could test the 23.6% Fibonacci retracement of the March 2020 upward wave at 32,400 points. Historically, the price's behavior around the SMA100 and SMA200 has often indicated buying opportunities or periods of weakness.

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Tesla

Tesla (TSLA.US) and other European automakers that import from China into the EU will be part of an investigation into whether the electric vehicle industry receives unfair subsidies, the Financial Times reported, citing Valdis Dombrovskis, the EU's executive vice president.

 

The EU is "open to competition" in the electric vehicle sector, the official added, but "competition must be fair," adding that other countries have already imposed tariffs on electric vehicles from China. The investigation will cover all companies (not just Chinese) that receive subsidies on the production side. 

 

 

This situation for Tesla (TSLA.US) itself could prove problematic, as nearly 20% of all the brand's electric vehicles sold in Europe are manufactured in China, including at a factory in Shanghai.

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EURUSD

Several economic reports from the United States were released at 3:00 pm BST today. The most anticipated was the Conference Board report, which was projected to show a slight decline compared to August. However, the actual report revealed a more significant drop than expected, from 106.1 to 103.0.

 

In addition to the Conference Board data, investors also received the Richmond Fed index for September and new home sales data for August. The Richmond Fed index was a pleasant surprise, while the new home sales data was slightly lower than anticipated.

 

 

- **Conference Board consumer confidence index for September**: 103.0, lower than the expected 105.5 (previous figure was 106.1)

- **New home sales for August**: 675k, lower than the expected 700k (previous figure was 714k)

- **Richmond Fed index for September**: +5, significantly better than the expected -6 (previous figure was -7)

 

Following the release of this data, the USD experienced a slight decline. However, the market reaction was minimal, with EURUSD increasing by approximately 0.05% in the initial minutes of trading, while USDJPY fell by around 0.1%. The stock markets largely disregarded the data.

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Gold - Chart of the Day

GOLD quotations continue the dynamic downward momentum initiated earlier this week. Bullion, for that matter, is responding directly to declines in the EURUSD and weakness in US debt securities, which, in the case of TNOTE, broke out to new lows. 

 

These movements largely reacted to the rise in expectations for one more potential Fed hike. Now, market sentiment has further deteriorated as a result of the sell-off in equity and derivatives markets, which have been dominated over the past week by increasing exposure to short positions. It is worth remembering, however, that since the last FOMC decision, the valuation of the implied interest rate has begun to fall, which not a little reduces the overtones of hawkish comments from bankers. 

 

 

Gold has broken out below the support set by the 200-day EMA (orange curve) and is currently slightly below the $1,900 per ounce barrier. The previously mentioned levels could be the most important zones to watch if we were to see a rebound on this instrument. On the other hand, the most important support zone at the moment is the $1885 zone, where the local minimums of August are located.  

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USDJPY Technical Analysis

The Japanese yen remains weak against most currencies, including the USD, EUR, and CAD. Coupled with the strengthening dollar, the USDJPY rate is entering higher territories and is currently approaching the historical high of 151.7. Leading representatives of the Japanese government and the Central Bank have repeatedly indicated that the yen is currently too weak. 

 

Today, Japanese Finance Minister Shunichi Suzuki again warned against speculative trading of the yen, which is approaching an 11-month low with USDJPY close to the 150 level. Although the minister did not confirm any plans regarding interest rate control or intervention, he leaves all options open to address excessive currency volatility.

 

However, an open question remains regarding an agreement with the US government concerning BoJ intervention, which would likely be necessary before any significant actions. For this reason, many analysts argue that the bar for intervention is set higher this time than the last and beyond market current expectations.

 

 

Looking at the USDJPY chart, we see that the rate is approaching its historical peak and the psychological level of 150. However, comparing the USDJPY rate to the dollar index, one can notice that reaching the current levels is not only due to the strengthening dollar but also a greater depreciation of the yen compared to October 2022. Currently, the dollar remains 7.5% lower than its peak last year.

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The EURUSD awaits more negative targets 

The EURUSD pair settles around 1.0500 barrier, waiting to get negative motive that assist to push the price to resume the expected bearish trend for the upcoming period, which targets 1.0440 as a next negative station.

 

 

The EMA50 continues to support the bearish wave within the bearish channel that appears on the chart, noting that breaching 1.0545 will stop the expected decline and lead the price to achieve some intraday bullish correction.

 

The expected trading range for today is between 1.0420 support and 1.0570 resistance. The expected trend for today: Bearish

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Today’s Forex Focus: GBPUSD Pair

The GBPUSD pair is currently experiencing a positive trading trend, testing the MA 50. This situation calls for caution in the upcoming trades. For the bearish trend to remain valid today, it’s essential for the price to return below the moving average. However, a close above the moving average could propel the price towards additional gains, potentially reaching 1.2280.

 

 

The Stochastic indicator is clearly losing its positive momentum, which bolsters the chances of a decline. It’s worth noting that our anticipated target stands at 1.2030. The expected trading range for today lies between the support level at 1.2040 and the resistance level at 1.228. The forecasted trend for today is bearish.

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USD Index - Chart of the Day

The US dollar has been increasing in value recently. This was caused by a large number of bonds being sold, which increased the yield (or return) on US Treasury bonds. The yield on 10-year bonds went above 4.60% and almost reached 4.70%. But then, the situation changed - the bonds regained their earlier losses and the yield on 10-year bonds fell below 4.60%. This also caused the value of the US dollar to decrease.

 

 

If we look at the USD index (USDIDX) chart for daily intervals, we can see that the index increased by more than 7% in the last two months and reached 106.50 - the highest it's been since late-November 2022. However, USDIDX has already fallen about 1% from its peak and is getting close to a price range that's around 38.2% lower than the high point it reached in September 2022. The lowest point of this range is near the bottom of this zone, and if it falls below this point, it could mean that the value of the US dollar might start decreasing.

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Silver

Silver prices have been rising strongly, boosted by lower bond yields, a weaker US dollar, gains in the Chinese market, and a generally better mood in global markets.

 

The future looks bright for silver due to increased demand from the solar power industry and limited supply from major mines. ANZ Research predicts that by 2025, solar power will increase silver demand to 225 million ounces, up from an estimated 161 million ounces in 2023.

 

Today's rise in silver prices is mainly due to global factors and speculators covering their short positions, expecting silver prices to fall further. Silver has been under pressure for several days due to the strong dollar and high yields.

 

As markets become more confident that interest rates may have reached their peak, some analysts predict that silver prices will rise if monetary policy is gradually relaxed worldwide.

 

Will solar energy increase the demand for silver?

According to the Silver Institute, the silver market had a deficit of 237.7 million ounces in 2022, and this deficit is expected to continue in the coming years. However, large inventories and holdings of individuals and investors are filling this gap.

 

Silver Institute analysts say that demand for silver from photovoltaic (PV) cells used in solar panels has tripled over the past eight years to 160 million ounces. This represents 14% of total silver demand in 2023, compared to 5% in 2014. There is a risk that the amount of silver used in panels could be reduced if prices become too high for producers, but there is limited scope for reduction given the usefulness of the metal.

 

 

Looking at the silver price chart, we can see that the price has risen above the 38.2% Fibonacci retracement of the upward trend from March 2020 and is now close to surpassing all three key moving averages, which are almost at the same level of $23.4 per ounce. If prices break above these averages, it could signal a potential rebound towards $25.7, where we see the 23.6% Fibonacci level. On a daily basis, despite today's strong increases, the RSI indicator is just over 53 points. The area around $22.5 has been a strong support for buyers in recent months - a possible decline around this level could signal longer-term weakness.

 

 

Looking at the SILVER chart and the dollar index (USDIDX, gold color), we see that a strong upward impulse has re-emerged as the dollar reduces the recent very strong gains. At the same time, the trend line has been maintained.

 

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US100 - Chart of the days

US index futures opened higher following the weekend, with US100 jumping almost 0.7% at futures trade launch. This is a response to US Congress passing a stopgap funding bill over the weekend that will ensure financing for the US government for 45 days. This means that a US government shutdown has been avoided, at least for now. US politicians will now attempt to work out a more enduring agreement before the new deadline passes in mid-November.

 

While the US government shutdown was never seen as a significant, plausible risk for the markets and discussions dragging close to the deadline were mostly attempts to win as many concessions from the other side as possible, some weakness could be seen on Wall Street on Friday, signaling that some investors positioned for a potential lack of agreement, and today's jump can be viewed as a retracement of that move.

 

 

Taking a look at the Nasdaq-100 futures chart (US100) at D1 interval, we can see that today's bounce plays well into the overall technical bullish setup. Index continues to climb following a bounce off the lower limit of the Overbalance structure. Bulls are trying to push the index back above the psychological 15,000 pts area today. Should they succeed, the way towards the major near-term resistance ranging below the 15,650 pts would be left open.

 

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Tesla

Wall Street is expected to open lower, with futures indices erasing earlier gains. Investors are shifting towards lower-risk positions as US 10-year bond yields surge and the dollar strengthens. 

 

Final PMI data indicates a contraction phase in major economies despite better than expected results from Europe. US Manufacturing PMI improved due to increased employment and better supply availability, but inflation concerns persist due to rising producers' costs.

 

US ISM Manufacturing PMI shows contraction for the 11th month in a row, despite some recovery signs. While demand remains soft, production improved, and suppliers retained capacity. Discrepancies between ISM and PMI prices underscore the rapidly changing environment.

 

 

Goldman warns of the impact of rising rates on US corporate profits. Kevin McCarthy faces pressure from Joe Biden to fund Ukraine and from Matt Gaetz to cut government spending. Bill Ackman plans to pursue a deal with Elon Musk's X through Pershing Square's SPARC.

 

The US500 index is trading at 4320 points, down 0.20%, with selling pressure preventing recovery. It's set to retest the critical 4300 support zone.

 

Tesla's shares fell 4.0% as Q3 deliveries and production fell short of estimates. The company delivered 435,059 vehicles and produced 430,488, attributing the decline to planned factory upgrades. However, Tesla's 2023 volume target of 1.8 million vehicles remains unchanged.

 

 

 

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Yield Curves Rise as US Shutdown Averted, Inflation Remains High

The yield curves have steepened this week, with the 10-year UST and Bund yields reaching new highs. This comes after a potential US government shutdown was avoided, leading to higher yields and firmer riskier assets. Despite this, inflation remains high, with the core PCE release for September close to 4% and the core CPI estimate for the Eurozone at 4.5%.

 

ECB Cautious on Inflation, Italian Spreads Recover

Luis de Guindos, Vice President of the European Central Bank (ECB), confirmed in a recent interview that discussions about rate cuts are premature. He highlighted the challenges posed by increased oil prices on inflation expectations. Meanwhile, Italian government bond spreads have recovered, with the BTP Valore sale attracting significant demand.

 

 

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Oil Analysis

 

Oil prices have been dropping for four days straight after reaching their highest point in 13 months. The price of a barrel of WTI oil almost hit $94, as buyers tried hard to keep prices high.

 

This seems to be the third increase in prices since they fell in June. Starting from last Thursday, any attempts to raise the price during the day have been stopped by large sell orders. On Tuesday, WTI's price briefly fell below $87, which is 7.5% less than the highest point last week.

 

Worries about a slowing world economy led to large sell orders that stopped any attempts to raise the price during the day. This constant pressure seems to be more than just a temporary cooling off of the market and fits the usual pattern of three downward movements.

 

Last month, there was a divergence on the daily RSI timeframe when a higher price peak happened at the same time as a lower oscillator peak. This often means that bullish momentum is running out. It's also worth noting that the index has already moved away from the overbought zone, which shows the start of the decline.

 

The next potential drop in price could be to the $84.4 per barrel area. The 50-day moving average is around this area, as are the price peaks from early August and mid-April.

 

 

However, oil prices could drop even further. The slowing global economy and decreasing final demand are now working against it. Moreover, oil has been rising against a rising dollar and falling markets for a long time. And now it might catch up with the falling markets with even greater force.

 

An important signal from exporters: there were reports last month of increased oil exports from Russia and Saudi Arabia, which reduced the market deficit and raised questions about whether the cartel's production limit is really as strict as it seems.

 

More solid support for oil might only come with a drop to $78. That's the 50-week moving average, but we wouldn't be surprised to see a drop to $75 by the end of the year. These are high levels by historical standards, but they no longer seem like they're holding back the economy or a good reason for further policy tightening.

 

From a global perspective, lower oil prices will now be good for equity indices rather than a sign of decreasing risk appetite, as is usually the case.

 

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USDJPY Takes a Dive, Is Bank of Japan Stepping In?

The USDJPY pair saw a significant drop this afternoon. The shift was swift and substantial, happening just as the pair reached the 150.00 mark - a peak not seen since October 2022! This level is crucial as it's often considered the trigger point for intervention by the Bank of Japan, as has happened in the past. Before this drop, the pair was climbing due to a strengthening US dollar, spurred on by a rise in JOLTS job openings data for August.

 

 

The USDJPY fell from around 150.00 to approximately 147.30 - a nearly 2% drop. Although much of this decline has been recovered, the pair is still trading close to the 149.00 mark.

 

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Asia Market Wrap: 

Asian markets are seeing a downturn, reflecting a global bond market sell-off due to fears of prolonged high interest rates. This has affected various assets, with global equities taking a significant hit.

 

The ISM manufacturing data and the JOLTS report suggest a hawkish outlook. The US factory sector, in contraction for 11 months, shows signs of potential expansion. The JOLTS report highlighted a large gap between labour supply and demand, leading to increased wages.

 

Amid strong economic data and predictions of higher rates from experts like Jamie Dimon and Ray Dalio, bondholders are nervous. Navigating such bond markets requires courage.

 

The US economy remains strong, with an estimated annualized growth rate of 4.2% in Q3, up from 2.1% in Q2. This is surprising given the Federal Reserve's aggressive monetary policy tightening. Factors like pent-up pandemic demand, job creation, and wage increases contribute to this growth.

 

However, the US economy is expected to slow down significantly, potentially below 1% in Q4 and may stall next year. This is due to the impact of the Federal Reserve's large interest rate hikes last year. The housing market is particularly affected, with 30-year mortgage rates at a 23-year high of over 7%, leading to low home sales and affordability issues. Bank lending standards are tightening. Services could be affected as households cut back on non-essential purchases and many have depleted their pandemic savings. Additionally, many student loan borrowers have resumed repayments after a 3.5-year break, adding to consumer financial pressures.

 

The current economic slowdown aligns with the Federal Reserve's aim to control inflation. However, rising oil prices have paused the steady decrease in inflation, which had fallen from a peak of 9.1% in summer 2022 to 3.0% in June, then rose to 3.7% in August. On the bright side, core inflation, excluding food and energy, has remained stable at near two-year lows of 4.3%, down from 6.6% last fall. This is due to smoother global supply chains and slower wage growth. But services inflation remains high, suggesting a return to the Fed's 2% target won't likely happen until early 2025.

 

The theme of "higher for longer" has pushed 10-year Treasury yields up by 130 basis points over the past five months, reaching a 16-year high of 4.8%. It's expected that yields will drop to 4.25% by year-end and further to 3.75% in late 2024, but this will likely need US data to show a downturn, a looser labour market, and lower inflation to convince investors.

 

The quick reversal of the US Treasury yield curve is significant. This change could lead to imminent recession warnings. If the unemployment rate increases even slightly, it could trigger recession alarms.