official Market Update by Solidecn.com

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CPI: Not the most welcome outcome

Recent inflation reports have exceeded expectations, potentially offsetting the cautious tone from Federal Reserve officials. However, the focus seems to be on the duration of current interest rates rather than their height. Thus, a slightly higher inflation rate may not significantly disrupt the market.

 

The "Fed rhetoric shift" is becoming evident, with Christopher Waller's comments suggesting that the rise in yields could substitute for a rate hike. This indicates a possible shift towards a more dovish monetary policy.

 

The future hinges on economic indicators. Unless inflation rises unexpectedly or labor market imbalances lead to a wage-price spiral, the Fed may maintain a less hawkish stance. This could boost demand for longer-duration assets and foster a "Santa rally".

 

The market's reaction to today's CPI print is uncertain, but it may not be what investors were hoping for.

 

 

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Crude Oil Market Analysis

 

Crude Oil rose from $80, which is in the Ichimoku cloud, and is currently testing the broken support around $84. Bears successfully broke out of the channel and the outlook of the current market is bearish, with the RSI hovering below the 50 line in the Crude Oil daily chart.

 

 

The bearish bias of Crude oil is more vivid in the 4H chart, as the black gold is trading below the pivot and within the bearish channel.

 

 

With the price holding below the 84.36 pivot, we expect the decline in Crude oil to continue and target the 80 support followed by 77.86.

 

On the flip side, if the oil price closes above the bearish channel in the 4H chart, the short-term bearish scenario will be over, and bulls are likely to drive up the price to test the daily resistance around $88 in upcoming sessions.

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XAUUSD 

Gold prices are looking to increase as we move into early European trading hours. With a rise of over 2.4 percent, the gold to US dollar rate (XAUUSD) is on track for its best week since mid-March. This comes as recent comments from the Federal Reserve have been increasingly cautious.

 

 

If we look at the daily chart, the first level of resistance seems to be at 1884.89, a key point from August. Resistance levels are prices at which sellers are expected to enter the market in sufficient numbers to take control from buyers.

 

Just above that, gold will encounter the 50- and 200-day moving averages. A moving average is a commonly used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random short-term price fluctuations.

 

There was a bearish crossover in September, which suggested a general downward trend. A bearish crossover occurs when a short-term moving average crosses below a long-term moving average, signaling potential downward price movement.

 

So, XAUUSD is facing important resistance levels as we approach the weekend. If prices start to fall, the midpoint of the Fibonacci retracement level is at 1848.37, followed by the 1804.78 – 1815.30 point. Fibonacci retracement levels are horizontal lines that indicate where support and resistance are likely to occur. They are based on Fibonacci numbers, each level is associated with a percentage, showing how much of a prior move the price has retraced.

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In-Depth Analysis of XAGUSD

Silver prices, much like their golden counterpart, are experiencing a similar trend. The XAGUSD pair has seen an impressive surge this week, with an increase of nearly 2 percent. This level of aggressive push in the value of this precious metal hasn't been witnessed since mid-September.

 

Looking ahead, the immediate resistance that the XAGUSD pair might face is twofold. Firstly, it's the previous rising range of support that was observed in September. Secondly, it's the 38.2% Fibonacci retracement level which stands at 22.85. These resistance levels could potentially hold their ground, thereby reinstating the broader bearish bias that has been prevalent since early May.

 

 

However, in the event of a downward turn, the immediate support seems to be situated at the midpoint of the Fibonacci retracement, which is at 21.84. If losses extend beyond this point, the focus then shifts to the 61.8% level at 20.83.

 

A clearance below this latter level could potentially open up the possibility for a resumption of the downtrend. This would be a significant development as it would indicate a continuation of the bearish bias in the market.

 

In conclusion, while silver prices have shown a promising increase this week, there are several key resistance and support levels to watch out for. These levels will play a crucial role in determining whether the current uptrend can sustain itself or if a return to the bearish bias is on the horizon.

 

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Frax's New Product sFRAX: A Game Changer in Decentralized Finance

Frax, a decentralized finance protocol, has introduced a new product called sFRAX. This product allows holders of Frax's stablecoin, FRAX, to earn interest at a rate similar to the U.S. Federal Reserve's interest rate on reserve balances, which is currently around 5.4%. The product started with an annual percentage yield (APY) of 10%, but it will eventually match the Federal Reserve's rate.

 

Since its launch, over 150 users have invested more than $35 million in sFRAX. This has caused the price of Frax's governance token, FXS, to increase by 7% to $5.66, although it has since dropped slightly to $5.49.

 

Meanwhile, lending protocol MakerDAO has been successful in attracting interest in the U.S., investing over $2 billion in short-term bonds since February 2022 and offering a 5% savings rate on its own stablecoin, DAI. This has led to a significant increase in the value of its token, MKR, which has risen by over 168% this year.

 

In comparison, FXS has only increased by 32% this year. However, some people in the crypto community believe that FXS will soon catch up with MKR.

 

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USDJPY: Temporary Pause, but Uptrend Persists

 

The USDJPY rally has recently hit a pause as it lingers near the firm resistance at the psychological level of 150, not too distant from the 2022 peak of 152. Nonetheless, there is no clear indication of a reversal in the ongoing uptrend. The price action for this month, thus far, can best be described as moving sideways, with the lower boundary finding support around the 200-period moving average, near the early-October low of 147.35.

 

 

Considering that USDJPY is currently within the intervention zone observed last year, breaking through the 150.00-152.00 range could be a challenging endeavor. This challenge is further accentuated by the views of some Federal Reserve officials who have suggested that interest rates may have peaked. For a more comprehensive understanding of the fundamental outlook, refer to the article "Japanese Yen Aided by Fed Pause View, Geopolitics; USDJPY, GBPJPY, AUDJPY," which was published on October 11. On the flip side, a drop below the 147.00-147.50 range would confirm a fading of the broader upward pressure. Such a decline could potentially pave the way towards the early-September low of 144.50.

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USDINDEX

In the wake of the escalating conflict in the Middle East, secure assets like gold and the US Dollar have seen a significant rise. 

The intensifying conflict in the Middle East has led to a notable increase in the value of secure assets such as gold and the US Dollar. The situation on the Israel-Lebanon border has worsened, resulting in over 2,000 civilian casualties in the Gaza Strip. In an attempt to alleviate the situation, the US has initiated covert negotiations with Iran. However, the possibility of a direct clash between Israel and Iran, a major backer of Hamas, is causing alarm. In tandem with these US-Iran discussions, oil prices have skyrocketed due to fears of impending oil sanctions. According to Bloomberg Economists, this situation could drive oil prices up to $150, potentially pushing the global economy into a recession.

The US Dollar is maintaining its upward trajectory, driven by strong inflation figures from the US. The rising geopolitical unrest in the Middle East has also strengthened the appeal of the greenback as a preferred safe-haven asset. Although the Dollar’s overall trend is subject to potential swings, the forthcoming speech by Fed Chairman Jerome Powell is a significant event to watch.

Currently, the Dollar Index is experiencing an uptrend while it tests the resistance level. However, the MACD indicates a decrease in bullish momentum, and with the RSI at 59, it suggests that the index may undergo a technical correction as the RSI has sharply withdrawn from overbought conditions.

Resistance levels: 106.60, 107.15.
Support levels: 105.65, 104.80.

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USDSEK Analysis: The Ultimate Guide to October 2023

The pair recently broke above the 10.84 resistance level, a significant milestone in its upward trajectory. This break was tested when the Stochastic oscillator signaled that the USDSEK might be overbought. However, with the RSI indicator remaining above the 50 level and far from the overbought area, it suggests a decent bid for buyers at the 10.84 support level.

To further confirm this scenario, we’ve zoomed into the USDSEK 4H chart. Despite attempts by the bulls to break out of the bearish channel, the USDSEK price has returned inside the channel. In this USDSEK analysis, we recommend traders to exercise patience at this level. Although the currency pair’s main trend is bullish in the weekly chart, it’s currently in a declining channel in the 4H chart.

If the bears manage to close below the blue bullish channel, we anticipate that the USDSEK price will decline to the middle line of the 4H bearish channel (shown in black), followed by reaching the 10.77 support level. On the other hand, if the bulls on the USDSEK manage to break out of the blue bullish channel in the 4H chart, we predict that the price of the pair would surge towards a target of 11.123.

Source

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EURUSD

 

The EURUSD pair is currently undergoing a test of the Tenkan-Sen line. The pair is trending downwards, beneath the Ichimoku Cloud, indicating a potential bearish trend. It's anticipated that there will be a test of the Cloud's upper boundary at 1.0565, which will then be followed by a drop to 1.0365. A bounce off the bullish channel's lower boundary will serve as an additional signal to confirm this downward trend. However, if there's a breakout at the Cloud's upper boundary and the price stabilizes above 1.0605, this scenario will be invalidated, suggesting a possible rise to 1.0705.

 

 

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Bitcoin 

Recently, we observed a notable event in the BTCUSD market trends. The BTCUSD broke out of the bearish channel, surpassing the $27,237 pivot with a strong bullish candle in the 4-hour chart. As of now, it’s testing the $27,952 resistance, indicating a potential shift in market dynamics.

Our BTCUSD Analysis wouldn’t be complete without examining the technical indicators. Upon scrutinizing the BTCUSD 4-hour chart, we noticed a divergence in the Relative Strength Index (RSI) indicator. Both the RSI and the stochastic oscillator are hovering in the over-bought zone. This observation is crucial as it often signals a potential reversal in market trends.

Given the current state of overbought conditions, our BTCUSD Analysis suggests a cool down in the bullish momentum. It’s likely that the bears will step in to correct the recent rise of BTCUSD. This correction phase is a common occurrence in financial markets after a significant price increase and is often seen as a healthy sign for long-term market stability.

We anticipate that BTCUSD might test the Ichimoku cloud before further rise. The Ichimoku cloud is a collection of technical indicators that show levels of support and resistance, as well as momentum and trend direction. It’s an essential tool in our BTCUSD Analysis toolkit.

Source

 

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SOLUSD Analysis

Amidst the ETF rumors, Solana’s price experienced a significant surge, peaking at $27, a trend that was mirrored by other cryptocurrencies. This spike in SOLUSD’s price resulted in it reaching the $24 - $27 resistance zone, causing both the RSI indicator and Stochastic oscillator to enter the overbought region.

Technical indicators suggest an impending market correction. With SOLUSD breaking the upper band of the Bollinger Bands, it’s anticipated that Solana will correct its recent gains and potentially decline to $22.4, aligning with the middle band of the Bollinger Bands.

This scenario is contingent on SOLUSD closing below the middle line of the Bollinger Bands on the 1-hour chart, which is currently around $23.5. If bearish momentum is observed, we can expect SOLUSD’s bearish trend to persist, with initial targets set at $23.24, followed by the $22 pivot point.

Source
 

 

 

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EURUSD 

The European currency is stable between 1.05-1.06 levels due to lack of new data. Yesterday, there were no surprises due to the absence of significant economic data. The focus remains on the Middle East, but there are no signs of major escalation, bringing stability to international stock markets and reducing the need for dollar purchases.

It's too early to predict if de-escalation is likely. The European currency is under pressure due to ongoing concerns. Today's agenda includes U.S. retail sales data, which may confirm the U.S. economy's stronger momentum compared to Europe.

After a two-month downward trend, the European currency shows signs of stability. Unless there's a major market shock, it's likely to remain stable this month. As the market direction is unclear, it's best to wait and see. I'm considering buying more European currency after significant dips and new lows.
 

 

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EURJPY

At the time of this EURJPY market analysis, the EURJPY is navigating a bullish channel, with the RSI indicator maintaining a position above the 50 level. On October 3, the pair managed to stay above the Ichimoku cloud, resulting in the continuation of the EURJPY uptrend. The primary hurdle for the EURJPY bulls is at the 158.64 mark.

For the bullish trend to persist, it’s crucial for the EURJPY bulls to achieve a close above the 158.64 level. Should this occur, the next target for this currency pair would be projected towards the 162.0 area.

Source
 

 

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GBPUSD

 

The British Pound (GBP) against the US Dollar (USD) is showing a decline in the European market on Tuesday. This is undoing some of the 0.65% increase we saw on Monday. The reason for this decline is weaker than expected growth in UK salaries, which is causing concern for those who want another rate hike from the Bank of England (BoE).

 

Everyone is waiting for the UK's inflation report for September, which will be released on Wednesday. The forecast is 6.5% year-on-year, compared to 6.7% in August, and the core is forecasted at 6.0% compared to 6.2% in August.

 

If the September figure meets or falls below expectations, it will further discourage a hawkish view on rates and keep the pound on the defensive.

 

 

The recent drop in value is putting pressure on the initial support level at 1.2141 (the upward trend line from the 1.2037 low), before a crucial point at 1.2122 (Friday's low). If it falls below this, it could signal further decline and risk retesting the October 4 low at 1.2037.

 

The converged 10/20 day moving averages at 1.2200/13 are a crucial barrier. If it breaks through this level and stays above it, it could sideline immediate downside threats and pave the way for a new recovery.

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FTSE100 Leads Amid Global Tensions

European markets just about managed to eke out a gain yesterday, but it was hard going, with the FTSE100 outperforming largely due to outperformance in health care.

With diplomatic efforts ongoing in the hope of preventing a further escalation of the crisis, the news that President Biden is going to Israel later this week, means it’s unlikely that we’ll see Israel mount an incursion into Gaza in the short term. That said the horrific bombing of the Gaza hospital overnight has complicated matters with a number of leaders cancelling their meetings with the US President amidst claim and counter claim as to whose responsibility the blast was, sending oil prices sharply higher.

 

Resilient US Markets Defy Yield Surge

US markets finished a choppy session largely unchanged, initially opening sharply lower, then rebounding, despite a sharp move higher in yields after retail sales in September came in well above expectations, rising 0.7%. The August sales numbers were also revised up as well.

Despite the rise in yields, which saw the US 2-year yield move above 5.2% for the first time since 2006, investors took the view that, with rates at current levels and the US consumer still looking resilient, the prospect of another rate hike, probably isn’t the end of the world, thus limiting the downside for US markets.

 

China’s Economic Outlook

This morning’s European open looks set to be a positive one with Asia markets having to absorb the latest economic numbers from China.

The last 3 months has seen little indication that the Chinese economy would see a significant improvement on its Q2 GDP numbers of 0.8%, given the direction of travel of both industrial production and retail sales data, both of which have struggled over the quarter, particularly consumer spending.

Today’s Q3 GDP numbers would appear to run counter to that, reinforcing the skepticism about the accuracy of Chinese economic numbers, especially GDP, there is little doubt that the Chinese economy is being hit by a slowdown in global market trends, as well as domestic demand if recent trade data has been any sort of guide.

China Q3 GDP came in at 1.3%, well above expectations of 0.9%, while Q2 was revised lower to 0.5%, while September retail sales rose by 5.5%, beating expectations of 4.9%, and industrial production came in at 4.5%.

This morning’s industrial production numbers were pretty much in line with previous months remaining steady, however, there was a modest improvement in retail sales, which runs counter to the narrative from a lot of high-profile retail companies that Chinese demand for luxury goods has been waning in recent months.

Consumer spending has been where the real weakness lies sharply down from Q2, Q3 has seen retail sales slow sharply, with gains of 2.5% and 4.6% in July and August, rounded off by 5.5% in today’s September numbers. While today’s numbers do suggest a modest improvement in Q3 the extent of the rebound does raise questions given the weakness of recent trade data as well as PMIs.

 

Global Market Trends: UK and EU Inflation

As we look towards today’s data releases we have UK CPI for September, along with the final readings for EU CPI.

Starting with the UK, the Bank of England caught a lot of people on the wrong foot when they decided by a narrow majority to keep interest rates unchanged at 5.25% last month.

The main reason why they decided to call a halt to 14 successive rate rises may well have been the sharp slowdown in core CPI that we saw in data released the day before, as well as concern that the UK economy has yet to feel the full effects of the previous rate hikes, and that more time is needed to assess the full pass-through effects.

It’s about time this penny dropped given the challenges facing the UK economy and its good that the MPC has finally woken up to this, although there are differing views amongst MPC members of how much has trickled down with arch dove Swathi Dhingra arguing that only 25% of the impact has been felt.

In August, core CPI slowed from 6.9% to 6.2% while headline CPI slipped to 6.7% when most people had been expecting an increase. This trend of slower inflation is expected to continue today with September CPI inflation set to slow 6.6% and core inflation forecast to slow to 6% from 6.2%.

One of the major leading indicators in recent months for a slowdown in inflation has been the slowdowns being seen in the headline PPI numbers since the start of the year, although there is evidence that these are starting to bottom out and pick up again.

Nonetheless, these have been in negative territory for both input and output prices over the last 2-months, which ought to bode well for further weakness in CPI inflation going forward, although higher fuel prices are likely to keep underlying inflation sticky.

Further evidence of slowing inflation should make life easier for the Bank of England when they meet in just over two weeks’ time, in terms of keeping rates on hold, with new forecasts due at the November meeting we could well find that the central bank is done and from here on in the main question will be how long rates are likely to stay at current levels.

EU CPI for September is expected to be confirmed as slowing to 4.3% from 5.2% in August while core prices are expected to slow to 4.5% from 5.3%, also reinforcing the idea that the ECB is done when it comes to further rate hikes. (source)

 

• FTSE 100 is expected to open 10 points higher at 7,685.
• DAX is expected to open 8 points higher at 15,259.
• CAC40 is expected to open unchanged at 7,029.

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Bitcoin

 

Bitcoin has successfully breached the $28,000 threshold. This significant level had previously maintained Bitcoin’s price within a range of $28,000 to $25,000 since mid-August 2023.

 

 

Upon examining the BTCUSD 4-hour chart, it’s evident that Bitcoin, often referred to as ‘digital gold’, is trading within a bullish channel. However, the Relative Strength Index (RSI) indicator is currently in the overbought zone. The critical level that sustains BTCUSD’s bullish trend is $27,952. As long as the price remains above this level, Bitcoin is likely to trade above the median line of the bullish channel. Given that the RSI is in the overbought territory, a minor decline to the R1 level is anticipated. This level presents a substantial supply zone for BTCUSD bulls.

 

 

If the R1 level is breached, the next bearish target for the bulls would be the $27,237 pivot point, followed by the lower boundary of the bullish channel.

 

Full article here

 

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EURNZD

The EURNZD pair is currently trading within a bullish channel on the weekly chart, and it is presently above the 1.774 level, which is acting as a support for the price. The RSI indicator has flipped above the 50 line, indicating a bullish outlook for the EURNZD pair.
 

For a more detailed forecast of EURNZD, we zoom into the daily chart. The pair closed above the 1.783 level after breaking out of the daily bearish channel. While the RSI indicator is above the mid-line, suggesting bullishness, the stochastic oscillator indicates that the pair is overbought. Given this bullish outlook for EURNZD, we could expect a correction to recent gains with a retest of the pivot point.

 

With the price currently above the pivot point, the forecast for EURNZD suggests that the pair is targeting the 1.812 resistance level, followed by an August high around 1.816.

However, if the pair falls below 1.78, this would put a pause on the bullish scenario and could lead to a retest of the previous supply area around 1.75.

Key levels to watch:

• Pivot: 1.78
• Resistance: 1.81
• Support: 1.75

Source

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EURUSD

Last week, the EUR/USD tried to rise above a downward trend channel but didn’t succeed, so the channel is still active. The highest point reached was 1.0640, but it ended the day below the downward trend line, which might mean the trend line is still valid.

 

If it rises above the trend line, it could face resistance at 1.0620, 1.0640 and 1.0675, which are previous high points. Further up, there could be resistance at an earlier peak of 1.0737, which is currently where the 55-day simple moving average (SMA) is. Beyond that, another earlier high point near 1.0770 could also offer resistance.

 

 

A bearish triple moving average (TMA) pattern happens when the price is below the short-term SMA, which is below the medium-term SMA, which is in turn below the long-term SMA. All SMAs also need to be decreasing.

 

When looking at any combination of the 21-, 34-, 55- and 100-day SMAs, if they meet these conditions, it might suggest that a bearish momentum is developing.

 

On the downside, support might be found near the low points of early 2023 that were tested at the start of this month, with 1.0480 and 1.0440 as potential important levels.

 

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EURJPY: Navigating the Fluctuations and Identifying Trading Opportunities

 

The EURJPY currency pair seems to have returned to its usual fluctuations after resisting a downward trend two weeks ago, which saw it drop to a three-month low at 154.39.

 

This decline went below the low of September and the 100-day Simple Moving Average (SMA), but managed to close above these levels in the following sessions.

 

 

This situation could present opportunities for a range trading strategy. For more insights on range trading, explore our related resources.

 

In terms of support, it could be found at the breakpoint and a recent low around 156.50. If there’s a continued downward trend, keep an eye on the previous lows and breakpoints at 154.39, 153.45, 151.60, 151.40, and 151.07.

 

Looking upwards, resistance might be encountered at recent highs and breakpoints near 158.65, 159.50, and 159.75.