• Dollar holds tentatively lower so far on the day
• The bond market continues to hold all the cards
• Saxony September CPI +5.4% vs +6.8% y/y prior
• Bavaria September CPI +4.1% vs +5.9% y/y prior
• Spain September preliminary CPI +3.5% vs +3.5% y/y expected
• Economic institutes forecast 0.6% GDP contraction for Germany this year
• China to introduce tax exemptions and cuts for affordable housing

Markets:

• AUD leads, USD lags on the day
• European equities mixed; S&P 500 futures down 0.1%
• US 10-year yields up 3.7 bps to 4.647%
• Gold flat at $1,875.15
• WTI crude down 0.4% to $93.28
• Bitcoin up 0.8% to $26,446

The two main outperformers this week are the laggards today, that being the dollar and oil.

The latter raced higher in Asia trading to $95 but is marked down by 0.4% now to $93.27 while the greenback is down across the board as it gives back some of the gains this week.

EUR/USD tested waters below 1.0500 for the first time since January before bouncing up to 1.0540 levels while USD/JPY is still caught out by intervention fears, down 0.2% to 149.30 currently.

All of this comes despite higher Treasury yields on the day, with 10-year yields in the US touching above 4.64%. And that is still keeping equities rather nervous, with some selling pressure in Europe which was met by dip buyers – who seem to be keeping things interesting ahead of month-end and quarter-end.

In terms of data, we got Spanish and German inflation numbers. The former continues to reaffirm stickier price pressures while the latter is showing a decent drop, which fits expectations. That being said, the monthly readings are still rising and alongside higher oil prices, that just means the ECB cannot quite breathe easy just yet.

This article was written by Justin Low at www.forexlive.com.

It looks like the more hawkish than expected FOMC Dot Plot last
week was kind of a wakeup call for the market as it’s been selling off with
almost no pullback ever since. The resilience in the economy is keeping the Fed
on the hawkish camp as it wants to see more weakness in the data, especially on
the labour market front. We’ve seen a huge rally since the lows back in October
2022 as the market continued to see a soft landing but even Fed Chair Powell said
that it’s not his base case, although they are aiming for it. With so many
bearish drivers that accumulated throughout the first half of 2023, the market
might be at risk of a major fall now.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 continued to fall after breaking below the key support around
the 1820 level. The target for the sellers is now the support around the 1720
level where we will likely find strong buyers stepping in with a defined risk
below the support to position for a rally back into the 1820 resistance.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that if we were to
see a pullback, the best place for the sellers from a risk management
perspective will be the trendline where
there’s also the confluence with the
Fibonacci retracement levels.
The buyers, on the other hand, will want to see the price breaking above the
trendline to position for a rally back into the 2020 resistance.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a divergence with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the minor trendline and
the 38.2% Fibonacci retracement level where the sellers are likely to pile in
for another selloff into the 1720 support. The buyers, on the other hand, are
likely to pile in on a breakout and position for a rally into the major
trendline.

Upcoming
Events

Today the main event will be the US Jobless Claims
report. At this point, looks like there’s not much difference if it’s strong or
weak data as the former would keep the Fed hawkish and even raise the risk of
higher rates, while the latter might point to a recession. Nonetheless, the
last time the market rallied on weak data as it decreased the risk of further
tightening and brought down Treasury yields. Tomorrow, we will see the latest
US PCE data which is unlikely to change much in terms of market pricing unless
we see some big surprises.

This article was written by FL Contributors at www.forexlive.com.

Equities had that familiar sinking feeling just about an hour ago but have found some relief right after this post here. It’s still a heavy-looking week all things considered and I wouldn’t count out another wave of selling later in US trading, especially if bonds also hit the skids. But at least for now, there is a bit of a breather as dip buyers step in with S&P 500 futures rallying back to be up 0.2%.

This article was written by Justin Low at www.forexlive.com.

Taxes will be exempt for urban land used for the construction of affordable housing projects and stamp duty will also be waived for management firms and buyers of said projects, all starting from 1 October. Adding to that, there will be a reduced deed tax of 1% to be levied on the purchase of affordable housing by home buyers.

All of this is to further bolster support for the real estate sector but again, I reckon Beijing needs to do so much more.

This article was written by Justin Low at www.forexlive.com.

The more hawkish than expected revision to the FOMC Dot Plot last
week keeps on weighing on the Nasdaq Composite as the market might starting to
be worrying that the Fed could go further with its tightening cycle and
eventually lead to a recession. Fed Chair Powell has also
admitted that the soft-landing scenario is not his base case at the moment, despite
the good macroeconomic projections. Yesterday, we also got Fed’s Kashkari attributing
a 60% chance on the soft landing scenario, but a 40% chance on significant
hikes ahead. The rally in Treasury yields is also putting some pressure on the
Nasdaq Composite as financial conditions continue to tighten.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite is breaking out of the key support area
around the 13174 level defined by the trendline and the
38.2% Fibonacci retracement level.
This breakout opened the door for a much bigger fall into the next support
around the 12274 level. The buyers will want to see the price bouncing back
strongly above the support zone and leave behind a fakeout to start looking for
higher prices.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4
hour chart, we can see more closely the breakout with the price starting get a
bit overstretched on the downside as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next impulse.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a divergence with
the MACD right
when the price is breaking out. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, we might see a pullback
into the downward trendline where we have also the confluence with
the 38.2% Fibonacci retracement level. That’s where the sellers are likely to
step in with a defined risk above the trendline to position for another
selloff. The buyers, on the other hand, will want to see the price breaking
above the trendline to confirm the fakeout and pile in to target the highs.

Upcoming
Events

Tomorrow we will see the latest US Jobless Claims
report. At the moment, it looks like bad data or good data all lead to further
downside as the former might point to a recession on the horizon and the latter
is likely to keep the Fed hawkish and even force to raise rates further.
Nonetheless, the last time we got weak data on the labour market front, the
Nasdaq Composite rallied strongly, so this is something to watch out for. On
Friday, we conclude the week with the latest US PCE data.

This article was written by FL Contributors at www.forexlive.com.

• Dollar keeps steadier in European trading
• Fed’s Kashkari: There is a risk that rates might have to go higher
• ECB’s Elderson: Interest rates have not necessarily peaked
• Eurozone August M3 money supply -1.3% vs -1.0% y/y expected
• Germany October GfK consumer sentiment -26.5 vs -26.0 expected
• France September consumer confidence 83 vs 84 expected
• Switzerland September Credit Suisse investor sentiment -27.6 vs -38.6 prior
• France prioritises inflation fight with 2024 budget bill
• China can still achieve economic growth of above 5% this year – PBOC advisor

Markets:

• USD leads, AUD lags on the day
• European equities mixed; S&P 500 futures up 0.4%
• US 10-year yields down 3.3 bps to 4.503%
• Gold down 0.5% to $1,891.72
• WTI crude up 1.5% to $91.77
• Bitcoin up 1.4% to $26,524

It was a quiet session again but the dollar continues to hold slightly firmer across the board, even with a light retreat in Treasury yields and a slight nudge higher in equities.

The greenback remains in the driver’s seat with EUR/USD at its lowest since March, down 0.3% to 1.0535. Meanwhile, USD/JPY is testing waters above 149.00 again as intervention fears are still in the back of traders‘ minds.

AUD/USD is the laggard, down 0.5% to 0.6367 at the lows for the day currently, not helped by the Australia CPI data earlier today. The flows are siding with the dollar, even as Treasury yields are not really extending higher on the day.

Yields are seemingly holding just at the highs so far this week but that is enough to keep broader markets on edge. Equities are able to find some relief today with US futures up 0.4%, although there is still the US session to go through.

In other markets, oil continues to shine with another 1% gain for WTI crude to rise above $91 while gold is dragged lower back under $1,900 amid a firmer dollar.

As we get into US trading in a bit, let’s see if the risk mood can hold up or will it turn again like it did yesterday.

This article was written by Justin Low at www.forexlive.com.

• Prior +5.4%
• Market index 189.6 vs 192.1 prior
• Purchase index 144.8 vs 147.0 prior
• Refinance index 411.7 vs 415.4 prior
• 30-year mortgage rate 7.41% vs 7.31% prior

Mortgage applications declined once again in the past week with both purchases and refinancing activity falling as the average rate of the most popular US home loan climbs up to 7.41% – its highest since December 2000.

This article was written by Justin Low at www.forexlive.com.

• We’re committed to 2% inflation
• There is a risk that rates might have to go higher but hard to know

This builds on his remarks from yesterday here where he touted that there is a chance for more „significant“ rate hikes.

This article was written by Justin Low at www.forexlive.com.

Even though Treasury yields are not making new highs today, gold is once again slumping as the dollar remains steady overall. Of note, price is dipping below $1,900 and that is starting to stir up some nerves among buyers surely.

The previous dip earlier this month was held at the $1,900 mark but with it potentially giving way today, it raises fresh concerns about gold’s recent resilience. The August lows around $1,885 will be the next big line in the sand to watch out for as a break there leaves little in the way of a steeper decline in gold.

The breakout in Treasury yields since last week is definitely a key trigger but the good thing for gold at least is that yields are not really racing higher in the past two days. 10-year yields in the US are still hovering around 4.50% to 4.55% and that is keeping broader market sentiment on edge, with gold being no exception to that.

Month-end and quarter-end flows could still muddy things up this week but in the bigger picture, if yields continue to stay higher, this little technical blip lower could end up being a key catalyst for the next correction lower in gold prices. Watch this space.

This article was written by Justin Low at www.forexlive.com.

• Japan finance minister says closely watching FX moves with a great sense of urgency
• A slight breather in bond selling for now
• USD/JPY stays poised in push towards the 150 mark
• Risk mood begins to sour ahead of European trading
• ECB’s Müller says that as things stand, not expecting any more rate hikes

Markets:

• EUR leads, AUD lags on the day
• European equities lower; S&P 500 futures down 0.4%
• US 10-year yields down 4.3 bps to 4.498%
• Gold down 0.2% to $1,910.67
• WTI crude down 0.9% to $88.90
• Bitcoin down 0.2% to $26,229

It was a quiet session for the most part, mostly due to a lack of headlines during the session.

There were no major economic releases, so market players were left to their own devices in European trading. The dollar is keeping steadier overall as equities are seen retreating again today, with sentiment continuing to be rocked by higher bond yields.

The latter was more of a factor earlier on, with 10-year Treasury yields briefly hitting 4.56% – its highest since 2007 – before keeping around 4.50% currently.

USD/JPY also nudged up to a high of 149.20 before a quick verbal pushback by Japan finance minister Suzuki saw the pair fall back to flattish levels now at 148.88 on the day.

Elsewhere, EUR/USD is sticky around 1.0600 with large option expiries at the figure level in play while AUD/USD is down near 0.6400 as the risk mood remains iffy at best, falling back after a decent showing by Wall Street yesterday.

This article was written by Justin Low at www.forexlive.com.