The market continues to march higher as the war in
Israel hasn’t spread to other Arab countries. In fact, yesterday the US intelligence has even reported that
Iran was surprised by the Hamas attack. This has weighed on Crude Oil prices
and eliminated the risk of a much bigger spike. Moreover, the US PPI report
yesterday beat expectations, but it was mainly energy driven and the market
brushed it aside as we got a big drop in Oil prices in October and even Fed’s Waller sounded
like a rate hike in November is not coming unless we get a very ugly CPI
report.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones
has now erased almost half of the losses seen in the prior month as the market
continues to charge higher targeting the key resistance zone
around the 34000 level. That’s where we are likely to see the sellers coming
into the market with more conviction as they will have a better risk to reward
setup to position for another drop into the lows.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the break
above the minor downward trendline saw even
more buyers coming into the market as a key barrier got taken out. There’s now
a minor resistance defined by the previous swing high around the 33893 level,
but at this point we should see the price getting into the 34000 resistance
zone before seeing more bearish pressure coming into the market.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the divergence with
the MACD
signalled a loss of bearish momentum and led to a reversal after the break of
the minor trendline. The buyers yesterday leant on the red 21 moving average to
position for another bullish impulse into the 34000 resistance. A break of the
most recent high might see more buyers piling into the market but we are now
near the sellers’ area, so we are likely to see the bullish momentum weakening
and the MACD could be helpful to time the reversal. An ugly CPI report today
might already be enough for the sellers to reverse this entire rally.

Upcoming Events

Today we will get the most important report of the
week, that is the US CPI report. The market is likely to focus on the core
measures and react positively to lower than 0.4% monthly rate readings. At the
same time, we will also see the latest US Jobless Claims data which is an
important labour market report. Tomorrow, we conclude the week with the
University of Michigan Consumer Sentiment report.

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

S&P 500 futures are up 0.4% while major European indices are posting gains of around 0.6% to 1.0% currently. This continues from the push higher yesterday as equities are looking to recover more ground after the drop in the last two weeks.

In terms of overall sentiment, tech stocks remain the beacon of hope in a sense and the Nasdaq chart exemplifies that:

It tested key trendline support over the last one week or so before pushing back to above its 100-day moving average (red line) yesterday. And buyers will be hoping for more follow through after the US CPI data today.

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

Headlines:

• Dollar relatively steady so far on the session
• Treasury yields dip further as Middle East tensions linger
• Fed’s Bowman: Interest rates may need to rise further
• ECB’s Knot: Policy is in a good place now
• ECB’s de Cos: Core inflation has turned a corner
• Eurozone consumers still see inflation higher for longer
• US MBA mortgage applications w.e. 6 October +0.6% vs -6.0% prior
• Germany September final CPI +4.5% vs +4.5% y/y prelim

Markets:

• CHF leads, NZD lags on the day
• European equities mostly higher; S&P 500 futures up 0.3%
• US 10-year yields down 9.5 bps to 4.560%
• Gold up 0.5% to $1,870.73
• WTI crude down 0.8% to $85.27
• Bitcoin down 0.7% to $27,200

It was a slow session for the most part as traders are largely waiting on key US data to come during the week. Today will feature the PPI report before we get to the main event tomorrow i.e. CPI report.

Major currencies are looking rather tentative and pushing and pulling within a narrow range. The dollar is keeping steadier overall despite a further plunge in Treasury yields on the day. 10-year yields are down nearly 10 bps now to 4.56% and after being roughed up early in European morning trade.

EUR/USD is flattish at 1.0600 while USD/JPY is little changed at 148.80 currently. The aussie and kiwi are lagging slightly but the softness can’t really be attributed to the risk mood.

Overall risk sentiment is holding up, with US futures ticking a little higher amid the drop in bond yields. The only drag comes from Europe and that features French and luxury stocks after LVMH reported slower sales growth in Q3.

Besides that, there is little to work with but perhaps we’ll get more affirmative action after the PPI report as Wall Street digests the continued fall in Treasury yields this week.

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

In asset trading, foreign exchange, or Forex,
occupies a unique niche. Foreign exchange is one of the most significant global
economic events. Simply put, it is a virtual international market where
currencies are bought and sold.

Multiple factors drive this dynamic marketplace, but one of the most essential
elements in understanding its fluctuations is the concept of imbalance. This
article will explain what is Forex
trading and what an
imbalance in Forex means.

Basics of Supply and Demand in Forex

At its core, Forex trading is purely reliant on
the basic economic principles of supply and demand. Currencies, like any other
asset, are subject to fluctuations in supply and demand. A currency in high
demand will be in limited supply; hence, its value will appreciate. Obviously,
the opposite is true of any currency that is not in demand.

The driver for a currency to be in high demand is its popularity as a primary
trading currency. Strong currencies such as the dollar, pound, and euro are
always in high demand because they are the staples of international trade.

The Concept of Imbalance

A fine line exists between the forces of supply
and demand in trading currencies.

Definition of Imbalance in Forex

An imbalance in Forex occurs when there is a
significant disparity between those forces for a particular currency. This
imbalance can manifest in two ways. One is a sudden surge in buying pressure,
known as a bullish imbalance. On the other hand, an imbalance driven by currency
sellers is a bearish imbalance.

Causes of Imbalance in Forex

Several factors can lead to an imbalance in the
supply of a currency in the Forex market. Economic releases, like employment
data or interest rate decisions, can trigger rapid shifts in currency demand.
Political events, such as elections or policy changes, can also create
imbalances.

Unexpected global events like natural disasters or geopolitical conflicts can
disrupt the balance between buyers and sellers in the market. These events
cause buyers or sellers to change their strategies abruptly, either trying to
dump or hoard their assets. When this situation manifests, the market becomes
quite volatile and even more unpredictable than usual.

Implications of Forex Imbalance

Imbalances can have far-reaching consequences.
For traders, they present both an opportunity and a risk. Trading is always
risky, but imbalanced situations add an extra element of uncertainty that can
be severely costly or might pay huge dividends.

Sudden imbalances can lead to sharp price spikes, and on a larger scale,
imbalances can impact a country’s trade balance. The trending phenomenon can
affect a currency’s exchange rate and international competitiveness. Imbalances
can affect the global economy, as Forex imbalances are interconnected with
international trade and investment.

Strategies to Navigate and Maximize Forex
Imbalances

Recognizing the signs of imbalance is a must for
traders. Monitoring economic calendars, news releases, and market sentiment can
help identify potential imbalances. Once identified, traders can employ various
strategies to capitalize on imbalances. However, predictive analytics is not an
exact science, so answers are not 100% accurate.

Utilizing Resources to Stay Ahead

Understanding imbalances in Forex is essential
for anyone participating in the trading market. Imbalances signify shifts in
supply and demand that can lead to significant price movements. These movements
are an opportunity as much as they are a risk. Traders must stay informed about
economic events and continuously adapt their strategies to navigate imbalances
effectively.

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

• More confident that inflation trajectory might lead us to 2% target
• If rates are maintained for a sufficiently long period, we could get there
• Market has understood very well our communication
• Growth risks skewed to the downside
• It is premature to discuss rate cuts

They are trying to sell the story they are right in pausing on rate hikes but I guess time will tell. We’ll see how confident they can still try to be if the economy takes a worse turn in the months ahead.

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

• Prior -6.0%
• Market index 179.3 vs 178.2 prior
• Purchase index 137.5 vs 136.6 prior
• Refinance index 385.8 vs 384.6 prior
• 30-year mortgage rate 7.67% vs 7.53% prior

After a sharp drop in mortgage applications in the week before, there is a mild bounce back in activity with both purchases and refinancing ticking a touch higher. The drop in rates this week will be welcome, after another 14 bps rise in the average rate of the most popular US home loan last week.

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

The recent breakout of the
symmetrical triangle led to a fall into the key support around the 3.54 level.
The causes are the tighter monetary conditions that are leading to a slowdown
in global growth. Moreover, in the past weeks we also had some risk aversion
due to falling equity prices and rising global yields and US Dollar. More
recently, Copper bounced as Chinese data started to show some improvement as
the PMIs improved amid easing measures from Chinese
officials. Yesterday, we got another news that China is considering new stimulus to meet the growth target, which
should further support Copper prices.

Copper Technical Analysis –
Daily Timeframe

On the daily chart, we can see that after the
breakout of the symmetrical triangle, Copper
fell to the key support around
the 3.54 level where it bounced as the buyers stepped in with a defined risk
below the level to position for a rally. The symmetrical triangle might now
turn into a descending triangle, so the 3.54 support and the top major trendline will be
key levels to watch from now on.

Copper Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that Copper bounced
on the 3.54 support and rallied into the 3.68 level before pulling back into
the 61.8% Fibonacci retracement level
and resuming the rally. The market structure on this timeframe is bullish as
the price has printed a new higher high and the moving averages have
crossed to the upside. The first target for the buyers should be the minor
downward trendline around the 3.74 level where the sellers are likely to step
in to target a selloff into the 3.54 support.

Copper Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
had a divergence with
the MACD right
into the key support which is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, we got a reversal, and the
buyers are now in control. On a more short-term basis, we might see the buyers
leaning on the recent swing low around the 3.64 level where we have the confluence with
the red 21 moving average. More conservative buyers might want to wait for the
price to take out the recent high before joining the rally. The sellers, on the
other hand, will want to see the price breaking below the recent swing low to target
another drop into the 3.54 support.

Upcoming Events

This week the market is likely to focus on the US CPI
report as that’s what might change the expectations around the next FOMC rate
decision. Today, we will see the US PPI data and later in the day the FOMC
Meeting Minutes. Tomorrow, it will be the time for the US CPI report, and at
the same time we will also get the latest Jobless Claims figures. On Friday we conclude
the week with the University of Michigan Consumer Sentiment report. Copper is
likely to react more to elevated Core CPI figures as they might lead to more
Fed tightening or ugly Jobless Claims data as that might signal a recession on
the horizon.

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

10-year Treasury yields are down to 4.707% now after returning from the long weekend, down notably from 4.782% at the end of Friday. That being said, they are much higher than the opening gap lower of 4.636% earlier today. We already saw how stocks brushed aside the Middle East conflict yesterday, will we see the same for the bond market later in the day?

That’s certainly something to watch out for and that could hurt risk sentiment, despite the strong rebound we are seeing in stocks since late yesterday. My gut feel tells me that investors are likely to keep any optimism in check, so perhaps we might not get roaring gains especially since the US CPI data is coming up on Thursday. But if bonds are going to topple over, it could see selling flows spill over to broader markets as well in the session(s) ahead.

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

US:

• The Fed left interest rates unchanged as
  expected at the last meeting.
• The macroeconomic projections were revised higher
  as the economy showed much stronger resilience than expected and the Dot Plot
  showed that the majority of members still expects another rate hike by the end
  of the year with less rate cuts in 2024.
• Fed Chair Powell
  reaffirmed their data dependency but added that they will proceed carefully.
• The latest US Core PCE
  came
  in line with expectations with disinflation continuing steady.
• The labour market remains
  fairly solid as seen last week with another strong beat in Jobless Claims and the NFP report.
• The ISM Manufacturing PMI beat
  expectations while the ISM Services PMI came in
  line with forecasts in another sign that the US economy remains resilient.
• The market doesn’t expect the Fed to hike anymore.

Australia:

• The
  RBA kept interest rates unchanged as expected as they are seeing inflation
  returning to target with the current level of interest rates.
• The
  latest monthly CPI showed that core inflation is
  slowing.
• The
  labour market is weakening as we got a big miss
  in July and the bulk of jobs added in August were part time.
• The
  Australian Manufacturing PMI fell further into contraction while
  the Services PMI jumped back into expansion.
• The
  market expects the RBA to hold rates steady at the next meeting as well.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the AUDUSD pair
was diverging with the
MACD right
when it was trying to break out of the range. This is generally a sign of
weakening momentum often followed by pullbacks or reversals. In this case, the
pair failed to sustain the breakout and bounced back into the range. The buyers
might now have enough conviction to target the top of the range around the 0.65
handle.

AUDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price
action within the range is a real mess with frequent spikes and erratic
movements. From a risk management perspective, the buyers would be better off
to wait for the price to pull back into the lower bound of the regression
channel around the 0.6380 level where they will also have the confluence with the
red 21 moving average. The
sellers, on the other hand, will want to see the price breaking below the support zone
around the 0.6370 level to position again for new lows.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the bullish setup with the 61.8% Fibonacci
retracement level adding further confluence to the
support around the 0.6380 level. As previously mentioned, the sellers will want
to see the price breaking below the lower bound of the channel to invalidate
the bullish setup and position for another selloff into new lows.

Upcoming Events

This week the market is likely to focus on the CPI
report as that’s what might change the expectations around the next FOMC rate
decision. Today, we will see the US PPI data and later in the day the FOMC
Meeting Minutes. Tomorrow, it will be the time for the US CPI report, and at
the same time we will also get the latest Jobless Claims figures. On Friday we conclude
the week with the University of Michigan Consumer Sentiment report.

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

• Prior 91.3

This marks 21 months in a row now that the index has come in below the 49-year average of 98. Of note, 23% of business owners continue to report that inflation remains their single biggest problem in operating their business – similar to last month. The full report can be found here.

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