UPCOMING EVENTS:

• Tuesday: US
  NFIB Small Business Optimism Index.
• Wednesday: US
  PPI, FOMC Minutes.
• Thursday: Japan
  PPI, UK GDP, ECB Minutes, US CPI, US Jobless Claims, NZ Manufacturing PMI.
• Friday: China
  CPI, China Trade data, Eurozone Industrial Production, US University of
  Michigan Consumer Sentiment.

This weekend, Hamas
launched a massive attack against Israel
which draws parallels between October 2023 and October 1973. The implications
for global markets are still uncertain, but the Oil market is the first one
that comes to mind. Javier Blas published a nice article
on Bloomberg where he highlights the likely implications and how the situation
can turn uglier.

Wednesday

The US PPI Y/Y is expected to match the
prior reading at 1.6%, while the M/M reading is seen at 0.3% vs. 0.7% prior.
The Core PPI Y/Y is expected at 2.3% vs. 2.2% prior, while the M/M figure is
seen at 0.2% vs. 0.2% prior. This report might not be that much marker moving
as the market is more likely to focus on the CPI report the following day.

The FOMC Meeting Minutes generally cause
some reaction in the markets, but the moves are usually faded soon after as the
contents are three-weeks old and mostly known. As
a reminder, the Fed left the FFR at
5.25-5.50% as expected with growth and inflation projections revised higher and
the unemployment rate revised lower. The Dot Plot showed that the FOMC still
expects another 25 bps hike by the end of the year but “surprisingly” sees only
50 bps of rate cuts in 2024, where previously it was 100 bps.

Thursday

The ECB Monetary Policy Meeting Accounts,
similar to the FOMC Minutes, are released roughly four weeks after the ECB
Policy Decision and they generally aren’t market moving. As
a reminder, the ECB hiked interest
rates by 25 bps at the last meeting with the market seeing a 50/50 chance back
then of either a hike or a pause. In the statement, the ECB added that it
“judges that rates have reached levels that, maintained for a sufficiently long
duration, will make a substantial contribution to the timely return of
inflation to the target”. This is basically them saying that they are done
with the tightening cycle, which is also what the ECB members have been
signalling in their speeches following the monetary policy meeting.

The US CPI Y/Y is expected at 3.6% vs.
3.7% prior, while the M/M reading is seen at 0.3% vs. 0.6% prior. The Core CPI
Y/Y is expected at 4.1% vs. 4.3% prior, while the M/M figures is seen at 0.3%
vs. 0.3% prior. Given the overall strong economic data and the beat in the NFP
report last Friday, a hot CPI report might force the Fed to proceed with a 25
bps hike at the November meeting.

The US Jobless Claims keep on beating
expectations week after week as the US labour market remains solid. This week
the consensus sees Initial Claims at 210K vs. 207K prior with no consensus at
the moment for Continuing Claims, although the prior reading was 1664K.

Friday

The
Chinese CPI Y/Y is expected at 0.2% vs. 0.1% prior, while the M/M reading is
seen at 0.3% vs. 0.3% prior. The PPI Y/Y is expected to remain in negative
territory at -2.4% vs. -3.0% prior. The Chinese inflation rate slipped into
deflation in July before returning in positive territory the next month as
officials kept on rolling out easing measures to prop up their ailing economy.

The
University of Michigan Consumer Sentiment is expected to tick lower to 67.4 vs.
68.1 prior. Consumer sentiment has been rising since October of last year as
consumers’ finances improved due to lower inflation and higher wages. More
recently, higher energy prices weighed on the sentiment, but the good news is
that inflation expectations haven’t gone up as one would have expected.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Just last week, White House National Security Adviser Jake Sullivan talked about how „quiet“ the Middle East was.

„I emphasize for now, because all of that can change, and the Middle East region is quieter today than it has been in two decades,“ he said.

It’s not anymore.

Hamas launched a massive attack against Israel from Gaza, far more than anything in decades. The images are horrific from what was an incredibly-coordinated attack that was somehow completely missed by Israeli intelligence. It’s still far from clear what was done and the fallout but Israel’s declaration of war against Hamas wasn’t hyperbole; officials from Israel promised to leave Gaza in ruins.

Efraim Halevy, the former head of Mossad, Israel’s Intelligence Service, told CNN:

“The number of missiles they have launched within less than 24 hours is
over 3,000. This is beyond imagination from our point of view, and we
didn’t know they had this quantity of missiles, and we certainly didn’t
expect that they would be as effective as they were today.“

Fingers are being pointed in every direction, particularly at Iran and it comes just as the US was trying to broker a defense pact with Saudi Arabia. Given what’s likely to be a long and brutal response against Hamas, it will now be difficult for Saudi Arabia to recognize Israel as part of that deal.

In general, Israel-Palestine conflicts don’t move global markets but the scope of this is now so large and has so much potential to spread beyond Gaza that markets are sure to take notice on Monday and that likely means a bid in safe haven assets like gold and Treasuries; along with commodities that could be affected like oil. Also expect a bid in the US dollar.

This article was written by Adam Button at www.forexlive.com.

It’s all happening in the Middle East once again this weekend. A surprise attack by Hamas on Israel set off a strong response in something that will rekindle instability in the region. I doubt Israel headlines move markets but the violence comes at the same time that the US looking for some kind of peace deal involving Saudi Arabia.

The WSJ’s Summer Said reports that Saudi Arabia has told the White House it would be willing to boost oil production early next year if crude prices are high. That would be part of a deal where Saudi Arabia would recognize Israel and get a defense pact with Washington.

There were rumors of a Saudi deal earlier in the week and that was cited as one of the reasons for the drop in oil prices.

The deal would include US support for a Saudi civilian nuclear program, and US approval for sophisticated weapons sales to Saudis.

The WSJ report said the US hopes to broker a deal in the next six months and that Israel, Saudi Arabia and the US have agreed on the broad contours of a deal. The deal may need Congressional approval and the US emphasized to Saudi Arabia that it would need to repair its image in the US, presumably by pumping more oil.

This will make for an interesting open to the oil market in the new week. The conditional part of the agreement that ‚if oil prices are high‘ is doing a lot of work in this report because ‚high‘ is certainly a matter of opinion. I’m certain Saudi Arabia doesn’t consider the $84.58 closing price of Brent on Friday as ‚high‘. So is that threshold $100? Or $120? Saudi Arabia also needs to balance its relationship with OPEC and Russia while funding its mega-projects.

There could be an element of ’sell the rumor, buy the fact‘ on this report. Also note that it was the same reporter who touted a rift between Saudi Arabia and the UAE earlier this year, saying „Emirati officials say the U.A.E. is having an internal debate about leaving OPEC“. There’s been no evidence since to substantiate that but it was part of a narrative that sank oil prices to $65 from $80 at the time. Finally, Summer Said also reported in November 2022 that OPEC was considering a production hike at the December 4, 2022 meeting, just after cutting by 2 million barrels per day. Saudi energy minister Prince Abdulaziz bin Salman denied the reports and said a production cut was possible instead but production was ultimately left unchanged.

This article was written by Adam Button at www.forexlive.com.

• US major indices close higher for the day. S&P snaps four week losing streak
• WTI crude futures settle at $82.79
• UAW Pres Fain: UAW strike is working but not there yet
• Mortgage rates at 23 year high.
• Baker Hughes oil rig count 497 versus 502 last week. Crude oil is trading little changed
• WSJ’s Timiraos: its a weird payroll report
• European indices close higher on the day. German Dax rises over 1%
• More from ECB Knot: Would prefer a tolerance band around target rate
• US 10 year yield tests the high from earlier the week after stronger US jobs report
• ECBs Knot: We are getting on top of inflation
• Canada September employment 63.8K vs 20.0K expected
• US September non-farm payrolls +336K vs +170K expected
• The GBP is the strongest and the JPY is the weakest as the North American session begins
• Forexlive European FX news wrap: Schnabel won’t rule out more ECB rate hikes

When the US jobs report came out and showed a stronger-than-expected 336K nonfarm payroll jobs (estimate 170K) and revisions of over 100K to the prior month’s, the US dollar moved higher, yields moved higher and stocks moved lower.

However, then people started to look at things like the unemployment rate remaining at 3.8% (despite the gain in jobs), the average hourly earnings coming in at 0.2% – lower than the 0.3% expected – and the year-on-year average earnings dipping to 4.2% which was lower than pre-pandemic levels, the tone in the market started to shift. First it was a correction. Then when technical level started to be taken out in the opposite direction of the initial moves, you could hear the „uh-ohs“, and more and more stories started to explain the strong data away.

• The 10 year yield moved up to 4.887% which took out the high yield from 2 days ago at 4.884%, but started to back off of that level.
• Stocks in premarket trading started to recover some of the losses and then opened with not so bad declines
• The USD recovered some of the earlier gains but was still higher on the day

There were enough pundits who questioned some of the seasonal influences. Some started to refer back to Fed’s Daly and Bostic who implied the rising yields were the equivalent of Fed tightening, and that the Fed moves warranted a pause in policy (who knows if they knew the data?).

The next thing you know, markets start to reverse even more.

• In the US stock market, the „good data equals lower stock prices“, turned around to „good data equals higher stock prices“ i.e. Goldilocks.
• In the bond market, the inability to extend toward 5% in the 10 year became a positive. The 30 year which moved above the 5% level to a high of 5.052%, but then worked its way back down and below the 5% level.
• The USD saw target levels stall the greenbacks rise, and other broken technical levels start to be taken back.

For example,

• The EURUSD moved down to test a key target at 1.0483 and then reversed back above its 100 hour moving average and 200 hour moving averages at 1.0507 and 1.05297 respectively. As London/European traders were looking to exit, a new high was made, the price moved above the 38.2% retracement of the move down from the September 12 high at 1.05709, and extended to just short of 1.0600.
• The GBPUSD initially fell down to test the corrective low from Wednesday’s trade, the day low from Thursday’s trade both at 1.21056. The low price today reached 1.21053 and like the EURUSD, moved back above its broken 100-hour moving average (currently at 1.21326) and 200-hour moving average (currently at 1.21536). That turned sellers to buyers. The price later moved above the 38.2% retracement of the move down from the September 11 high at 1.22316. Then made a new high for the week at 1.2258. The price is closing above that level for the trading week.
• The AUDUSD fell below its 100-hour moving average of 0.6340 after the jobs report, but then rebounded back above that level and also back above its 200-hour moving average at 0.63726.
• The USDCHF moved up to test its near converged 100 and 200-hour moving averages shortly after the jobs report near 0.9166. It found willing sellers against that level in reversed down to a low for the day and week at 0.9072.
• The NZDUSD stalled its initial fall after the jobs data near the 100 hour MA at 0.5931, bounced back above its 200 hour MA at 0.59469, and extended to an intraday high at 0.6002 (just above natural resistance at 0.6000). The price is closing the day at 0.59883.

Overall, the NZD is ending the day is the strongest of the major currencies. The JPY is the weakest. The USD is down vs all the major currencies with the exception of the JPY.

In the US interest rate market, yields remain higher on the day but off the highest levels:

• 2-year yield 5.081%, +5.6 basis points
• 5-year yield 4.751%, +6.8 basis points
• 10-year yield 4.794%, +7.9 basis points
• 30-year yield 4.959%, +7.3 basis points

In the US equity markets, the major indices all close solidly higher led by the NASDAQ index. For the trading week, the S&P snapped a 4-week losing streak. The Dow industrial average was still negative on the week. The NASDAQ and the closed higher for the week:

• Dow industrial average rose 288.01 points or 0.87% at 33407.59. For the trading week the index fell -0.30%.
• S&P index rose 50.31 points or 1.18% at 4308.49. For the trading week the index gained 0.48% thanks to today’s move higher.
• NASDAQ index rose 211.50 points or 1.60% at 13431.33. For the trading week the index gained 1.6% after starting the day unchanged for the week.

Next week US CPI data be released on Thursday. Hope springs eternal that the Fed is now able to maneuver through strong employment without inflation moving higher. Time will tell, but today the market celebrated

This article was written by Greg Michalowski at www.forexlive.com.

The major US indices are closing higher for the day. The gains came despite strong and expected US jobs report and higher yields. Traders are hoping that the tame wage data and the unemployment rate remaining unchanged at 3.8% (expected 3.7%) will keep the Fed on hold. Next week we get key consumer price index data in the US released on Thursday.

The final numbers are showing:

• Dow industrial average rose 288.01 points or 0.87% at 33407.59
• S&P index rose 50.31 points or 1.18% at 4308.49
• NASDAQ index rose 211.50 points or 1.60% at 13431.33

For the trading week, the Dow industrial average could not erase its declines and still closed lower, but the S&P rebounded into positive territory today and snapped a 4-week losing streak. The NASDAQ index is also higher and has now risen for 2 consecutive weeks (admittedly last week’s gain was by the slimmest of 0.06%).

• Dow industrial average, -0.30%
• S&P index, +0.48%
• NASDAQ index +1.60%

Some of the big gainers today were the big cap/AI stocks:

• Adobe, +1.98%
• Nvidia, +2.41%
• Google, +1.87%
• Microsoft, +2.46%
• Meta, +3.49%
• Netflix, +2.43%

Shares of Apple rose by 1.43%, but lagged the NASDAQ index today. Amazon rose 1.59%

This article was written by Greg Michalowski at www.forexlive.com.

In this video, I outline the risks and targets in the USDCH as we work toward the close for the week, and the look ahead to the new trading week.

What is the bias? What are the targets? What is the risk? What did the price action today and this week tell us technically about the price action going forward?

This article was written by Greg Michalowski at www.forexlive.com.

In this video, I outline the risks and targets in the USDCAD as we work toward the close for the current week, and the look ahead to the new trading week starting October 9, 2023.

What is the bias? What are the targets? What is the risk? What did the price action today and this week tell us technically about the price action going forward?

This article was written by Greg Michalowski at www.forexlive.com.

The price of WTI crude futures are settling at $82.79. That’s up $0.48 or 0.58%. Since then the price has rallied up to $82.98.

For the week, the price is still down sharply by -8.57% currently that is the sharpest fall since March 13, 2023 week

This article was written by Greg Michalowski at www.forexlive.com.

• ECB’s Schnabel: If risks materialize, further rate hikes may be necessary
• Halifax says downward pressure on UK house prices likely to last into next year
• German industrial orders rebounded in August
• Italy August retail sales -0.4% vs +0.4% prior
• Mohamed El-Erian on 2 factors that makes a US recession more likely
• JPMorgan’s Marko Kolanovic is preparing for a possible 20% drop in the S&P 500

Markets:

• Gold up $1 to $1821
• US 10-year yields up 2.9 bps to 4.74%
• WTI crude oil up 18-cents to $82.48
• S&P 500 futures up 0.2%
• GBP leads, JPY lags

The news was mostly positive in Europe as German industrial orders rebounded from a dreadful July and Schnabel kept the door open to rate hikes, though the later may have only served to reinforce that it will take a surprise to jar the ECB from the sidelines.

The euro was under some pressure early in Europe as the dollar strengthened broader but it’s since turned around and is trading at the highs of the day. The pound also has some momentum in its third day of gains.

The yen is weaker though as global yields tick higher again. Perhaps the most-intriguing news is that President Biden scheduled an appearance to talk about the jobs report at 11:30 am ET. That’s the kind of thing a President would do to take a victory lap after a good report.

This article was written by Adam Button at www.forexlive.com.

It’s likely a fool’s errand to try to make sense of price action in the hour before the non-farm payrolls report but USD/JPY is at the highs of the day, up 58 pips to 149.09. It’s getting help from a 3.4 bps rise in 5-year yields to 4.71% the rest of the curve is up 2.5-3.5 bps as well.

The pair is starting to brush against some post-intervention highs but continue to run to 149.31 and those surely won’t be tested before non-farm payrolls. Afterwards, a strong jobs report would leave some room to the upside before the 150.00 level puts intervention back on the agenda.

This article was written by Adam Button at www.forexlive.com.