Still, it feels like something of a loss for the bulls, or at least a loss of momentum. We touched $95 early on Thursday before giving back more than $4 and are on track to finish flat on the week.

That, combined with the early-week selling paints a prominent doji star on the weekly chart. That’s a bit of a red flag about the potential for a reversal and also a sign that volatility will stay high.

I would be more cautious on the downside here for five reasons:

1. It’s a new month/quarter on Monday and that could shift allocations. Overall, funds are light on energy, so that could end up being good but a new quarter can change the trend and the trend in Q2 was undoubtedly bullish.
2. All OPEC+ risks are to the downside. All it will take is a small hint that OPEC is thinking about pumping more and oil will fall
3. Similarly, the 2024 is an election year and the temptation will be for the Biden admin to tap the SPR
4. Gasoline cracks are plunging right now. I think that’s more about refineries and them running hotter and changes to winter gas ahead of maintenance but it could reflect demand. Diesel is still rock solid but something is changing in gasoline and any change from the status quo in oil is bearish.
5. October, seasonally, is by far the worst month for front month oil

I think that paints a compelling picture for caution.

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

• Dollar slumps as yields retreat towards the end of the week
• Equities keep the faith ahead of US trading
• ECB’s Vasle: We’re probably done with rate hikes
• BOJ to conduct unscheduled bond buying operation to tamp down rates
• Eurozone September preliminary CPI +4.3% vs +4.5% y/y expected
• France September preliminary CPI +4.9% vs +5.1% y/y expected
• Germany August retail sales -1.2% vs +0.5% m/m expected
• Germany August import price index +0.4% vs +0.5% m/m expected
• Germany September unemployment change 10k vs 15k expected
• UK August mortgage approvals 45.35k vs 45.00k expected
• UK Q2 final GDP +0.2% vs +0.2% q/q prelim
• UK finance minister Hunt says GDP data once again proves the doubters wrong
• Switzerland September KOF leading indicator index 95.9 vs 90.5 expected

Markets:

• AUD and NZD lead, USD lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields down 2.6 bps to 4.571%
• Gold up 0.1% to $1,867.19
• WTI crude up 1.1% to $92.69
• Bitcoin down 0.4% to $26,992

There was plenty of data releases to work through in European trading but the crux of it is that Eurozone inflation did ease to its lowest in two years, allowing some wiggle room for the ECB to work with – at least on paper. The drop is largely led by a steep decline in German price pressures, which owes much to base effects unfortunately as pointed out here.

Besides that, UK Q2 GDP was confirmed to show a slight marginal growth although the year-on-year reading did surprise higher but that doesn’t distract from the ongoing worries in Q3 and heading into Q4.

The dollar was weaker throughout the session as yesterday’s retreat continues today amid lower bond yields. The retreat in yields is also helping out broader market sentiment as risk trades are pushing higher, with equities looking to salvage the week and turn losses into gains before the weekend.

EUR/USD moved up to 1.0600 and is holding just below that, with large option expiries in play at the figure level. Adding to that, USD/JPY did see a dip from 149.40 to 148.52 before finding support from its 200-hour moving average and then now holding at 149.20 on the day. There are also large expiries at 149.00 in play for the pair.

But amid the better risk mood, it is the commodity currencies that are running away with things as we see AUD/USD run up by 1% to test 0.6500 once again and USD/CAD dropping by 0.5% to 1.3420. The latter is angling towards its 100-day moving average at 1.3400 once again, which was what kept the downside move earlier this month at bay.

In the equities space, US futures are holding higher alongside European indices as they look to close out the week by turning the rough losses on Tuesday and Wednesday into gains before all is said and done.

But how much all of this can be chalked up to month-end and quarter-end flows remains to be seen.

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

European indices are seeing gains of ~1% and S&P 500 futures are up 0.5% currently. That is hinting at a rather optimistic end to the week, after the rough period initially amid higher bond yields. The solid rebound yesterday is carrying over to today and it is very much helping with sentiment. The Nasdaq in particular seems to be what is holding things together. Yeah, I know. Tech stocks. Pfft.

Lower Treasury yields is adding to the better mood for risk trades today and in somewhat unbelievable fashion at one point, stocks might just end the week with gains. That being said, how much of this can be chalked up to month-end and quarter-end flows will remain to be seen. But at least for now, the technicals are also holding up as per the above.

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

After the strong selloff following the more hawkish
than expected FOMC dot plot, the Nasdaq Composite is now taking a breather just
around a key level. On the fundamental side nothing’s changed this week other
than another very strong Jobless Claims report
yesterday that points to a tight labour market, which is not what the Fed wants
to see as it might put upward pressure on wage growth and make it harder to
achieve the inflation target.

Nasdaq Composite
Technical Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite pulled back into the support turned resistance and what
happens next will be key for the market. This is where we can expect the
sellers to start positioning more aggressively into the 12274 support, while
the buyers will want to see a break to the upside to invalidate the bearish
setup and target new highs.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely that
the price is in a kind of a limbo. The red 21 moving average is
likely to act as dynamic resistance if the price spikes higher, but overall we
should see more upside if the Nasdaq Composite continues to trade above the
resistance and more downside if it falls back below it.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
price has been diverging with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we got a pullback into the resistance zone where we can
find the trendline and
the 38.2% Fibonacci
retracement level for confluence. This
is where the sellers should step in with a defined risk above the trendline and
target the 12274 support. The buyers, on the other hand, will want to see the
price breaking above the trendline to pile in and target new highs.

Upcoming
Events

Today the only notable release will be the US PCE
report. The data is unlikely to change anything for the market unless we get
some big surprises.

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

The balance of favour now is leaning very much towards a pause by the ECB and markets have already come to terms with that. There are no more rate hikes priced in now and the latest set of inflation numbers this week will just allow the central bank to spin the narrative towards their viewpoint.

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

They confirmed that for the period of 30 August to 27 September, there were no currency interventions made. It is just confirming the obvious as if they did step into the market, we will definitely see a blip in the charts like we did last October.

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

• Prior +6.1%
• CPI +% vs +0.3% m/m expected
• Prior +0.3%
• HICP +% vs +4.5% y/y expected
• Prior +6.4%
• HICP +% vs +0.3% m/m expected
• Prior +0.4%

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

• 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.