• Eurozone economy to stagnate in the next few quarters
• Risks to inflation have become more balanced
• Fiscal impasse is starting to turn into a headache

The fear for the euro area now is that as the economy skirts around the risk of a recession, a second-round effect of inflation pressures would basically put them in a rather dire spot. Stagflation, anyone? Lagarde is trying to sound optimistic but surely she can’t say with unequivocal certainty that the ECB has done enough.

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

The near-term chart shows the change in prospects for gold as price now falls below the 100-hour moving average (red line). That indicates that the near-term bias is now more neutral as sellers wrestle back some control:

The fall comes after gold tested the highs from June and July around the region of $1,983-87 on the daily chart. And with a lack of significant escalation in the Israel-Hamas conflict since the weekend, we are perhaps starting to see safety bets come off the boil even more this week.

If gold keeps with losses today, it will be the first back-to-back daily decline for the precious metal since the start of October.

That could be a turning point for sellers to try and gather more momentum for a downside push in the sessions ahead. The next key test will be the 200-hour moving average (blue line) first around $1,935.24 currently before moving on to the 100 and 200-day moving averages around $1,922-31 next.

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,
  and the Dot Plot showed that the FOMC still expects another rate hike by the
  end of the year with less rate cuts projected in 2024.
• Fed Chair Powell reaffirmed their data dependency but added that
  they will proceed carefully.
• The US CPI beat expectations on the headline
  figures, but the core measures came in line with forecasts and the market’s
  pricing barely changed.
• The labour market remains pretty resilient as seen once again last
  week with the beat inJobless Claims, although continuing claims missed for a second
  time in a row.
• The US Retail Sales last week beat expectations by a big
  margin with positive revisions to the prior figures, suggesting the consumers’
  spending remains resilient.
• Fed Chair Powelland other FOMC members continue to highlight the rise in long term yields as doing
  the job for the Fed and therefore they are expected to keep rates steady in
  November as well.
• The market doesn’t expect the Fed to hike anymore.

New Zealand:

• The RBNZ kept its official cash rate
  unchanged while
  stating that demand growth continues to ease and it’s expected to decline
  further with monetary conditions remaining restrictive.
• The New Zealand inflation data last week missed expectations
  supporting the RBNZ’s stance.
• The latest employment data surprised to the upside.
• The Manufacturing PMI continues to slide further into
  contraction, but the Services PMI jumped back into expansion.
• The RBNZ is expected to keep the
  cash rate steady at the next meeting.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the NZDUSD pair
is massively 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 broken support turned resistance which
might end up being a classic “break and retest” pattern. If the price continues
higher and breaks above the resistance though, we will get a confirmation of a
reversal and the NZDUSD pair might rally all the way back to the trendline.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the recent
break above the minor trendline and the moving averages
crossover switched the bias more to the upside. This might be just a complex
correction though and the sellers are likely to step in at the resistance with a
defined risk above the level to position for a drop into new lows. The buyers,
on the other hand, will want to see the price breaking higher to pile in and
start targeting the major trendline around the 0.5980 level.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we’ve
been diverging with the MACD for quite some time. The first target of the
divergence, in case the price breaks above the resistance, is the swing high
around the 0.5925 level. A lot will depend on how the price reacts to the key
resistance. A break below the recent higher low around the 0.5838 level should
change the market structure on this timeframe back to bearish and likely
increase the downside momentum leading to a drop to new lows.

Upcoming Events

Today we will get the latest US PMIs where strong
figures should support the greenback, while weak readings are a bit more
complicated as the USD might weaken due to falling Treasury yields but also
strengthen due to recessionary fears. On Thursday, we will see the US Jobless
Claims figures, while on Friday we get the US PCE report which is not expected
to change anything for the Fed at this time.

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

The pair is now down to 1.0634 on the day, lower by 0.3% as it owes more to a slump in the euro with the dollar keeping relatively steadier on the session. The greenback was slightly softer earlier on but 10-year Treasury yields are now up 2.1 bps to 4.858% and that is helping the dollar to find a bit of a footing. As for the euro, the poor PMI readings from France and Germany has been a real drag for the single currency.

With the drop today, EUR/USD is threatening to undo yesterday’s technical breakthrough above the 23.6 Fib retracement level at 1.0643. That will give sellers back some semblance of control, as they are also putting up a defense with price action having fallen off after hitting a high of 1.0693 earlier – which tested the 100-week moving average of 1.0685.

That tells us that any upside break is not secured just yet and will rely a lot on the daily close today to some degree.

If buyers can’t hang on and keep price above 1.0643, it’s tough to argue for a strong push higher in EUR/USD unless Treasury yields threaten to retrace much more than it already has yesterday.

In turn, that perhaps is a sigh of relief for dollar bulls as well considering that EUR/USD was the only pair that really threatened something at the start of the day here.

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

Headlines:

• 10-year Treasury yields clip the 5% mark
• Equities dragged lower, dollar muted as 10-year US yields hit 5%
• USD/JPY but a whisker away from retesting the 150.00 mark
• The key risk events to watch out for in trading this week
• Heads up: A note on the UK labour market data due tomorrow
• SNB total sight deposits w.e. 20 October CHF 478.8 bn vs CHF 483.8 bn prior

Markets:

• EUR leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.4%
• US 10-year yields up 6.5 bps to 4.988%
• Gold down 0.1% to $1,978.51
• WTI crude down 0.6% to $86.30
• Bitcoin up 3.7% to $30,690

The session started off with some light relief as the Israel-Hamas conflict did not escalate significantly over the weekend. That saw safety flows abate as equities gained by the slightest of margins while bonds were offered as well. That also saw both gold and oil hold lower ahead of the open in Europe.

But as European traders entered, the focus turned towards the bond market as 10-year Treasury yields jumped up above 5% to its highest levels since 2007. The move is a rather brief one though as yields track back to ~4.98% now as Europe waits on validation from US traders later on.

The push higher in yields weighed on stocks as S&P 500 futures was dragged down by 0.7% at one point, before halving losses now.

However, outside of equities, the reaction to yields touching 5% was rather muted. Gold trimmed its earlier losses alongside oil, with the precious metal climbing back up to $1,978 currently from a low of $1,964 in Asia.

Meanwhile, the dollar barely responded with the euro, yen, and pound all trading flattish against the greenback for almost the entirety of the session. USD/JPY in particular remains one to watch as it seems to be holding back dollar bulls, with the pair continuing to hover just below the 150.00 mark at around 149.80-90 levels today.

It is now over to Wall Street to make do with the bond market and if we are to see yields retrace lower after touching 5% now, I would expect that to translate to some bout of dollar weakness across the board; vice versa.

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

Last week, we got some risk aversion in the market
as the tensions in the Middle East intensified. In fact, going into the weekend
the bearish momentum increased as ABC news reported
that the Israeli military got the „green light“ to move into Gaza
whenever it was ready. Since we haven’t seen any ground offence over the
weekend, we might see a relief rally today.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite “confirmed” the downside breakout as the price fell not only below
the key trendline, but also
below the key support around
the 13174 level. The sellers have now a high chance of reaching the 12274
support where we will find the buyers stepping in more strongly to position for
a rally back to the 13174 level.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the Nasdaq
Composite now sits at the previous lows and that’s where we can expect the
buyers to pile in with a defined risk below the low to position for a relief
rally today into the broken support turned resistance and
hoping for an upside breakout.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that from
a risk management perspective, the sellers would be better off waiting for the
price to pull back into the trendline where we can find the confluence with
the 38.2% Fibonacci
retracement level, the red 21 moving average and
the previous support turned resistance. The buyers, on the other hand, will
want to see the price further breaking higher to invalidate the bearish setup
and increase the bullish bets into the next resistance around the 13400 level.

Upcoming
Events

Tomorrow, we will get the US PMIs and the market might
not like bad figures given the fragile risk sentiment. On Thursday, we will see
the US Jobless Claims data with Continuing Claims recently showing some
softness in the labour market. Finally, on Friday, we will get the US PCE
report, which is not expected to change anything for the Fed at this time.

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

In case you missed this headline last week: Heads up: UK labour market data today will only be a partial one

ONS is now out with an operational note stating that the release tomorrow will feature „a new series using additional data sources to produce adjusted levels and rates for employment, unemployment and inactivity for the latest two 3-monthly periods (May to July 2023 and June to August 2023)“.

And that the previously used labour force survey data methodology will not be published in the report tomorrow. As such, just be wary of that when interpreting the numbers that we will see with regards to employment change and the unemployment rate especially.

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

The pair now trades at 149.98 and at the highs for the day, albeit in a rather constricted range. It’s been a while coming and the pair has been teasing for a push back towards 150.00 since last week already. The last attempt in early October was shot down by Japanese officials but amid higher yields, will Tokyo feel necessary to step in again?

I fear that the longer that USD/JPY is handicapped just under the 150.00 mark, it will create much more frustration for dollar bulls. They are getting anxious but looking at the tamer reaction across the board for the dollar, it is looking like traders need this break higher in USD/JPY to really move the other pairs too.

And if that doesn’t come, you have to wonder how long can the dollar hold up especially if at some point we are to run into a retracement in the bond market after all the heavy selling.

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

10-year Treasury yields are at their highest since 2007, touching 5.018% currently as the selling in the bond market continues. I would’ve expected a slightly more reactive function in the dollar but that hasn’t really been the case. The greenback is rather muted across the board and it is equities that have reacted much more. S&P 500 futures are now down at the lows for the day, softer by 0.7%:

It has been one-way traffic for equities since the opening bell in Europe and the fact that 10-year yields in the US have crossed over above the 5% mark is just compounding woes at this point.

Going back to FX, the dollar is rather muted with EUR/USD flattish at 1.0595, USD/JPY still thereabouts at 149.93, and GBP/USD flat at 1.2155 on the day. It is only the aussie and kiwi that has weakened slightly with AUD/USD down 0.3% to 0.6291 currently but that owes more to the drop in risk trades amid higher yields, rather than any outright dollar strength.

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

UPCOMING EVENTS:

• Tuesday:
  AU-JP-EZ-UK-US PMIs, UK Unemployment Rate.
• Wednesday:
  Australia CPI, German IFO, BoC Policy Decision.
• Thursday:
  ECB Policy Decision, US Durable Goods, US GDP Q3, US Jobless Claims.
• Friday:
  Tokyo CPI, Australia PPI, US Core PCE.

Tuesday

The ONS last week published
only the figures on the workers’ earnings, vacancies and real time information
on employment. The rest of the UK labour market data was pushed back to this
week due to falling response rates to the LFS survey. The consensus sees the
Unemployment Rate to remain unchanged at 4.3%.

Throughout
the day we will get the PMIs for Australia, Japan, Eurozone, UK and the US. At
this point they are unlikely to influence the near-term policy outlook
as the central banks are expected to keep rates steady as they gather more data
and let the monetary policy lags filter through the economy. The market is more
likely to react to downside surprises given the recent rise in long-term
yields. The most important ones will be the Eurozone, the UK and especially the
US PMIs:

• Eurozone Manufacturing PMI 43.7 vs. 43.4 prior.
• Eurozone Services PMI 48.7 vs. 48.7 prior.
• UK Manufacturing PMI 45.0 vs. 44.3 prior.
• UK Services PMI 49.5 vs. 49.3 prior.
• US Manufacturing PMI 49.5 vs. 49.8 prior.
• US Services PMI 49.9 vs. 50.1 prior.

Wednesday

The
Australian Q3 CPI Y/Y is expected at 5.3% vs. 6.0% prior, while the Q/Q reading
is seen at 1.1% vs. 0.8% prior. The RBA is more likely to focus on the core
measures with the Trimmed Mean CPI Q/Q expected at 1.1% vs. 0.9% prior and
the Y/Y reading seen at 5.0% vs. 5.9% prior, while the Weighted Mean CPI Q/Q
expected at 1.0% vs. 1.0% prior and the Y/Y figure seen at 5.0% vs. 5.5%
prior. The recent RBA Minutes were more
hawkish than expected and suggest that an upside surprise in the CPI data
could raise the chances of another rate hike.

The BoC is
expected to keep interest rates unchanged at 5.0% given the recent miss in the CPI report. In fact, prior
to that, there was a good chance that the BoC could have hiked by 25 bps as
the underlying inflation measures kept on surprising to the upside with wage
growth trending upwards. If the BoC decides to surprise with a rate hike, the
Canadian Dollar is likely to come under pressure after an initial spike.

Thursday

The ECB is
expected to keep the deposit rate unchanged at 4.0% given several dovish
comments from ECB members, the miss in the Eurozone
CPI and the line in the September
Monetary Policy Statement saying that “the GC 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 target”.

Last week, the US
Initial Claims beat expectations once again, but Continuing Claims missed for
the second time in a row suggesting that workers are finding it harder to
get another job after being laid off. This week the consensus sees Initial
Claims at 209K vs. 198K prior, while Continuing Claims are expected at 1720K
vs. 1734K prior.

Friday

The Tokyo
CPI is seen as a leading indicator for National CPI, and it’s been
consistently trending downwards, although the Core-Core measure looks
stickier. The consensus sees the Headline CPI Y/Y to tick lower to 2.7% vs.
2.8% prior, while the CPI ex-Fresh Food Y/Y is expected to remain unchanged at
2.5%.

The US PCE
Y/Y is expected to tick lower to 3.4% vs. 3.5% prior, while the M/M reading is
seen at 0.3% vs. 0.4% prior. The Core PCE Y/Y, which is the Fed’s preferred
measure of inflation, is expected at 3.4% vs. 3.5% prior, while the M/M figure
is seen at 0.3% vs. 0.1% prior. This report shouldn’t be market moving
given that it’s unlikely to change the near-term policy outlook and we recently
got the timelier CPI report.

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