Since the Israel-Hamas conflict escalated earlier this month, gold and oil have been the two assets that are arguably impacted the most. And heading into every weekend since, we have seen both commodities gain ground only to fall back again on the following Monday. And with today’s decline, they look set for a third straight fall on the opening day of the new week.

Gold in particular is an interesting spot to watch after an attempted break above $2,000 on Friday. It is now down 0.6% to $1,993 and that could invalidate the breakout and put pressure back on the downside.

The Israel-Hamas conflict continues to be mostly centered around Gaza only and that is perhaps a cause for relief in broader markets. Equities are catching a bid today and that is translating elsewhere too, as we see in the price action in the commodities space.

Meanwhile, oil is down over 1% today tying in with a slight opening gap lower although price action in WTI crude continues to hold around $82 and $90 for now:

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

The back and forth continues in the bond market, as yields are trickling higher to start the new week. The more tentative mood on Friday might be caused by safety flows but we are seeing that unwind all across the board with both gold and oil sitting lower while equities are higher today.

That in turn is seeing 10-year Treasury yields be up nearly 5 bps to 4.892% in European trading. Still, it isn’t doing much to provide any help for the dollar as the greenback is marginally softer on the day. USD/JPY is able to recover slightly to 149.73 at least, up from a low of 149.30 earlier here. It’s still all to play for later in US trading, with month-end flows also a consideration in the coming day.

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

UPCOMING EVENTS:

• Monday:
  Australia Retail Sales.
• Tuesday: Japan
  Jobs data, Japan Retail Sales and Industrial Production, Chinese PMI, BoJ
  Policy Decision, Swiss Retail Sales, Eurozone GDP and CPI, Canada GDP, US
  ECI, US Consumer Confidence, New Zealand Jobs data.
• Wednesday:
  Chinese Caixin Manufacturing PMI, US ADP, Canada Manufacturing PMI, US ISM
  Manufacturing PMI, US Job Openings, FOMC Policy Decision.
• Thursday: Swiss
  CPI, US Challenger Job Cuts, BoE Policy Decision, US Jobless Claims.
• Friday:
  Chinese Caixin Services PMI, Eurozone Unemployment Rate, Canada Jobs data,
  US NFP, US ISM Services PMI.

Tuesday

The BoJ is
expected to keep everything unchanged with rates at -0.10% and YCC to target
the 10yr JGBs at 0% with a +/-50 bps soft cap and 1% hard cap. There is some
speculation about a tweak of the YCC policy though. The central bank is also expected
to raise its inflation forecasts to show prices exceeding its 2% target for
2023 and 2024.

The
Eurozone CPI Y/Y is expected to fall to 3.2% vs. 4.3% prior,
while the Core CPI Y/Y is seen at 4.2% vs. 4.5% prior. The ECB
has paused its tightening cycle at the last meeting with the market expecting
the central bank to remain on hold into the mid-2024 when it sees the ECB starting
the rate cut cycle.

The
US Consumer Confidence is seen ticking lower to 100 vs. 103 prior. The Conference
Board survey is more weighted
towards the labour market, while the University of Michigan survey is more
about households’ financial outlook. The labour market details have been
showing some weakness lately, which is something that we’ve been also seeing
via rising continuing claims.

Wednesday

The
US ADP has a poor track record in forecasting the US NFP, but it’s still a
market moving report, especially now that the labour market data is at the top
of the market’s attention. The consensus sees 150K jobs added in October vs.
89K in the prior
month.

The
US ISM Manufacturing PMI is expected to remain unchanged at 49.0 vs. 49.0
prior. The recent S&P
Global Manufacturing PMI beat expectations with the index printing at 50.0 as
the sector rebounded from the 2022 recession. Moreover, price pressures continue
to ease, which is a good development for the Fed.

The
US Job Openings are seen falling to 9.270M vs. 9.610M prior.
This has been a strong market moving report given that the labour market data
is now at the top of the market’s focus. For now, the US labour market has been
softening via less jobs rather than more layoffs, which is what the Fed has
been aiming for. This is something that we’ve been also seeing lately with the
rising continuing claims and falling initial claims.

The
Fed is expected to keep the FFR unchanged at 5.25-5.50%. The market doesn’t
expect the Fed to raise rates anymore and sees the central bank cutting in
mid-2024. The focus will be more on the guidance for the December meeting, but
we are unlikely to see any pre-commitment as the FOMC remains in a “wait and
see” mode. Expect to hear the usual “data-dependent”, “proceeding carefully”
and “resilient economy”, but this meeting is likely to be as “boring” as the July
one.

Thursday

The
Swiss CPI Y/Y is expected at 1.8% vs. 1.7% prior,
while the M/M reading is seen at 0.1% vs. -0.1% prior. The Switzerland
inflation has been in the SNB’s 0-2% target on both the headline and core
measures for quite some time already.

The
BoE is expected to keep the bank rate unchanged at 5.25%. Citing
Governor Bailey, this decision is likely to be a “tight” one as the hawks might
not like the recent
CPI report, while the doves may see the softness in the labour
market as a reason to keep rates steady.

The
US Jobless Claims last
week missed expectations with Continuing Claims now showing a clear upward
trend, which suggests that workers are finding it harder to get a job after
being laid off. This week the consensus sees Initial Claims at 210K vs. 210K
prior, while Continuing Claims are expected at 1795K vs. 1790K prior.

Friday

The
US NFP is expected to show 172K jobs added vs. a whooping 336K seen in the prior
month, and the Unemployment Rate to remain unchanged at 3.8%. The Average
Hourly Earnings Y/Y are expected to cool to 4.0% vs. 4.2% prior, while the M/M
figure is seen at 0.3% vs. 0.2% prior.

The
Canadian labour market report is expected to show 20K jobs added vs. 63.8K in
the prior
month and the unemployment rate to increase to 5.6% vs. 5.5% prior. The
focus will also be on wages as the BoC has been highlighting its focus
on wage growth.

The
US ISM Services PMI is expected to tick lower to 53.0 vs. 53.6 prior. The recent S&P
Global Services PMI beat expectations with the Services index returning
into expansion. The good news is that the price pressures continue to ease.

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

It’s tough to assess in exactly is happening in Gaza because electricity and communications have been largely cut off but it appears as though Israel’s ground offensive is underway. It came with an overwhelming number of airstrikes and reports of tanks entering in the northeastern corner of Gaza.

In any case, it hasn’t expanded into a broader Middle Eastern war. If anything, the US is signalling that it wants de-escalation. A general meant to advise Israel on a ground war has been recalled, ostensibly because the US advised Israel against a broad ground war and instead in favor of something more targeted. Evidently, Israel rejected that advice.

Now that could all be a smokescreen but I haven’t seen many signs that the US is trying to escalate this into a war with Iran, aside from a few leaks to the WSJ blaming Iran.

In any case, I expect this will set up as a sell-the-fact trade because so long as fighting is limited to Gaza, it’s a non-factor for the global economy.

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

• US September PCE core +3.7% vs +3.7% expected
• October final UMich US consumer sentiment 63.8 vs 63.0 expected
• BOJ likely to raise CPI forecast to 2% range – report
• Atlanta Fed GDPNow initial estimate for Q4 growth debuts at 2.3%
• Baker Hughes US weekly oil rig count 504 vs 502 prior
• Israel refused to respond to a long truce requested by Hamas – report
• Israeli military spokesman: Ground forces are expanding their operations tonight
• Reports suggest Israel ground incursion in Gaza; others suggest the US urges restraint
• There has been a ‚breakthrough‘ on Hamas hostage negotiations — CNN
• Sam Bankman-Fried takes the stand

Markets:

• Gold up $21 to $2006
• US 10-year yields down 1 bps to 4.83%
• WTI crude oil up $1.93 to $85.15
• S&P 500 down 0.5% or 20 points to 4117
• Nasdaq up 0.4%
• JPY leads, CHF lags

The cross-currents were deep and violent on Friday. Let’s break them down:

1) The fog of war

Early reports talked about a ‚breakthrough‘ in ceasefire talks but that was later disputed. It was followed by heavy strikes in Gaza and reports of tanks crossing, or getting ready to cross, into Gaza. Meanwhile, the Washington Post reports the US is trying to convinced Israel to abandon a ground assault altogether. With the late rally in gold, it seems as though the market concluded that escalation is more likely than the opposite into the weekend.

2) Tech turn

Amazon earnings and oversold conditions provided a reason for stocks to rally early and two hours into trading, it looked like we could see a rally into the weekend. But it wasn’t to be as tech stocks sagged aside from Amazon, Meta and Intel.

3) Pain in stocks elsewhere

The Russell 2000 broke major support today to touch (and close) at a three year low and back at 2018 levels. It illustrates the broader pain in equities that’s masked by strength in a few megacap names.

4) Yields slightly lower

Yields edged down and weren’t a big factor on Friday with 10s wrapping up the week 16 bps from the 5% threshold. That will be tested Wednesday with the FOMC and the quarterly refunding announcement.

5) Bank of Japan in focus

Some leaks suggest the BOJ will shift its 2024 inflation outlook higher and the fear is that could also lead to the end of yield curve control and steps towards rate hikes as soon as Tuesday’s meeting. That thinking is likely why USD/JPY fell and perhaps why the US dollar was broadly soft, particularly before late-day worries about Gaza.

6) Economic data

Yesterday’s PCE report foreshadowed higher headline inflation but that never materialized. Still, inflation did rise and the expectations metrics in the UMich report were worrisome. It all makes it less likely the Fed takes rate hikes off the table.

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

The major US stock indices are closing the day with mixed results, but all are down for the week.

A snapshot of the closing level shows:

• Dow industrial average -366.71 points or -1.12% at 32417.60
• S&P index -19.86 points or -0.48% at 4117.36
• NASDAQ index rose 47.4 points or 0.38% at 12643.00

For the trading week, the major indices or close lower led by the NASDAQ index:

• Dow industrial average fell -2.14%. The decline comes after -1.61% for last week
• S&P index fell -2.53%. That decline comes after a -2.39% fall last week.
• NASDAQ index fell -2.62%. That decline comes after a -3.16% fall last week.

Technically the S&P is closing below its 100 and 50-week moving averages near 4180. It also ran away from its 200-day moving average at 4240.24. All of those levels would need to be broken to tilt the buys back to the upside.

The NASDAQ index also closed below its 200-day moving average at 12784.99 (it is already below its 50-day and 100 day moving average). The good news is the NASDAQ index tested but is closing above its 100 week moving average at 12573.81.

For the month of October, the major indices are also on track for a negative close:

• Dow industrial average -3.25%
• S&P index -3.98%.
• NASDAQ index -4.36%.

Each of the major indices are on pace for the 3rd consecutive monthly down close.

For the trading year:

• Dow industrial average is down -2.20%
• S&P index is up 7.24%
• NASDAQ index is up 20.80%

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

This week 4 of the „Magnificent 7“ (Microsoft, Amazon, Alphabet and Meta reported) reported their earnings and their results really didn’t matter. The markets were intent on moving to the downside spurred on by higher yields, concerns about global growth, concerns about the Fed, and concerns about Israeli/Hamas war. The wall of worry is high.

For the week:

• Meta is down -4.08%
• Alphabet is down -10.21%
• Microsoft is up 0.682%
• Amazon is up 1.77%

Although earnings showed a lot of BEATS vs MISSES, the major indices are sharply lower.

Next week the breath of earnings continues. Apple leads the way on Thursday with other large caps in different industries scattered throughout the week. Apple tumbled -3.09% this week.

Below is a smattering of the major releases (*denotes release before the open).

Monday

• SoFI *
• McDonald’s“
• Western Digital“
• Pinterest

Tuesday

• Pfizer*
• Caterpillar*
• BP*
• AMD
• First Solar

Wednesday

• CVS *
• Humana *
• Paypal
• Roku
• Qualcomm

Thursday

• Palantir *
• Shopify *
• Lilly *
• Apple
• Starbucks

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

The GBPUSD is trading up and down today, but the move to the upside today stalled near the 100/200 hour MAs near 1.2154 area. Recall, that area stalled the rally on Wednesday as well.

The subsequent fall, in the US afternoon session, has taken the price back toward the swing area near 1.2105 and 1.21109. Earlier today, that area stalled the fall on 2 separate occasions.

In this video, I outline the above levels along with what needs to be done to increase the bearish bias (with downside targets) or what would shift the bias back to the upside.

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

We’re deep in the fog of war today.

There are many reports that Israeli fighters have entered Gaza in the northeastern corner of the Gaza strip in Beit Hanoun. Throughout the Gaza strip, there are reports of heavy airstrikes, perhaps the heaviest yet. There are also reports of tanks nearby and perhaps anti-tank weapons.

I don’t see any confirmation of this, though there are many purported photos and videos. Adding to the belief that a ground incursion has begun is that telecommunications have been broadly cut off in Gaza.

Meanwhile, the Washington Post reports that the US is trying to convince Israel not to launch a ground offensive and instead be more surgical because a ground offensive risks starting a broader war. They site five US officials.

Administration officials have become highly concerned about the potential repercussions of a full ground assault, the officials said, and they increasingly doubt that it would achieve Israel’s stated goal of eliminating Hamas. They also are concerned that it could derail negotiations to free nearly 200 hostages, particularly as diplomats think they have made “significant” advances in recent days to free a number of them, potentially including some Americans, one of the officials said.

Who knows what to believe. This all comes after earlier reports from CNN on a ‚breakthrough‘ in hostage negotiations.

In any case, it looks like good traders have already made up their minds.

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

Headlines:

• USD/JPY gets pulled towards the 150.00 mark on the day
• Major currencies little changed amid a more mixed market mood
• Futures trim advance ahead of US trading
• Japan’s biggest life insurers plan to add to JGB holdings but guarded against policy shift
• Spain Q3 preliminary GDP +0.3% vs +0.2% q/q expected
• France October consumer confidence 84 vs 83 expected
• Brandenburg October CPI +4.6% vs +5.6% y/y prior

Markets:

• AUD leads, CHF lags on the day
• European equities lower; S&P 500 futures up 0.2%
• US 10-year yields up 2.8 bps to 4.872%
• Gold down 0.1% to $1,981.89
• WTI crude up 1.8% to $84.71
• Bitcoin down 0.6% to $33,984

It was a quieter session as markets are gearing up for the weekend with some mixed mood music. Equities gained some early relief after better earnings releases from Intel and Amazon overnight but gave back gains in European morning trade. S&P 500 futures were up over 0.7% but are now just up 0.2% as the gains in tech shares are fading and that is dragging down sentiment.

In the bond market, Treasury yields are slightly higher but not by much with 10-year yields up nearly 3 bps to 4.872% currently. Meanwhile, in the commodities space, we are seeing oil prices rise up again as the weekend draws near. WTI crude was up over $2 to $85.35 before easing back to just under $85 currently.

As for FX, the dollar is trading rather mixed as traders have quite a number of moving parts to scrutinise. EUR/USD is down 0.2% to 1.0538 but stuck in a relatively narrow range. Then, USD/JPY is hovering just above the 150.00 mark with large option expiries in play. USD/CAD is down a touch amid higher oil prices while AUD/USD is up 0.3% to 0.6340 as equities are holding a slight advance – at least for now.

Looking to the session ahead, safety bets amid geopolitical tensions might factor into play again while there is also US PCE price data to work through before the weekend comes along.

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