Nasdaq Composite Technical Analysis – The bears remain in control 0 (0)

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.

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Heads up: A note on the UK labour market data due tomorrow 0 (0)

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.

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USD/JPY but a whisker away from retesting the 150.00 mark 0 (0)

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.

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Equities dragged lower, dollar muted as 10-year US yields hit 5% 0 (0)

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.

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Weekly Market Outlook (23-27 October) 0 (0)

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.

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No sign of Gaza ground war. Emergency aid truck convoy enters Gaza. 0 (0)

A weekend update on the Middle East, where there are no reports that the ground war in Gaza has begun yet.

  • An convoy of trucks carrying emergency aid has entered into Gaza
  • The aid, a consignment of food, water and medical supplies, has arrived while air attacks continue
  • The UN and US have warned Hamas from stealing the supplies, that the aid is intended for the Palestinian people: „We have been clear: Hamas must not interfere with the provision of this life-saving assistance“ (US Sec State Blinken)
  • A summit in Cairo failed to reach a ceasefire agreement

For markets, the impending ground war saw shifts into ‚haven‘ Treasuries at the end of the week, albeit against the persistent UST downtrend.

CHF also gained towards the end of last week, hourly candles chart:

No ground war over the weekend should be likely to prompt tentative moves back into non-safe haven assets at the beginning of the new trading week.

This article was written by Eamonn Sheridan at www.forexlive.com.

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Newsquawk Week Ahead: EZ/UK flash PMIs, ECB, BoC, US PCE, Australian CPI 0 (0)

  • MON: Bank of Israel Announcement, EZ Consumer Confidence (Oct), US National Activity Index (Oct)
  • TUE: German GfK Consumer Confidence (Nov), EZ/UK/US Flash PMIs
  • WED: BoC Announcement, NBH Announcement, Australian CPI (Q3/Sep), German Ifo Survey (Oct)
  • THU: ECB Announcement, CBRT Announcement, South Korean GDP Advanced (Q3), US GDP Advanced (Q3)
  • FRI: CBR Announcement, Japanese Tokyo CPI (Oct), Australian PPI (Q3), US PCE (Sep)

NOTE: Previews are listed in day order

EZ FLASH PMI (TUE): Expectations are for October manufacturing PMI to rise to 43.7 from 43.4, services to tick lower to 48.6 from 48.7, and lifting the composite at 47.4 vs. prev. 47.2. The prior report saw a modest downtick in the manufacturing component to 43.4 from 43.5, whilst an increase in the services headline to 48.7 from 47.9 was enough to lift the composite metric to 47.2 from 46.7. For the upcoming release, analysts at ING state “while much less relevant than the ECB meeting, it has caused some movement in recent months as weakening economic data from the eurozone has raised concerns over a possible downturn”. The desk adds that “a downbeat reading for the PMI would be negative for euro sentiment as it would increase expectations of a recession”.

UK FLASH PMI (TUE): Expectations are for October’s services PMI to rise to 49.5 from 49.3, with the manufacturing reading seen ticking higher to 44.6 from 44.3. The prior report saw services tick lower to 49.3 from 49.5 and manufacturing advance to 44.3 from 43.0, leaving the composite at 48.5 vs. prev. 48.6. This time around, economists at Oxford Economic expect the data to “signal a further contraction in private sector output”. On manufacturing, the consultancy expects that the slowing in the pace of new orders falling, should provide some respite for the October release. On services, Oxford Economics is less constructive amid lower demand, particularly from abroad. From a policy perspective, a soft release is unlikely to have much bearing on the November meeting given that the MPC already paused last month. However, signs of a more pronounced slowing could see a bringing forward of rate cut expectations in 2024.

BOC ANNOUNCEMENT (WED): The market currently prices in an 80% probability of rates being left unchanged, while the probability for a BoC hike in October diminished to under 20% following Canada’s September inflation data, where CPI cooled by more than the consensus was expecting. Additionally, analysts have become more cautious on the growth outlook after the economy saw a surprise contraction in Q2, and activity has been subdued since, as a result of previous BoC tightening, wildfires/floods and labour market industrial action. There are also growing concerns that higher rates will heap pressure on household mortgage costs. The labour market, however, continues to show resilience, with jobs being added in August and September, and the unemployment rate remaining low. Analysts at ING note that BoC Governor Macklem recently argued that the expected trajectory of inflation is where the central bank is focussed, stressing the importance of inflation expectations and wage growth, and although these can be volatile, they are trending upwards. „Slower-than-expected inflation, a clouded growth outlook and higher bond yields means the BoC is likely to overlook jobs tightness and keep rates on hold,“ ING writes, adding that „there is still all the interest in keeping a higher-for-longer narrative alive, but markets may start to shed some doubts on it.“

AUSTRALIAN CPI (WED): The quarterly metrics for Q3 and monthly metrics for September will be released on Wednesday. September Weighted CPI Y/Y is forecast to tick higher to 5.4% from 5.2%, whilst the Q3 Q/Q rate is expected at 1.1% (prev. 0.8%) and Y/Y at 5.3% (prev. 6.0%). Further on the Quarterly metrics, Weighted Median Q/Q is expected at 1.0% (prev. 1.0%), Y/Y at 5.0% (prev. 5.5%), while the Trimmed Mean Q/Q is seen at 1.1% (prev. 0.9%) and Y/Y at 5.0% (prev. 5.9%). Analysts at Westpac suggest “This month will see a quarterly update of some critical services prices including health” and add that forecasts “have a larger than usual degree of uncertainty due to our uncertainty around what the full impact of the changes to government rebates will mean for childcare prices.” The desk also highlights that last month, although the August print was in line with Westpac forecasts, the analysts were surprised by the smaller-than-expected rise in housing amid softer-than-expected rents. From an RBA standpoint, Governor Bullock is due to speak on Tuesday, a day before the CPI metrics, whilst in her most recent speech, she said she is a bit more worried about the inflation impact from supply shocks and seeing demand slow and per capita consumption declining, and if inflation remains higher than forecast, the RBA will have to respond with policy. The most recent RBA minutes also tilted towards the hawkish side and noted “Further tightening may be required if inflation is more persistent than expected”, while “rising house prices could support consumption and might signal policy is not as tight as assumed.”

ECB ANNOUNCEMENT (THU): Consensus is unanimous in expecting the ECB to stand pat on all three of its key rates with markets virtually signalling a 100% chance of such an outcome. The expectation for unchanged rates has stemmed from the September policy statement, which noted that the GC now 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“. Since the prior meeting, headline Y/Y CPI cooled to 4.3% in September from 5.2%, whilst the super-core metric fell to 4.5% from 5.3%. Furthermore, the Composite Eurozone PMI for September rose to 47.2 from 46.7, but remained deep in contractionary territory with the accompanying report noting “output volumes across both the manufacturing and service sectors were constrained by deteriorating demand conditions”. In terms of commentary from the Bank, President Lagarde has continued to reiterate that rates are sufficiently restrictive, whilst also noting there is more policy lag in the pipeline from past hikes. Even the hawks on the Governing Council such as Netherlands’ Knot have stated that they are “comfortable” with the current level of interest rates. Furthermore, it is also worth noting that recent increases in Eurozone bond yields will act to tighten financial conditions whilst geopolitical risks in the Middle East have given reason for caution. That being said, as has been the case for other major central banks that have engineered a “pause”, policymakers will likely wish to keep optionality over further rate hikes beyond October, particularly given the recent increase in oil prices. In terms of other policy measures, a couple of policymakers have suggested that an early end to PEPP reinvestments (currently set to run until the end of 2024) should be discussed at the upcoming meeting. However, ING is of the view “the surge in bond yields, combined with new debt sustainability concerns in the eurozone” makes it difficult for the ECB to agree an early conclusion to reinvestments at this stage.

CBRT ANNOUNCEMENT (THU): There are currently no expectations for what the central bank may opt to do at its upcoming meeting. As a reminder, last month the CBRT opted to match market expectations with a 500bps hike to 30%. The Bank said tightening will continue until a significant improvement to the inflation outlook is achieved, while tightening will be further strengthened as much as needed in a timely and gradual manner. The CBRT also said it will continue to simplify, and improve the existing micro and macroprudential framework. The release noted inflation readings were above expectations in July and August. Analysts at CapEco at the time suggested the central bank is “now doing what many investors had hoped they would by raising interest rates sharply and taking a more serious stance against inflation”, and “All of this is helping to maintain investor optimism in the policy shift and keeping Turkey’s sovereign dollar bond spreads near multi-year lows.” CapEco suggested a lot more tightening needs to be delivered, as the desk expects rates to rise to at least 35% by year-end. Meanwhile, the latest CBRT survey upgraded its end-year CPI forecast to 68.01% (Prev. 67.22%) alongside GDP Growth to 4.1% (prev. 3.9%). The USD/TRY level was also revised higher to 30.0453 (prev. 30.1422), while the 12-month CBRT Rate was upped to 37% (prev. 32.44%).

JAPANESE TOKYO CPI (FRI): The Tokyo CPI is seen as a precursor to the nationwide release around two weeks later. Headline CPI is seen cooling to 2.7%, but the “ex-fresh food” metric is seen remaining at 2.5% in October. Analysts at ING suggest that “Tokyo’s CPI inflation is expected to slow mainly due to base effects. Headline inflation could come down to 2.6% YoY in October… However, a monthly comparison would show that the recent pick-up in global commodity prices and the weaker yen could add more upside pressure.” From a BoJ standpoint, Governor Ueda on Friday suggested inflation is likely to narrow the pace of its rise, then re-accelerate, reflecting changes in corporate wages and price-setting behaviour. Recent Bloomberg sources meanwhile noted the BoJ is reportedly mulling raising its FY23 price view closer to 3%, raising its FY24 price view to 2% or above, while the inflation outlook is said to keep FY25 around 1.6%.

US PCE (FRI): Currently, headline PCE is expected to rise 0.3% M/M from the prior 0.4% pace, while the Core is also expected to rise by 0.3%, accelerating from 0.1% previously. September’s headline CPI data rose by a little more than expected (0.4% M/M vs an expected 0.3%), although the core rate of inflation rose in line with expectations, by 0.3% M/M; the Y/Y rate of core inflation slowed to 4.1% from 4.4%. Pantheon Macroeconomics said that this reflected a larger increase in electricity prices, but is unlikely to persist. „The big picture here is that core inflation continues to slow, with the annual rate dipping in September, and the Q3 quarterly annualised gain was only 2.8%.“ Pantheon says the forces are in place for core inflation to fall substantially in H1 2024; using the CPI data as well as September’s PPI report, its economists say a 0.27% M/M increase in September’s core PCE deflator is implied. „Our forecast implies the core PCE rose at mere 2.5% annualised rate in the three months to September, compared to the previous three months, the slowest rate since January 2021 and closing in on the target,“ it writes, adding that „the annual rate will remain elevated, dipping to 3.7% from 3.9% in August, but the Fed will not wait until 2% Y/Y is reached before starting to ease.“ There will also be attention on Personal Income and Consumption to gauge the strength of the consumer, with income seen rising 0.4%, matching the prior month’s pace, while consumption is seen rising 0.3%, easing a touch from 0.4% previously. The data will help gauge Fed expectations, albeit the November decision is largely expected to see rates left unchanged as the Fed proceeds carefully and with markets almost fully pricing this in, currently with a 98% probability. There is a c. 40% probability of another hike by January, a hot report may exacerbate these odds, but a cool report will help with evidence that the Fed is done with rate hikes. Meanwhile, further out the curve the first cut is fully priced in by July, which is somewhat at odds with the Fed’s dot plot and higher for longer messaging.

This article originally appeared on Newsquawk.

This article was written by Newsquawk Analysis at www.forexlive.com.

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Forexlive Americas FX news wrap: Yields turn lower but stocks battered anyway. FX flat 0 (0)

Markets:

  • WTI crude down 20-cents to $88.14
  • US 10-year yields down 7.6 bps to 4.91%
  • Gold up $5 to $1978
  • S&P 500 down 56 points, or 13%
  • GBP leads, NZD lags

Equities took another beating but there were signs of optimism elsewhere. Buyers arrived in fixed income after a test of 10s early in US trading that got to 4.995% but not through. Gold and oil gave back gains, in part due to a report about hostage negotiations in Gazaw.

In FX, there was some stability that might have been paralysis as 150.00 continues to hold in USD/JPY and uncertainty reigns. The antipodeans were soft but not overly so as AUD/USD fell 17 pips and NZD/USD declined by 22 — both staying in recent ranges.

Cable reflected some of the optimism as it trended to 1.2165 from 1.2100 as it marked a double bottom just below the figure. The euro also chopped higher.

In all, the deep confusion about what will happen in bonds, USD/JPY and the Middle East is making for a wait-and-see market. Stocks were hit hard though in a broad move as TSLA continues to retreat following a disappointing earnings report. Next week will be critical with a busy slate of earnings including Microsoft, Alphabet and Visa on Tuesday.

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

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US stocks close at session lows. Nasdaq gets hammered. 0 (0)

US stocks are closing the session at the lows with the Nasdaq index leading the way.

The final numbers are showing:

  • Dow industrial average -286.91 points or -0.86% at 33127.27
  • S&P index -53.84 points or -1.26% at 4224.15
  • NASDAQ index is down -202.38 points or -1.53% at 12983.80

For the trading week, the NASDAQ fell over 3%.

  • Dow industrial average fell -1.61%
  • S&P index fell -2.39%
  • NASDAQ index -3.16%

Helping to pressure the stocks into the close, is the S&P’s technical break and close below its 200-day moving average at 4233.13. It was the 1st close below that moving average since March 22.

Concerns about interest rates, the Middle East, Washington stagnation all contributed to anxiety in the US stock market. Next week a slew of earnings will be released including 4 of the so-called Magnificent 7 – Microsoft, Alphabet, Meta and Amazon. In addition, there are a number of other large cap names scheduled to announce their earnings (see the schedule here).

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

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US 2023 fiscal deficit $1.695 trillion vs $1.375 trillion in 2022 0 (0)

What happens to the deficit when the economy turns? I know some of this is long-term infrastructure spending but if the bond market is signalling problematic deficits, some tough choices are going to have to be made.

  • Sept deficit $171B vs -$78.6B expected
  • Sept 2022 deficit $430B

The deficit in the 2023 fiscal year was larger than every pre-covid deficit.

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

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