• ECB’s Lagarde: We will return inflation to 2%, it is happening
• BOC’s Macklem: We are not expecting a recession
• Harker: Fed is likely to be done with rate hikes
• Harker: Banks tell Fed there is almost no activity for first-time home buyers
• BOJ’s Ueda: There is no big change to my view on the global economic outlook
• US September import prices +0.1% vs +0.5% expected
• Baker Hughes US oil rig count 501 vs 497 prior
• UAW Fain: Not announcing any new expansion of strikes today.

Markets:

• Gold up $60 to $1928
• Oil up $4.74 to $87.65
• US 10-year yields down 7.9 bps to 4.62%
• S&P 500 down 0.6%
• CHF leads, NZD lags

This isn’t the kind of price action anyone wants to see while bombs are flying in the Middle East. The strength of the rallies in gold and oil suggest some real fear about a wider conflict beyond Gaza. At best, these moves signal caution mixed in with some short covering but the larger they got as the day wore on, the more it felt like something ominous.

The Swiss franc was the safe haven of choice with sales in EUR/CHF kicking off midway through European trading and extending into the European close.

The pound was also sold for the second day, falling 40 pips and finishing near the lows of the day at 1.2134. The two day slide in cable wiped out the previous five days of gains and leaves a sustainable bounce in doubt.

The antipodeans remain the larger laggards as a three-day fall in NZD/USD puts the pair back to within striking distance of the September lows, which are also the lows of the year. That’s in a week where China floated more fiscal stimulus so it underscores the level of worry.

Treasury yields weren’t as big of a factor today as 30-year yields fell 11 bps on something of a safe haven bid. That’s a big turn after the terrible auction yesterday.

The next big question is what happens on the weekend and beyond. There’s a risk that we’re not into WWIII by the time markets reopen (though Dalio says there’s a 50/50 chance it’s coming) and if that’s the case, we should see some of the safety premium fade.

Have a safe weekend.

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

Closing changes on the day:

• S&P 500 down 0.6%
• DJIA +0.1%
• Russell 2000 -0.8%
• Nasdaq Comp +1.3%
• Toronto TSX Comp -0.3%

Closing changes for the week:

• S&P 500 up 0.4%
• DJIA +0.8%
• Nasdaq Comp -0.2%

You hate to see Lockheed Martin up 1.6% and closing near the best levels of the week ahead of potential Middle Eastern war.

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

CIBC today indicates that next week it will upwardly revise its forecasts for US economic growth and pencil in an additional Fed hike this year.

That move goes against the current prevailing market thinking that has the Fed stuck on the sidelines for months. Current pricing suggests only an 8% chance of a hike on Nov 1 and about 30% for the Dec 13 meeting.

CIBC said the upcoming forecast will include „an additional Fed rate hike
before this year ends, and a further delay before our forecast
slowdown kicks in“ along with an upward forecast to US growth.

Coupled with that will be a boost in Q3 GDP to „nearly 4%“ from 2.5% just a month ago. They also estimate only a small chance that Q4 growth is negative.

„We still expect that an outright
recession can be avoided if the central bank plays its cards right,
and starts to ease rates in the latter half of 2024,“ CIBC writes.

As for the rate hike call, it appears to have a conditional element.

„if long rates start to edge lower again,
as they could in the absence of a fed funds hike in October, that
could see them hike again before year end,“ CIBC writes.

„We’ll risk being a broken record by simply pushing back our call
for a stall in US growth into Q1 of 2024. Some of the leading indicators for such a retreat, including slowing bank lending,
and weaker activity in interest-senstive measures like housing
starts and resales, are still pointing that way, as is the market’s
favourite omen, an inverted yield curve.“

The Canadian bank notes that it won’t be boosting up its BOC forecast for terminal rates, saying that current interest rates are already providing a sufficient headwind to growth.

Looking to next week, CIBC highlights speeches from Williams and Chair Powell for potential signals about how higher long-dated yields will affect rate setting. Next Saturday the FOMC blackout also begins.

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

Yesterday, we got an enormous US crude oil supply build, erasing five weeks of draws. It was coupled with data showing US oil production at the highest ever.

Yet today we have oil up $4.69 to $87.56 and above the post-Hamas attack peak.

I highlight the fibonacci retracement levels from the October rout on this chart with the first bounce stalling out at the 38.2% level and this rally yet to hit the 50% level. But also notice the three-candle reversal over the past three days and the higher low. Those are bullish signals in a market that’s still materially short oil supply due to OPEC+ curbs.

This week we had Russian President Putin endorse OPEC+ and say that cooperation is likely to be extended. But the main driver is Middle Eastern war and the potential for something to spill over into Iran or the region more broadly. There is also an increasing belief that some possible grand bargain between the US and Saudi Arabia to pump more oil and recognize Israel in exchange for US defense guarantees is a unworkable for now.

I tend to think there’s a big ‚weekend risk‘ bid and/or short covering underway right now but we won’t know until Monday.

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

In this video, I outline the key technical levels in play for the EURUSD as we end one week, and look to the next.

The bias is more to the downside, thanks to a run higher in the USD on Thursday in Friday.

Today, the price moved into a swing area between 1.0483 and 1.0500. That area will be a barometer for both buyers and sellers to start off the new trading week.

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

Headlines:

• Markets seek shelter as Israel orders Gaza evacuation
• Oil rallies back on the week on Middle East fears
• The bond market continues to hold all the cards
• ECB’s Visco: Uncertainty looms great on global economy
• BOE’s Bailey: Last policy decision was a tight one
• PBOC says it still has ample room to support the economy
• France September final CPI +4.9% vs +4.9% y/y prelim
• Spain September final CPI +3.5% vs +3.5% y/y prelim
• Switzerland September producer and import prices -0.1% vs -0.2% m/m prior
• China September M2 money supply +10.3% vs +10.7% y/y expected
• German economy to show another mild decline in Q3 – economy ministry

Markets:

• CHF leads, NZD lags on the day
• European equities lower; S&P 500 futures flat
• US 10-year yields down 10 bps to 4.608%
• Gold up 1.5% to $1,897.53
• WTI crude up 4.0% to $86.26
• Bitcoin up 0.3% to $26,807

It started off with a more tentative mood but markets eventually settled on seeking shelter again – similar to Monday – as Israel threatened attacks on Gaza by ordering an evacuation within the next 24 hours.

Equities retreated as bond yields slumped hard and that is helping to underpin gold and oil prices once more today.

10-year yields in the US are down 10 bps to 4.608% while gold is jumping up by 1.5% to close in on the $1,900 mark. Meanwhile, WTI crude is over 4% on the day to above $86 as oil rallies back Monday levels again.

In FX, the reaction is more muted though but the dollar is steadying itself after some mild losses early on. USD/JPY is down 0.15% to 149.57 but not too far off its earlier high of 149.80 during the session. Meanwhile, EUR/USD is flattish at 1.0525 and GBP/USD just up 0.1% to 1.2185 on the day.

After the bond rout yesterday, caution ahead of the weekend is messing up the flows in markets and that won’t make it easy until the dust settles in the Middle East.

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

After four consecutive green days, the Nasdaq
Composite yesterday got under some pressure caused by an ugly bond auction that
made Treasury yields to spike higher. The US data before the auction hasn’t
weighed on the index as Core CPI came in
line with expectations and Jobless Claims beat
forecasts again. In fact, the market’s pricing for future interest rates
expectations hasn’t changed much, so we might see yesterday’s dip being bought
back today.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite finally pulled back a bit after the strong rally from the 13174 support. The
culprit seems to have been the ugly bond auction as we got a spike in Treasury
yields but the buyers stepped in into the close around a key support. The
target for the buyers remains the trendline around
the 13800 level with a breakout likely leading to a new cycle high.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price
pulled back into the broken minor trendline in what could end up being a “break
and retest” pattern. This is where we can expect the buyers to pile in with a
defined risk below the trendline and position for a rally into the major
trendline. The sellers, on the other hand, will want to see the price falling
back below the trendline to leave behind a fakeout and target again a break
below the 13174 support.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the bullish setup with the support zone around the 13500 level where we
have the confluence with
the broken trendline, the swing support and the 38.2% Fibonacci
retracement level of the entire rally. A break below
the support should invalidate the setup and lead to more selling.

Upcoming
Events

Today the only notable event on the agenda is the
University of Michigan Consumer Sentiment report although it has lost its
market moving ability lately. Only big surprises are likely to have an impact
on the market.

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

Oil is up nearly 4% on the day with WTI crude now seen up to above $86 in a big surge in European morning trade. This comes as Israel issued a threat and instructed civilians in Gaza to evacuate the city and relocate to the south within the next 24 hours. As such, markets are responding by seeking shelter ahead of the weekend it would seem.

Looking at other commodities, gold is also up 1% on the day to $1,887 as safety bets are preferred. The yellow metal is helped out by a continued rebound from its 200-week moving average last week near $1,810 but the developments between Israel and Palestine have proven rather timely as well.

Going back to oil, the price action today brings us back to the gap higher on Monday as we look to close out the week.

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

The latest news from the Middle East is that Israel has instructed for all civilians in Gaza to evacuate the city and relocate to the south within the next 24 hours. The call is that „now is the time for war“ as the Israeli military is preparing to attack and social media is rife with talk of ‚genocide‘. Once again, fear is propagating in the echo chamber and that is leading to a similar reaction in markets that we saw on Monday.

10-year Treasury yields are down 9 bps to 4.620% while S&P 500 futures are also marked down by 0.3%, with European indices extending losses to a little over 1% mostly now. Meanwhile, gold is up 1% to $1,887 while WTI crude is up nearly 4% to $86.16 on the day currently. It’s exactly what you would expect on an escalation in the situation between Israel and Palestine.

This seems to be the case that markets are seeking shelter and it is not making it easy for traders and investors to read into the moves, especially after having seen how the bond market reacted yesterday to the US CPI data and poor Treasury auction.

In FX, the mood is more muted though as the dollar keeps little changed now after some mild weakness earlier. EUR/USD is flat at 1.0528 while USD/JPY is down just 0.1% to 149.60 on the day.

If there is nothing short ‚genocide‘ over the weekend, expect markets to turn things around again as they did earlier this week come next Monday.

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 in 2024.
• Fed Chair Powell reaffirmed their data dependency but added that
  they will proceed carefully.
• The US CPI yesterday 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 fairly solid as seen last week with the NFP report
  and yesterday’s Jobless Claims.
• The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts in another sign that
  the US economy remains resilient.
• The Fed members continue to cite elevated long-term
  yields as a reason to proceed carefully and likely pause 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 recent New Zealand inflation and employment data surprised to the upside but
  the PMIs continue to slide further into contraction as seen also today with the
  Manufacturing PMI.
• The wage growth has also missed
  expectations and it’s something that the central banks are watching closely.
• The recent New Zealand Retail Sales beat expectations although the data
  remains deeply negative.
• The RBNZ is expected to keep the
  cash rate steady at the next meeting as well.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the NZDUSD pair
couldn’t break above the recent high at 0.6050 and got smacked back down.
Yesterday the pair sold off following the US CPI release, but the reaction was
a bit perplexing as the core measures came in line with expectations and the
market’s pricing hasn’t changed. If that was just an overreaction, we might see
the pair going back up and erase the post-CPI losses in the next few days.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that as soon as the
pair broke the upward trendline, the
sellers piled in to target the lows, and the bearish momentum increased
following the break of the 0.60 handle and the US CPI release. If the bias has
indeed switched to the downside, the sellers are likely to lean on the downward
trendline where there’s also the confluence with the
38.2% Fibonacci retracement level
and the red 21 moving average.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
bearish momentum seems to be waning as the price is diverging with
the MACD. The
buyers don’t have much to lean onto other than waiting for the price to break
above the trendline to invalidate the bearish setup and start looking forward
to new highs. If the price continues lower though and reaches the lows around
the 0.5860 level, the buyers should step in more aggressively with a defined
risk below the low and position for a rally into the previous high at
0.6050.

Upcoming Events

Today the only notable event on the agenda is the
University of Michigan Consumer Sentiment report although it has lost its
market moving ability lately. Only big surprises are likely to have an impact
on the market.

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