• US 2023 fiscal deficit $1.695 trillion vs $1.375 trillion in 2022
• Canada August retail sales -0.1% versus -0.3% expected
• Fed’s Harker: Now is the time to hold rates steady
• Jim Jordan loses secret ballot to remain House speaker nominee
• Hostages released from Gaza are currently with the Red Cross – report
• Fed’s Mester: Looking at lots of data on mon pol, including money supply
• Baker Hughes US oil rig count 502 vs 501 prior
• UAW Pres. to present plans to workers later today
• Feds Mester: Fed is at or near the peak of the rate hike cycle
• Fed’s Bostic: We are not going to see a recession
• Canada’s tallest building goes into bankruptcy, not even half-built

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.

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.

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.

It has been a negative week for the major US stock indices, as rates moving higher, geopolitical tension, and dysfunction in Washington. That dynamic does not seem to be going away anytime soon.

However next week we get a slew of corporate earnings with something for everyone. A total of 4 of the „Magnificent 7“ are scheduled to be released including Microsoft, Alphabet, Meta, and Amazon.

Tesla – another of the 7 – already released this week (it was a disappointment). Nvidia and Apple will announce in the future.

In addition to the big 4, there are a number of other large cap companies scheduled for release.

Below are the major companies on the earnings calendar (* are companies who will announce before the open):

Monday:

• Phillips*
• Logitech

Tuesday:

• Coca-Cola*
• Verizon*
• GE*
• 3M*
• GM*
• Microsoft
• Alphabet
• Visa
• Texas Instruments

Wednesday:

• Boeing*
• T-Mobile*
• Hilton*
• General Dynamics*
• Meta
• IBM
• servicenow

Thursday:

• Altria*
• Southwest*
• Northrup Grumman*
• Merck*
• Amazon
• Intel
• Ford
• Chipotle

Friday:

• Exxon Mobil*
• Chevron*
• Phillips 66*
• Colgate-Palmolive*

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

Synopsis: Despite its historical strength and the ‚USD smile‘ framework, the USD’s recent subdued performance has left market observers questioning the continued applicability of this model. Credit Agricole delves into the factors affecting the USD’s momentum and highlights the potential paths for the currency moving forward.

Key Takeaways:

1. Synchronized G10 Rates and Yields: One of the chief factors that may have hampered the USD’s surge is the synchronized movement of most G10 rates and yields. This synchronous movement has marginally improved the USD’s relative rate appeal, making it less of a standout amidst its peers.

2. Fed’s Signal on Financial Conditions: The Federal Reserve has hinted that a combination of higher US rates, increased yields, and risk aversion could dampen the urgency for additional rate hikes. This signaling potentially curbs aggressive bullish sentiments for the USD.

3. Rising Foreign Portfolio Outflows: The US has witnessed a surge in foreign portfolio outflows from its fixed income markets. This trend is attributed to deteriorating fiscal prospects in the US coupled with diminishing FX reserves. Such outflows can act as a drag on the USD’s strength.

4. Overhang of USD Long Positions: An accumulation of long positions on the USD could be indicating market saturation, making further bullish movements harder to achieve.

5. The ‚USD Smile‘ Framework: While recent events have made market participants question the relevance of the ‚USD smile‘, Credit Agricole believes it remains a pertinent FX market model. The primary channel that could bolster the USD, under this framework, is a sudden surge in risk aversion leading to a robust inflow into US safe-haven assets.

Conclusion: While recent dynamics have posed challenges to the USD’s dominant trajectory, the ‚USD smile‘ remains a relevant tool to understand potential currency movements. The USD might find significant support if global markets witness heightened risk aversion, channeling more investments into safe-haven US assets. Investors should be vigilant of global risk sentiments to gauge future USD movements.

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

• Inflation has come down a lot, should continue
• Economy has been resilient
• But business contacts say a slowdown is coming
• Not going to see a recession, inflation will go to 2%
• Don’t think there will be rate cuts before middle of next year
• Economy still has a lot of momentum
• Inflation will ebb slowly; Fed will need to be cautious, patient and resolute

As always is the case, you don’t really have to talk about the R-word unless there is a risk of it materialising. So, that sort of speaks for itself. But among all the major economies, it does seem like the Fed is best prepared to weather a slowdown at the moment.

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

Headlines:

• It’s all about the known unknowns right now
• USD/JPY nervy as traders test waters at 150.00
• Gold runs up towards next technical hurdle as geopolitical tensions persist
• Israel says that at any time Hezbollah shoots, they will fire back
• UK September retail sales -0.9% vs -0.2% m/m expected
• BOJ’s Ueda: Japan economy is recovering moderately
• BOJ to hold first long-term monetary policy review workshop on 4 December
• BOE’s Bailey says expects a ‚marked fall‘ in inflation next month

Markets:

• CAD leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.2%
• US 10-year yields down 5.5 bps to 4.932%
• Gold up 0.5% to $1,982.84
• WTI crude up 1.5% to $89.71
• Bitcoin up 4.4% to $30,001

Traders are feeling sidelined for the moment awaiting further key developments in all areas, before really firming up any convictions. The bond selling hasn’t yet resulted in 5% yields in 10-year Treasuries, with flows also balanced out somewhat by uncertainty and rising tensions in the Middle East.

Stocks are pinned down for now but US futures are pointing to modest losses, although European indices are hammered down towards the end of the week.

In FX, it’s all about watching for USD/JPY at the 150.00 mark. The pair briefly clipped the figure level according to some quotes and that triggered a drop to around 149.60-70 before keeping just under 150.00 again now.

The pound also fell for a moment after a weak UK retail sales data, with GBP/USD slipping to 1.2095 before holding flattish around 1.2135 currently.

The loonie is the one leading gains on the day, helped out by higher oil prices with commodities still impacted by the Israel-Hamas conflict and worries surrounding the region.

WTI crude is up 1.5% to $89.71 while gold is also underpinned and testing the June and July highs at $1,983-87 on the day.

We’re approaching the weekend and that could explain the more cautious approach for now, after having seen a similar take last Friday already.

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

The good news on the economy continues to be
trumped by further tightening in financial conditions due to rising Treasury
yields, and the tensions in the Middle East increasing. In fact, on a
forward-looking basis, these events are likely to weigh on the economy further
down the road, which is not a good thing for the market. Yesterday, the US Jobless Claims beat
expectations once again but the Continuing Claims missed for a second time in a
row, which might be signalling that laid off people are finding it harder to
find another job fast.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite broke down and it’s now at a key support around
the 13174 level. This is where we can expect the buyers to step in with a
defined risk below the level to position for a rally into the top trendline around
the 13700 level. The sellers, on the other hand, will want to see the price
breaking lower to increase the bearish bets into the 12274 level.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a
minor trendline adding an extra layer of confluence to the
13174 support level. This is likely to be a “break it or make it” moment for
the Nasdaq Composite as a break to the downside would open the door for much
lower prices.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that if we
were to get a bounce here, the sellers are likely to lean on the previous support now turned
resistance around the 13340 level where we can also
find the 50% Fibonacci
retracement level and the red 21 moving average. The
buyers will want to see the price breaking above that resistance zone as well
to invalidate the bearish setup and target the highs with more conviction.

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

If you’ve been glued to yours screens waiting for that USD/JPY push towards 150.00 again, it must be a real snoozer over the last 1.5 hours. Here’s the minute price action in the pair and it shows a roughly 8-10 pips range:

At this stage, it’s all about anticipating the things that will or might come next in markets. We know what those are but we don’t know what the bigger picture reaction that may be. Let’s take stock of the the key focus points right now.

1. The bond market. 10-year Treasury yields are down slightly today to 4.95% but it’s all about the trigger at 5% and if that will have broader market spillovers to follow. Or perhaps we could hit stops and see a retracement of sorts first, before revisiting that in the near future.
2. The Israel-Hamas conflict. And now we can sort of add in tensions at the Israel-Lebanon border as Hezbollah starts to interfere as well. There’s so much uncertainty breeding in the region and that is keeping commodities entertained. Gold is up alongside oil but broader markets are not too heavily impacted yet. However, there’s still the potential flight to safety before the weekend to consider.
3. USD/JPY and Tokyo intervention. According to some charts, we clipped the 150.00 mark earlier and that saw a brief drop to 149.73 (or perhaps lower on some charts) before getting bought back up. That to me reads as stops being triggered rather than any Japanese meddling but if we do catch a bid back above the figure level, could Tokyo step in again? There’s only one way to find out.

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 last week 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 once again yesterday
  with the beat inJobless Claims, although continuing claims missed for a second
  time in a row.
• The US PMIs
  recently showed that the US economy remains pretty resilient.
• The University of Michigan Consumer Sentiment report last Friday missed across the
  board with the inflation expectations figures spiking back up.
• The US Retail Sales this week beat expectations by a big
  margin with positive revisions to the prior figures.
• The Fed members continue to cite elevated long-term
  yields as a reason to proceed carefully and will likely pause in November as
  well.
• Fed Chair Powell yesterday highlighted the rise in long term yields
  as well and the need to “proceed carefully”.
• 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 this week missed expectations
  supporting the RBNZ’s stance.
• The employment data surprised to the upside
  recently.
• 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 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 as well.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the NZDUSD pair
managed to eventually break the low following the miss in the New Zealand CPI
and the strong US data. The bearish momentum continues to be weak, but the bias
remains skewed to the downside. The recent drop got a bit overstretched as
depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have a good
resistance now
around the 0.5860 level where we can find the confluence with the
trendline, the
38.2% Fibonacci retracement level
and the red 21 moving average. This is where we can expect the sellers to keep
piling in with a defined risk above the trendline to target new lows. The
buyers, on the other hand, will want to see the price breaking higher to
invalidate the bearish setup and target a rally back into the 0.60 handle.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the key levels to watch out for. From a risk management perspective,
the best spot for the sellers was the resistance around the 0.5860 level. Late
sellers may want to wait for the price to take out the low before joining the
trend but with a worse risk to reward setup. The buyers, on the other hand,
should wait for the break above the trendline before considering new longs.

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