Today we received new confirmation that high inflation is fast sliding from being a desirable goal to a plague for advanced economies. Fresh data for Germany has highlighted the continued strong growth in wholesale prices, up 0.8% m/m and 13.2% y/y. The year-over-year growth rate is the highest since October 1974, resonating with the energy crisis of that time.
Since May, when the indicator was near double-digit growth, German business sentiment has crept lower. Estimates for October saw the index drop to 22.3, its lowest since March 2020.
Falling business activity will tie the hands of the central bank in tightening monetary policy to fight inflation. This is bad news for the euro, which runs the risk of falling into the role of the yen. The latter seems to have broken free, adding 2.6% since last Monday, showing abnormally high volatility after going above 112.
For the EURUSD, the same watershed line may be at 1.1500. For now, we see desperate intraday buying of the Euro on declines under 1.1550.
Since May, when the indicator was near double-digit growth, German business sentiment has crept lower. Estimates for October saw the index drop to 22.3, its lowest since March 2020.
Falling business activity will tie the hands of the central bank in tightening monetary policy to fight inflation. This is bad news for the euro, which runs the risk of falling into the role of the yen. The latter seems to have broken free, adding 2.6% since last Monday, showing abnormally high volatility after going above 112.
For the EURUSD, the same watershed line may be at 1.1500. For now, we see desperate intraday buying of the Euro on declines under 1.1550.
#Soy broke support level 1235.00
• Likely to fall to support level 1200.00
Soy under the bearish pressure after breaking the pivotal support level 1235.00 (which stopped the previous minor impulse wave (i) at the start of October).
The breakout of the support level 1235.00 accelerated the active impulse waves 3 and (iii).
Given the prevailing downtrend, Soy can be expected to fall further toward the next support level 1200.00 (target for the completion of the active impulse wave (iii)).
• Likely to fall to support level 1200.00
Soy under the bearish pressure after breaking the pivotal support level 1235.00 (which stopped the previous minor impulse wave (i) at the start of October).
The breakout of the support level 1235.00 accelerated the active impulse waves 3 and (iii).
Given the prevailing downtrend, Soy can be expected to fall further toward the next support level 1200.00 (target for the completion of the active impulse wave (iii)).
#CADJPY reversed from resistance zone
• Likely to fall to support level 90.00
CADJPY currency pair today reversed down from the resistance zone lying between the multi-month resistance level 91.20 (which stopped the sharp uptrend in June) and the upper daily Bollinger Band.
The downward reversal from this resistance zone stopped the earlier impulse waves 3 and (3).
Given the strength of the aforementioned resistance zone, CADJPY currency pair can be expected to fall further toward the next support level 90.00 (former resistance from June and July).
• Likely to fall to support level 90.00
CADJPY currency pair today reversed down from the resistance zone lying between the multi-month resistance level 91.20 (which stopped the sharp uptrend in June) and the upper daily Bollinger Band.
The downward reversal from this resistance zone stopped the earlier impulse waves 3 and (3).
Given the strength of the aforementioned resistance zone, CADJPY currency pair can be expected to fall further toward the next support level 90.00 (former resistance from June and July).
S&P500 continues its slide
Since the beginning of September, there has been a clear downward trend in the S&P500. Unlike the correction episodes of recent months, we see what appears to be a reluctant slide. But it is this dynamic that has the potential to be the most dangerous trap for speculative bulls. The latter can link to buying on downturns, betting on a rebound after a correction.
More experienced investors and traders are likely to note that equities’ sell-offs have been noticeable in recent weeks as they attempt to rise from increasingly lower levels. The 50-day moving average has been in the role of firm resistance since the end of September, although it was strong support before.
It would not be surprising if the short-term buyers would lose their support in the coming weeks or even days, accelerating the corrective momentum and allowing the S&P500 to pull back from the current 4340 to the 200 SMA, which is now near 4170.
Since the beginning of September, there has been a clear downward trend in the S&P500. Unlike the correction episodes of recent months, we see what appears to be a reluctant slide. But it is this dynamic that has the potential to be the most dangerous trap for speculative bulls. The latter can link to buying on downturns, betting on a rebound after a correction.
More experienced investors and traders are likely to note that equities’ sell-offs have been noticeable in recent weeks as they attempt to rise from increasingly lower levels. The 50-day moving average has been in the role of firm resistance since the end of September, although it was strong support before.
It would not be surprising if the short-term buyers would lose their support in the coming weeks or even days, accelerating the corrective momentum and allowing the S&P500 to pull back from the current 4340 to the 200 SMA, which is now near 4170.
In the most traded currency market pair, there is an even more persistent downward trend. The EURUSD has rolled back to 1.1550 from the local peak at 1.1900 in early September, experiencing a systematic decline. Since late September, the RSI on the daily charts has been moving around 30, an oversold area, but that hasn’t stopped the single currency from rewriting its lows from last July.
As we pointed out earlier, there are no significant support levels in the pair up to the 1.14000 area.
However, locally, one may notice buying on declines. A consolidation above 1.1600 by the end of the week may allow us to talk about breaking the descending trend and launching a broader rebound, but the bulls will have to try harder for that.
As we pointed out earlier, there are no significant support levels in the pair up to the 1.14000 area.
However, locally, one may notice buying on declines. A consolidation above 1.1600 by the end of the week may allow us to talk about breaking the descending trend and launching a broader rebound, but the bulls will have to try harder for that.
The Swiss National Bank, which is preventing the CHF from rising against the Euro, might be on the side of the Euro again. The EURCHF pair has formed a “floor” near the level of 1.07, approximately where it was in August. The SNB predominantly monitors the CHF against the Euro but doesn’t neglect the USD either.
The USDCHF has been on an uptrend since August, so the intensity of the interventions against the Euro might weaken, reducing the support for the single currency. In any case, one hardly can expect the Swiss National Bank to reverse any meaningful long-term trends.
The USDCHF has been on an uptrend since August, so the intensity of the interventions against the Euro might weaken, reducing the support for the single currency. In any case, one hardly can expect the Swiss National Bank to reverse any meaningful long-term trends.
US inflation shows no signs of easing. The headline number returned to 5.4% y/y, the highest since 2008, vs the expected 5.3%. Core CPI stabilised at 4%. That is not to say that the data deviated much from expectations and marked a turning point in the economic cycle. But the first reaction of the markets to this data was as sharp as the NFP release last Friday.
This was particularly so for gold. Buying gold gathered momentum today, taking the price to $1777, from where the seemingly strong CPI figures caused it to plummet to $1757. However, this dip attracted even more furious demand, taking the price to $1785 at the time of writing.
There were big bulls in gold. This was evident from the initial reaction to the NFP, although it proved volatile. However, this week, demand from gold has moved into gold miners' shares - a leading indicator for an asset.
A meaningful sign of a bearish trend reversal in gold would be a consolidation above $1800 and confirmation to overcome previous local highs at $1836.
This was particularly so for gold. Buying gold gathered momentum today, taking the price to $1777, from where the seemingly strong CPI figures caused it to plummet to $1757. However, this dip attracted even more furious demand, taking the price to $1785 at the time of writing.
There were big bulls in gold. This was evident from the initial reaction to the NFP, although it proved volatile. However, this week, demand from gold has moved into gold miners' shares - a leading indicator for an asset.
A meaningful sign of a bearish trend reversal in gold would be a consolidation above $1800 and confirmation to overcome previous local highs at $1836.
#Wheat falling inside wave (2)
• Likely to reach support level 700.00
Wheat continues to fall inside the intermediate correction (2), which started earlier from the resistance zone lying between the key resistance level 760.00 (which has been reversing the price from April) and the upper daily Bollinger Band.
The downward reversal from this resistance zone started the active corrective wave (2).
Wheat can be expected to fall further toward the next support level 700.00 (low of the previous correction 4 and the target for the completion of the active corrective wave (2))
• Likely to reach support level 700.00
Wheat continues to fall inside the intermediate correction (2), which started earlier from the resistance zone lying between the key resistance level 760.00 (which has been reversing the price from April) and the upper daily Bollinger Band.
The downward reversal from this resistance zone started the active corrective wave (2).
Wheat can be expected to fall further toward the next support level 700.00 (low of the previous correction 4 and the target for the completion of the active corrective wave (2))
#NZDCAD reversed from support zone
• Likely to rise to resistance level 0.8715
NZDCAD currency pair recently reversed up from the support zone lying between the key support level 0.8625 (former Triple Bottom from June) and the lower daily Bollinger Band.
The upward reversal from this support zone will most likely create the second consecutive candlesticks reversal pattern Piercing Line.
Given the strength of the aforementioned support zone, NZDCAD currency pair can be expected to rise further toward the next resistance level 0.8715 (former low of the minor impulse wave 1 from the end of September).
• Likely to rise to resistance level 0.8715
NZDCAD currency pair recently reversed up from the support zone lying between the key support level 0.8625 (former Triple Bottom from June) and the lower daily Bollinger Band.
The upward reversal from this support zone will most likely create the second consecutive candlesticks reversal pattern Piercing Line.
Given the strength of the aforementioned support zone, NZDCAD currency pair can be expected to rise further toward the next resistance level 0.8715 (former low of the minor impulse wave 1 from the end of September).
The dollar pulled back from a one-year high area, with US stock markets closing higher on Wednesday and its futures adding in trading in Asia. This performance was a market reaction to inflation data and FOMC meeting minutes. The market was near extremes in several major instruments and indices.
First and foremost, traders should pay attention to the dynamics of the US debt market. Minutes from the September FOMC meeting indicate that tapering could start as early as mid-November, and a rate hike by the end of 2022 is already completely priced into the Fed Funds Rate Futures market.
At the same time, two- to three-year bond yields decreased, indicating that policy tightening would start quickly, but after that will be slower than previously expected.
This revaluation wasn't good news for the dollar, causing the DXY to retreat from 94.6 to 94.0. There is a potential for a further correction with price and RSI divergence and the latter retreating from the overbought area above 70 on the daily charts.
First and foremost, traders should pay attention to the dynamics of the US debt market. Minutes from the September FOMC meeting indicate that tapering could start as early as mid-November, and a rate hike by the end of 2022 is already completely priced into the Fed Funds Rate Futures market.
At the same time, two- to three-year bond yields decreased, indicating that policy tightening would start quickly, but after that will be slower than previously expected.
This revaluation wasn't good news for the dollar, causing the DXY to retreat from 94.6 to 94.0. There is a potential for a further correction with price and RSI divergence and the latter retreating from the overbought area above 70 on the daily charts.
EURUSD is also undergoing a critical test of the latest trend. The daily jump of 0.6% to 1.1600 lifted the pair above the downward resistance line, in force since early September.
A consolidation above 1.1600 today would be the first signal to break the upside trend of the dollar, and a rise above 1.1640 promises to be a confirmation signal.
We should point out that this jump in EURUSD is not a strength of the Euro against its peers. It remains near cyclical lows against the pound at 0.8475 in EURGBP and has broken the floor at 1.07 in EURCHF, melting to lows last seen in November.
A consolidation above 1.1600 today would be the first signal to break the upside trend of the dollar, and a rise above 1.1640 promises to be a confirmation signal.
We should point out that this jump in EURUSD is not a strength of the Euro against its peers. It remains near cyclical lows against the pound at 0.8475 in EURGBP and has broken the floor at 1.07 in EURCHF, melting to lows last seen in November.
The S&P500 is also testing its downside resistance. Futures have been trading above it since morning, but we should wait for the reaction of the US market. Better yet, a consolidation above the area of the prior local highs near 4400.
Gold made an almost 2% jump on Wednesday, approaching $1800, the 200-day moving average. A meaningful sign of a bearish trend reversal in gold would be a consolidation above $1800 and confirmation to overcome previous local highs at $1836. More on Gold we wrote yesterday.
Gold made an almost 2% jump on Wednesday, approaching $1800, the 200-day moving average. A meaningful sign of a bearish trend reversal in gold would be a consolidation above $1800 and confirmation to overcome previous local highs at $1836. More on Gold we wrote yesterday.
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#NZDJPY broke pivotal resistance level 78.7
• Likely to test resistance level 80.15
NZDJPY currency pair under the bullish pressure after the price broke the pivotal resistance level 78.7 (which has been reversing the price from the start of July).
The breakout of the resistance level 78.7 accelerated the active minor impulse wave 3 – which is a part of the higher-order upward impulse wave (3) from last month.
NZDJPY can be expected to rise further toward the next resistance level 80.15 (multi-month high from May and the target price for the completion of the active wave 3).
• Likely to test resistance level 80.15
NZDJPY currency pair under the bullish pressure after the price broke the pivotal resistance level 78.7 (which has been reversing the price from the start of July).
The breakout of the resistance level 78.7 accelerated the active minor impulse wave 3 – which is a part of the higher-order upward impulse wave (3) from last month.
NZDJPY can be expected to rise further toward the next resistance level 80.15 (multi-month high from May and the target price for the completion of the active wave 3).
#NatGas reversed from support zone
• Likely to rise to resistance level 6.3
Natural gas recently reversed up from the support zone lying between the key support level 5.40 (low of the previous wave (a)), 20-day moving average and the 61.8% Fibonacci correction of the upward impulse from September.
The upward reversal from this support zone started the active minor impulse wave 5 – which is a part of the higher-order upward impulse sequence (5) from July.
Natural gas can be expected to rise further toward the next resistance level 6.3 (which stopped the previous waves 3 and (b)).
• Likely to rise to resistance level 6.3
Natural gas recently reversed up from the support zone lying between the key support level 5.40 (low of the previous wave (a)), 20-day moving average and the 61.8% Fibonacci correction of the upward impulse from September.
The upward reversal from this support zone started the active minor impulse wave 5 – which is a part of the higher-order upward impulse sequence (5) from July.
Natural gas can be expected to rise further toward the next resistance level 6.3 (which stopped the previous waves 3 and (b)).
The S&P500 index closed Thursday with the biggest gain in seven months, adding 1.7%. In a sharp move, the index managed to get back above the 50-day average and maintained its position above that line as of Friday morning.
Traders should pay attention to the trading around this level, which acted as support since November 2020 and turned into resistance in September 2021. The regular session and the weekend promise to set the tone for the next few days and even weeks.
The Japanese market in the form of the Nikkei 225 supports America’s optimism by adding 1.7% since the beginning of the trading session on Friday and surpassing the 29000 level and its 50- and 200-day moving averages. The weakening Japanese yen against its major rivals are keeping interest in shares of the Land of the Rising Sun alive. They also benefit from some pullback in energy prices, which are mainly imported.
Traders should pay attention to the trading around this level, which acted as support since November 2020 and turned into resistance in September 2021. The regular session and the weekend promise to set the tone for the next few days and even weeks.
The Japanese market in the form of the Nikkei 225 supports America’s optimism by adding 1.7% since the beginning of the trading session on Friday and surpassing the 29000 level and its 50- and 200-day moving averages. The weakening Japanese yen against its major rivals are keeping interest in shares of the Land of the Rising Sun alive. They also benefit from some pullback in energy prices, which are mainly imported.
The weakening of the yen overnight fits well with the persistent inverse relationship between its exchange rate and the demand for risk: low-yielding Japanese bonds are used as funding for purchasing risky assets such as stocks or high-yielding currencies. This factor has added to yen weakness as the trade balance shifts towards higher imports due to a jump in energy and metals prices.
Having surpassed 114 this morning, the USDJPY was near the upper end of its trading range since early 2017. On the charts up to the weekly timeframes, there is a clear overbought situation in the pair. The same is largely true for GBPJPY, which, having risen to 156.5, is testing its highest levels since mid-2016.
Having surpassed 114 this morning, the USDJPY was near the upper end of its trading range since early 2017. On the charts up to the weekly timeframes, there is a clear overbought situation in the pair. The same is largely true for GBPJPY, which, having risen to 156.5, is testing its highest levels since mid-2016.
Since early October, the yen’s dip has appeared too fast and abrupt, and the move could potentially be even stronger. In the coming days, we may see the sellers surrender on the rise above the turning points of recent years. Or, on the contrary, an increase in bear’s grip. Either way, there will be no dullness in the yen.
A further weakening of the Japanese currency would inflate the stock market’s sails and support a further strengthening of commodities and high-yielding currencies. Having started at the beginning of October, this momentum is relatively new and therefore, its potential is far from exhausted. On the other hand, there are also questions about its sustainability because massive bond placements from the US Treasury should be on the horizon, drawing liquidity from the market and supporting the demand for the dollar.
A further weakening of the Japanese currency would inflate the stock market’s sails and support a further strengthening of commodities and high-yielding currencies. Having started at the beginning of October, this momentum is relatively new and therefore, its potential is far from exhausted. On the other hand, there are also questions about its sustainability because massive bond placements from the US Treasury should be on the horizon, drawing liquidity from the market and supporting the demand for the dollar.