However, geopolitics is not the only fundamental driver of oil prices. Last week, the US ramped production to a record 13.2 million barrels. These reports, as well as a 10.2-million-barrel jump in commercial inventories, pressured quotes midweek.
Towards the end of the week, the Middle East again drew attention to the risks of geographic expansion of the conflict, which increased the risks of a decline in supplies.
However, one should not underestimate the factor of production growth in the US. Producers there have increased average daily production by 1 million barrels since August.
It seems that US oil producers, after the August OPEC+ assurances, have finally joined the fight for a share of global oil supplies. This comes after another round of assurances from Russia and Saudi Arabia that quotas and voluntary cuts on top of those quotas will remain in place for the foreseeable future.
Towards the end of the week, the Middle East again drew attention to the risks of geographic expansion of the conflict, which increased the risks of a decline in supplies.
However, one should not underestimate the factor of production growth in the US. Producers there have increased average daily production by 1 million barrels since August.
It seems that US oil producers, after the August OPEC+ assurances, have finally joined the fight for a share of global oil supplies. This comes after another round of assurances from Russia and Saudi Arabia that quotas and voluntary cuts on top of those quotas will remain in place for the foreseeable future.
It is also possible that the trigger was the price, which exceeded $80 per barrel of WTI in August and has been trading above $90 since the second half of September.
That said, oil prices may already be too high for consumers, and we may see a reduction in supply. In addition, the risks of supply cuts from Iran and other Middle Eastern countries are real but still risks. But at the same time, supply from the US is increasing while demand is giving up.
All this is a good enough reason to test the support at $80 per barrel WTI once again.
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That said, oil prices may already be too high for consumers, and we may see a reduction in supply. In addition, the risks of supply cuts from Iran and other Middle Eastern countries are real but still risks. But at the same time, supply from the US is increasing while demand is giving up.
All this is a good enough reason to test the support at $80 per barrel WTI once again.
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US Retail sales exceeded expectations. For September, sales rose 0.7% after rising 0.8% a month earlier. During six months of back-to-back spending increases, Americans added 3.4%.
This is new evidence that suppressing inflation is not easy for the central bank with a strong labour market (abundant income) and high inflation expectations (due to rising fuel prices). And it runs counter to expectations that high interest rates will cool demand in the economy. Perhaps not until the labour market turns around, forcing Americans to adopt a saving behaviour.
Fuel sales have risen sharply since July, reaching their highest level this year. In contrast, spending on building materials and home improvement has continued to trend downward, although at historically high levels.
This is new evidence that suppressing inflation is not easy for the central bank with a strong labour market (abundant income) and high inflation expectations (due to rising fuel prices). And it runs counter to expectations that high interest rates will cool demand in the economy. Perhaps not until the labour market turns around, forcing Americans to adopt a saving behaviour.
Fuel sales have risen sharply since July, reaching their highest level this year. In contrast, spending on building materials and home improvement has continued to trend downward, although at historically high levels.
The big question now for the markets is whether this data will change the Fed's mind. In the most general case, strong retail sales are a positive signal for risk demand. Over the past two months, the market has played up strong statistics as a negative for equities, expecting new Fed rate hikes or keeping them high for longer. However, over the last couple of weeks, it appears that markets have reverted to a classic pattern of behaviour where good news on the economy is good news for the market.
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#WaveAnalysis
#Silver reversed from support level 20.70
Likely to rise to resistance level 23.50
Silver recently reversed up with the weekly Hammer from the key support level 20.70 (which has been reversing the pair from the end of 2022 as can be seen below) intersecting with the 61.8% Fibonacci correction of the weekly uptrend from last year.
The upward reversal from the support level 20.70 stopped the previous intermediate ABC correction (2).
Given the strength of the support level 20.70, Silver can be expected to rise further toward the next resistance level 23.50.
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#Silver reversed from support level 20.70
Likely to rise to resistance level 23.50
Silver recently reversed up with the weekly Hammer from the key support level 20.70 (which has been reversing the pair from the end of 2022 as can be seen below) intersecting with the 61.8% Fibonacci correction of the weekly uptrend from last year.
The upward reversal from the support level 20.70 stopped the previous intermediate ABC correction (2).
Given the strength of the support level 20.70, Silver can be expected to rise further toward the next resistance level 23.50.
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#WaveAnalysis
#EURCHF reversed from strong support level 0.9480
Likely to rise to resistance level 0.9600
EURCHF currency pair recently reversed up from the strong support level 0.9480 (which stopped the weekly downtrend in 2022 as can be seen below) intersecting with the lower weekly Bollinger Band.
The upward reversal from the support level 0.9480 stopped the previous sharp downward impulse waves 3 and (3).
Given the bullish divergence on the weekly Stochastic, EURCHF can be expected to rise further toward the next resistance level 0.9600.
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#EURCHF reversed from strong support level 0.9480
Likely to rise to resistance level 0.9600
EURCHF currency pair recently reversed up from the strong support level 0.9480 (which stopped the weekly downtrend in 2022 as can be seen below) intersecting with the lower weekly Bollinger Band.
The upward reversal from the support level 0.9480 stopped the previous sharp downward impulse waves 3 and (3).
Given the bullish divergence on the weekly Stochastic, EURCHF can be expected to rise further toward the next resistance level 0.9600.
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The crypto market has gained 0.4% over the past 24 hours. There was a fresh attempt to warm up the market with buying early Wednesday morning, but the market is avoiding acceleration in favour of a steadier rise. This is perhaps the most natural start to an uptrend, as many investors still see an opportunity to sell on the rise.
#Bitcoin approached $29K on Wednesday morning, enjoying increased demand after breaking above the 200-day MA and the former resistance line of the ascending channel. There is now an active battle for the 200-week MA, with consolidation above it at the end of the week likely to encourage further buying.
The picture in the altcoins is less optimistic. #Ethereum has been making lower and lower local highs and lows for the past two weeks after coming under increased pressure following a consolidation below the 200-week MA, with the 50-week MA acting as local resistance. Should the pressure on the cryptocurrency intensify, the $1200 area appears to be the downside target for Ethereum.
#Bitcoin approached $29K on Wednesday morning, enjoying increased demand after breaking above the 200-day MA and the former resistance line of the ascending channel. There is now an active battle for the 200-week MA, with consolidation above it at the end of the week likely to encourage further buying.
The picture in the altcoins is less optimistic. #Ethereum has been making lower and lower local highs and lows for the past two weeks after coming under increased pressure following a consolidation below the 200-week MA, with the 50-week MA acting as local resistance. Should the pressure on the cryptocurrency intensify, the $1200 area appears to be the downside target for Ethereum.
UK inflation data came in slightly higher than expected, helping the Pound to perform better than other European currencies on Wednesday.
Headline inflation was 6.7% y/y in September, the same as the previous month and 6.8% in July. So we have seen a stabilisation at a very high level in the third quarter, rather than a slowdown.
At the same time, producer prices (PPI) are lower than a year ago. The Input PPI is 2.6% lower than a year ago and has been negative for the past four months. Output PPI is down by 0.1% year-on-year and is only in slightly negative territory for the third month.
Headline inflation was 6.7% y/y in September, the same as the previous month and 6.8% in July. So we have seen a stabilisation at a very high level in the third quarter, rather than a slowdown.
At the same time, producer prices (PPI) are lower than a year ago. The Input PPI is 2.6% lower than a year ago and has been negative for the past four months. Output PPI is down by 0.1% year-on-year and is only in slightly negative territory for the third month.
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Final prices are in no hurry to fall and even slow meaningfully. This report should be another reason for the Bank of England to reconsider. It may still have to raise interest rates to fight inflation, or it may have to keep them high for much longer.
We believe the fight against inflation is now entering its most morally challenging phase. Several signs of a slowing economy have led officials to believe that inflation is on the path they want. But a tight labour market, a new spike in fuel prices and entrenched inflation expectations make the task more difficult. Likely, central bankers will still have to temporarily sacrifice the economy by suppressing demand to tame inflation.
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We believe the fight against inflation is now entering its most morally challenging phase. Several signs of a slowing economy have led officials to believe that inflation is on the path they want. But a tight labour market, a new spike in fuel prices and entrenched inflation expectations make the task more difficult. Likely, central bankers will still have to temporarily sacrifice the economy by suppressing demand to tame inflation.
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#WaveAnalysis
#AUDNZD reversed from support level 20.70
Likely to rise to resistance level 23.50
AUDNZD recently reversed up sharply from the powerful support level 1.0600 (which has been reversing the pair from April) intersecting with the lower daily Bollinger Band and the support trendline of the weekly down channel from June.
The upward reversal from the support level 1.0600 stopped the previous intermediate ABC correction (2).
Given the strength of the active impulse wave 3, AUDNZD can be expected to rise further toward the next resistance level 1.0850.
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#AUDNZD reversed from support level 20.70
Likely to rise to resistance level 23.50
AUDNZD recently reversed up sharply from the powerful support level 1.0600 (which has been reversing the pair from April) intersecting with the lower daily Bollinger Band and the support trendline of the weekly down channel from June.
The upward reversal from the support level 1.0600 stopped the previous intermediate ABC correction (2).
Given the strength of the active impulse wave 3, AUDNZD can be expected to rise further toward the next resistance level 1.0850.
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#WaveAnalysis
#NZDCHF falling inside weekly impulse 3
Likely to fall to support level 0.5200
NZDCHF continues to fall inside the sharp weekly downward impulse 3, which started earlier from the key resistance level 0.5450 (former strong support from the middle of this year).
The downward reversal from the resistance level 0.5450 continues the strong multi-year downtrend inside which the pair has been moving from the start of 2022.
Given the widespread CHF gains and NZD outflows, NZDCHF can be expected to fall further toward the next support level 0.5200 (low of the previous impulse wave 1).
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#NZDCHF falling inside weekly impulse 3
Likely to fall to support level 0.5200
NZDCHF continues to fall inside the sharp weekly downward impulse 3, which started earlier from the key resistance level 0.5450 (former strong support from the middle of this year).
The downward reversal from the resistance level 0.5450 continues the strong multi-year downtrend inside which the pair has been moving from the start of 2022.
Given the widespread CHF gains and NZD outflows, NZDCHF can be expected to fall further toward the next support level 0.5200 (low of the previous impulse wave 1).
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Gold rises against the tide, but energy is running out
Gold is trading at nearly $1950 an ounce, having surged since the end of July after hitting $1810 just under two weeks ago on the 6th.
Gold lost value rapidly in late September as US Treasury yields rose. However, the fall and the rise in yields stopped after the employment report. This added to speculation that the Fed will not raise rates in November, although some members are leaning towards a December hike.
The war in the Middle East sparked gold's momentum, forming a gap at the open on Monday, 9 October. It is continuing now but has already been priced in and is unlikely to be a major driver in the coming days. There is no strong capital outflow from equity or bond markets, so there is no basis for gold buying.
At the same time, bond prices have fallen again this week. 10-year Treasury yields close to 5% - the highest since the peak in 2007. They have not been consistently higher since 2002. This has begun to undermine risk appetite in the equity market, but this change has not yet reached gold, which ignores the main reason for its decline at the end of last month.
Gold is trading at nearly $1950 an ounce, having surged since the end of July after hitting $1810 just under two weeks ago on the 6th.
Gold lost value rapidly in late September as US Treasury yields rose. However, the fall and the rise in yields stopped after the employment report. This added to speculation that the Fed will not raise rates in November, although some members are leaning towards a December hike.
The war in the Middle East sparked gold's momentum, forming a gap at the open on Monday, 9 October. It is continuing now but has already been priced in and is unlikely to be a major driver in the coming days. There is no strong capital outflow from equity or bond markets, so there is no basis for gold buying.
At the same time, bond prices have fallen again this week. 10-year Treasury yields close to 5% - the highest since the peak in 2007. They have not been consistently higher since 2002. This has begun to undermine risk appetite in the equity market, but this change has not yet reached gold, which ignores the main reason for its decline at the end of last month.
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Gold also resists the renewed pullback in the dollar, which has recovered more than half of its losses from its early October peak. The upshot is that gold is now rising against the tide. It is likely to run out of steam sooner rather than later.
Technically, gold had necessary support on its side in the form of the 200-week average. The price touched the lows earlier in the month and quickly moved away from it. The local correction at the beginning of this week ended with a touch of the 50-week average.
Technically, gold had necessary support on its side in the form of the 200-week average. The price touched the lows earlier in the month and quickly moved away from it. The local correction at the beginning of this week ended with a touch of the 50-week average.
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In the smaller daily timeframes on Wednesday, gold consolidated above the 200-day moving average, fuelling impulsive buying and short covering, taking the price above $1960 at one point.
However, gold is now close to the overbought territory, making it vulnerable to a reversal under pressure from fundamental factors such as high bond yields and a strengthening dollar.
We also note that the war factor in the Middle East is hardly a reasonable long-term bullish bet for gold. The turbulent environment is scarcely conducive to sustained demand. The Russia-Ukraine conflict caused a similar spike in the price that we already have, but then there were fears of a supply disruption from a major producer. Even then, the price fell well below where it started before the "war rally".
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However, gold is now close to the overbought territory, making it vulnerable to a reversal under pressure from fundamental factors such as high bond yields and a strengthening dollar.
We also note that the war factor in the Middle East is hardly a reasonable long-term bullish bet for gold. The turbulent environment is scarcely conducive to sustained demand. The Russia-Ukraine conflict caused a similar spike in the price that we already have, but then there were fears of a supply disruption from a major producer. Even then, the price fell well below where it started before the "war rally".
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US home sales have fallen into a severe crisis zone
Sales in the secondary housing market in the US have fallen to an annualised pace of 3.96 million. At the peak of the downturn, the figure managed to stay above 4 million. Only during the darkest times for the US economy, during the global financial crisis, have secondary home sales been below that level.
Now, the reason is extremely high mortgage rates. The market's main benchmark - the rate on a 30-year fixed mortgage - has reached 8 per cent, a level we haven't seen since 2000. That's a real shock to consumers, who have been fed by a long era of zero interest rates. As a result, the weekly index of mortgage activity has fallen to its lowest level since 1995.
Sales in the secondary housing market in the US have fallen to an annualised pace of 3.96 million. At the peak of the downturn, the figure managed to stay above 4 million. Only during the darkest times for the US economy, during the global financial crisis, have secondary home sales been below that level.
Now, the reason is extremely high mortgage rates. The market's main benchmark - the rate on a 30-year fixed mortgage - has reached 8 per cent, a level we haven't seen since 2000. That's a real shock to consumers, who have been fed by a long era of zero interest rates. As a result, the weekly index of mortgage activity has fallen to its lowest level since 1995.
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In previous episodes of modern history, such low sales have coincided with problems in other sectors, forcing the Fed or the government to stimulate abundant demand. But don't expect that to happen this time. It now appears that the central bank will look past the collapse in sales in the coming months. There is still a need to contain inflation, even if the process is initially hypertrophied in the housing sector.
At the same time, the stock of unsold homes stands at a comfortable 3.4 months of sales at the current pace - double the level at the start of 2022. Prices have also retreated from their pandemic trend, rising by more than 50 per cent in less than two years.
Meanwhile, falling home sales and prices are further bad news for banks, which are already sitting on huge "paper" losses due to the collapse in bond prices. As house prices fall, more Americans may choose to default on their monthly payments as their debt falls below the house price.
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At the same time, the stock of unsold homes stands at a comfortable 3.4 months of sales at the current pace - double the level at the start of 2022. Prices have also retreated from their pandemic trend, rising by more than 50 per cent in less than two years.
Meanwhile, falling home sales and prices are further bad news for banks, which are already sitting on huge "paper" losses due to the collapse in bond prices. As house prices fall, more Americans may choose to default on their monthly payments as their debt falls below the house price.
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#WaveAnalysis
#GBPCHF falling inside minor impulse wave 3
Likely to fall to support level 1.0820
GBPCHF currency pair continues to fall inside the minor impulse wave 3, which reversed earlier from the resistance level 1.1000 (former multi-month support level from March).
The active minor impulse wave 3 belongs to the intermediate impulse wave (C) from the middle of June.
Given the clear daily downtrend, GBPCHF can be expected to fall further toward the next support level 1.0820 (target for the completion of the active impulse wave (C)).
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#GBPCHF falling inside minor impulse wave 3
Likely to fall to support level 1.0820
GBPCHF currency pair continues to fall inside the minor impulse wave 3, which reversed earlier from the resistance level 1.1000 (former multi-month support level from March).
The active minor impulse wave 3 belongs to the intermediate impulse wave (C) from the middle of June.
Given the clear daily downtrend, GBPCHF can be expected to fall further toward the next support level 1.0820 (target for the completion of the active impulse wave (C)).
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#WaveAnalysis
#CHFJPY under bullish pressure
Likely to test resistance level 170.00
CHFJPY currency pair under the bullish pressure after the pair broke above the key resistance level 166.10 (which reversed the pair 3 times in August as can be seen below).
The breakout of the resistance level 166.10 accelerated the active intermediate impulse wave (5) from the start of October.
Given the clear daily uptrend and the accelerating upward momentum, CHFJPY can be expected to rise further toward the next resistance level 170.00 (target for the completion of the active impulse wave (5)).
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#CHFJPY under bullish pressure
Likely to test resistance level 170.00
CHFJPY currency pair under the bullish pressure after the pair broke above the key resistance level 166.10 (which reversed the pair 3 times in August as can be seen below).
The breakout of the resistance level 166.10 accelerated the active intermediate impulse wave (5) from the start of October.
Given the clear daily uptrend and the accelerating upward momentum, CHFJPY can be expected to rise further toward the next resistance level 170.00 (target for the completion of the active impulse wave (5)).
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The crypto market is roaring, gaining over 3% in the last 24 hours. Bitcoin has accelerated its growth, with altcoin buyers seemingly emboldened by its sustained rise in recent days.
At one point, the total capitalisation exceeded 1.13 trillion, the highest since mid-August. The Fear and Greed Index is approaching 50 - also the highest since August - and Bitcoin's share is above 50% - the highest in two years.
Bitcoin is moving upward, reminiscent of the dynamics of shorts squeezed out of the market. Bitcoin is making a series of higher local lows and highs.
Technically, the leading cryptocurrency feels increasingly confident at levels above its 200-day average and has returned to territory above its 200-week average.
We think it's important to note that the break of these curves was accompanied by a strong move, marking the capitulation of some of the sellers. A fundamental shift usually follows this in investor sentiment.
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At one point, the total capitalisation exceeded 1.13 trillion, the highest since mid-August. The Fear and Greed Index is approaching 50 - also the highest since August - and Bitcoin's share is above 50% - the highest in two years.
Bitcoin is moving upward, reminiscent of the dynamics of shorts squeezed out of the market. Bitcoin is making a series of higher local lows and highs.
Technically, the leading cryptocurrency feels increasingly confident at levels above its 200-day average and has returned to territory above its 200-week average.
We think it's important to note that the break of these curves was accompanied by a strong move, marking the capitulation of some of the sellers. A fundamental shift usually follows this in investor sentiment.
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