#EURUSD lost nearly 0.5% shortly after the data was released, turning sharply lower on a move away from 1.07. Technically, sellers piled on the pressure after the pair touched its 50-day moving average, a medium-term trend indicator.
A close below 1.07 would be a reminder that the pair's slow recovery from 1.05 levels this month was a correction of oversold and not a trend change.
Fundamentally, Europe again shows it is struggling to grow with rising interest rates and volatile energy prices. These conditions have led the ECB to stop raising rates earlier than the Fed. Perhaps, as in the previous cycle of rate hikes following the global financial crisis, the ECB will turn to easing earlier than the Fed. This is an important factor weighing on the euro against the dollar at a time when the carry trade has re-emerged as a market driver.
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A close below 1.07 would be a reminder that the pair's slow recovery from 1.05 levels this month was a correction of oversold and not a trend change.
Fundamentally, Europe again shows it is struggling to grow with rising interest rates and volatile energy prices. These conditions have led the ECB to stop raising rates earlier than the Fed. Perhaps, as in the previous cycle of rate hikes following the global financial crisis, the ECB will turn to easing earlier than the Fed. This is an important factor weighing on the euro against the dollar at a time when the carry trade has re-emerged as a market driver.
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The US “Big Oil” has picked up recently, with both production growth and mergers and acquisitions.
At the end of last week, the number of active drilling rigs in the US rose to 502 oil rigs and 122 gas rigs, according to Baker Hughes estimates. This is the second week in a row with some increase. It is minimal, but it could start a trend if it is reinforced by other news.
The last two weekly EIA reports show a jump in average daily oil production to 13.2 million bpd, a record high. And the rising rig count suggests that companies in America are finally seeing the potential in investing in expanding oil production.
They may have been spurred on by the fact that crude oil inventories are now 4% lower than a year ago and close to their lowest levels since 2015 when the shale boom was in full swing.
Oil producers may have been encouraged by the US government's move to buy oil for the Strategic Petroleum Reserve.
At the end of last week, the number of active drilling rigs in the US rose to 502 oil rigs and 122 gas rigs, according to Baker Hughes estimates. This is the second week in a row with some increase. It is minimal, but it could start a trend if it is reinforced by other news.
The last two weekly EIA reports show a jump in average daily oil production to 13.2 million bpd, a record high. And the rising rig count suggests that companies in America are finally seeing the potential in investing in expanding oil production.
They may have been spurred on by the fact that crude oil inventories are now 4% lower than a year ago and close to their lowest levels since 2015 when the shale boom was in full swing.
Oil producers may have been encouraged by the US government's move to buy oil for the Strategic Petroleum Reserve.
Chevron agreed to buy Hess for $60bn. About two weeks earlier, Exxon Mobil announced it was buying Pioneer Natural Resources for $58bn. Now it's clear what the US oil majors have been saving up for.
The easing of sanctions on Venezuela could also be a boon for US oil producers, having capacity there.
The Middle East war and the risk of supply disruptions are long-term factors favouring investment in US oil production.
Perhaps the OPEC+, which have spare capacity but artificially limit production to support the price, also see this trend. So far, however, there has been no response from the Islamic world to Iran's calls for an oil blockade of the West.
This could be the prologue to a shift in focus from the battle for profits and the final price of crude to a war for market share. Given years of record interest rates, it won't be easy for US companies. But it is also worth noting that the biggest players are now in business, with impressive capital reserves and strong lobbies in government.
The easing of sanctions on Venezuela could also be a boon for US oil producers, having capacity there.
The Middle East war and the risk of supply disruptions are long-term factors favouring investment in US oil production.
Perhaps the OPEC+, which have spare capacity but artificially limit production to support the price, also see this trend. So far, however, there has been no response from the Islamic world to Iran's calls for an oil blockade of the West.
This could be the prologue to a shift in focus from the battle for profits and the final price of crude to a war for market share. Given years of record interest rates, it won't be easy for US companies. But it is also worth noting that the biggest players are now in business, with impressive capital reserves and strong lobbies in government.
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Gold rally runs out of steam
Gold is experiencing profit-taking after an impressive rally following the escalation in the Middle East.
The cost of a troy ounce of gold was down to $1955 at the peak of the European session on Tuesday, after a two-week rally from $1811 to almost $2000 since the 6th of October.
This week's opening with a gap down was a sign that the market had built considerable profit-taking demand. The gap was closed during the day, but the decline continued Tuesday.
The market blew off steam just as the daily RSIs hit overbought levels. If this is not some short-term market noise, a full-blown correction of the latest rally would take the price to $1925, up to 61.8% of the initial advance.
Theoretically, there is a more bullish scenario for gold. According to this, today's pullback to $1955, or 76.4%, has already removed some overbought conditions and spurred enough buying demand to increase the price.
Gold is experiencing profit-taking after an impressive rally following the escalation in the Middle East.
The cost of a troy ounce of gold was down to $1955 at the peak of the European session on Tuesday, after a two-week rally from $1811 to almost $2000 since the 6th of October.
This week's opening with a gap down was a sign that the market had built considerable profit-taking demand. The gap was closed during the day, but the decline continued Tuesday.
The market blew off steam just as the daily RSIs hit overbought levels. If this is not some short-term market noise, a full-blown correction of the latest rally would take the price to $1925, up to 61.8% of the initial advance.
Theoretically, there is a more bullish scenario for gold. According to this, today's pullback to $1955, or 76.4%, has already removed some overbought conditions and spurred enough buying demand to increase the price.
Looking at other markets, we continue to believe that the selling of gold still needs to be completed. US 10-year Treasury yields briefly breached 5% on Monday. But this attracted buyers into bonds, making the case for a yield top (price bottom).
While we often hear that rising government bond yields are bearish for gold, it is unlikely that significant capital will buy into a falling market to avoid catching a falling knife. Signs of a bottom forming could trigger an essential shift in the overriding trade, triggering a capital flow out of gold and into bonds.
The timing of this shift is also appropriate, as it is often in October that we see a change in long-term trends with the start of a new fiscal year. A year ago, such a shift was the stock market reversal and the beginning of a weakening dollar. And now it could be the emergence of interest in beaten-down long-term US bonds to the detriment of gold and possibly equities, whose yields are now lower than most debt market securities.
While we often hear that rising government bond yields are bearish for gold, it is unlikely that significant capital will buy into a falling market to avoid catching a falling knife. Signs of a bottom forming could trigger an essential shift in the overriding trade, triggering a capital flow out of gold and into bonds.
The timing of this shift is also appropriate, as it is often in October that we see a change in long-term trends with the start of a new fiscal year. A year ago, such a shift was the stock market reversal and the beginning of a weakening dollar. And now it could be the emergence of interest in beaten-down long-term US bonds to the detriment of gold and possibly equities, whose yields are now lower than most debt market securities.
#WaveAnalysis
#NZDCAD reversed from support level 0.7960
Likely to rise to resistance level 0.8100
NZDCAD currency pair recently reversed up with the Piercing Line from the key support level 0.7960 (which stopped the sharp downtrend in September).
The support level 0.7960 was strengthened by the nearby lower daily Bollinger Band , as can be seen below.
Given the strength of the support level 0.7960 and the oversold daily Stochastic, NZDCAD can be expected to rise further toward the next resistance level 0.8100.
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#NZDCAD reversed from support level 0.7960
Likely to rise to resistance level 0.8100
NZDCAD currency pair recently reversed up with the Piercing Line from the key support level 0.7960 (which stopped the sharp downtrend in September).
The support level 0.7960 was strengthened by the nearby lower daily Bollinger Band , as can be seen below.
Given the strength of the support level 0.7960 and the oversold daily Stochastic, NZDCAD can be expected to rise further toward the next resistance level 0.8100.
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#WaveAnalysis
#EURJPY reversed from resistance level 159.50
Likely to fall to support level 0.8100
EURJPY currency pair recently reversed down from the powerful resistance level 159.50 (which reversed the pair twice in August) intersecting with the upper daily Bollinger Band.
The downward reversal from the resistance level 159.50 is likely to form the daily Bearish Engulfing – which will stop the active impulse wave (3).
Given the strength of the resistance level 159.90, euro outflows and the overbought daily Stochastic, EURJPY can be expected to fall further toward the next support level 156.95 (low of the previous wave (2)).
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#EURJPY reversed from resistance level 159.50
Likely to fall to support level 0.8100
EURJPY currency pair recently reversed down from the powerful resistance level 159.50 (which reversed the pair twice in August) intersecting with the upper daily Bollinger Band.
The downward reversal from the resistance level 159.50 is likely to form the daily Bearish Engulfing – which will stop the active impulse wave (3).
Given the strength of the resistance level 159.90, euro outflows and the overbought daily Stochastic, EURJPY can be expected to fall further toward the next support level 156.95 (low of the previous wave (2)).
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The #crypto market is attempting to settle at the previous day's highs. The $1.26tn capitalisation is close to this year's peak, briefly touched in April.
#Bitcoin is up just under 1% in 24 hours and over 19% in the last seven days, consolidating at levels near $34K after a surge higher. The consolidation forms a triangle with exits often to the upside. However, the RSI on the daily timeframe is highly overbought, suggesting that short-term speculators should be looking for a corrective pullback. Looking at the longer term, the current setup for Bitcoin seems very promising for the bulls.
Bitcoin has rallied on the back of institutional investors' hopes that the SEC will soon decide to approve spot ETFs on BTC.
BlackRock's proposed spot bitcoin ETF, the iShares Bitcoin Trust, appeared for a while on the asset list of The Depository Trust and Clearing Corporation (DTCC), a Nasdaq clearing house. The instrument was listed under the ticker IBTC, then disappeared, and reportingly reappeared on Wednesday.
#Bitcoin is up just under 1% in 24 hours and over 19% in the last seven days, consolidating at levels near $34K after a surge higher. The consolidation forms a triangle with exits often to the upside. However, the RSI on the daily timeframe is highly overbought, suggesting that short-term speculators should be looking for a corrective pullback. Looking at the longer term, the current setup for Bitcoin seems very promising for the bulls.
Bitcoin has rallied on the back of institutional investors' hopes that the SEC will soon decide to approve spot ETFs on BTC.
BlackRock's proposed spot bitcoin ETF, the iShares Bitcoin Trust, appeared for a while on the asset list of The Depository Trust and Clearing Corporation (DTCC), a Nasdaq clearing house. The instrument was listed under the ticker IBTC, then disappeared, and reportingly reappeared on Wednesday.
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Australian inflation surprised on the upside, reigniting expectations of another rate hike as early as November. However, the Aussie could not enjoy the buying momentum for long as the US dollar strengthened.
In the third quarter, CPI rose 1.2%, accelerating from 0.8% three months earlier due to fuel and energy cost dynamics. Annual inflation slowed to 5.4% from 6.0%, above expectations of 5.3%.
Monthly data showed that inflation accelerated to 5.6% y/y in September from 5.2% in August and 4.9% in July. This looks like a dangerous and sustained uptrend, although it is yet to be seen in the quarterly numbers, which are the central bank's primary focus.
In the third quarter, CPI rose 1.2%, accelerating from 0.8% three months earlier due to fuel and energy cost dynamics. Annual inflation slowed to 5.4% from 6.0%, above expectations of 5.3%.
Monthly data showed that inflation accelerated to 5.6% y/y in September from 5.2% in August and 4.9% in July. This looks like a dangerous and sustained uptrend, although it is yet to be seen in the quarterly numbers, which are the central bank's primary focus.
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#AUDUSD came close to 0.6400, adding two-thirds of a cent shortly after the news. However, the round level and touching of the 50-day moving average also triggered heavier selling in the pair, repeating what we saw in EURUSD a day earlier.
At the time of writing, the Aussie has pulled back to 0.6330, erasing the gains made early Tuesday. Technically, the Aussie remains in the hands of the bears as it makes a series of lower local highs and stumbles off the 50-day moving average. There is significant support at 0.63, from which the pair has been bought on the downtrend since the beginning of the month. A break below this level would open the door for a quick fall back below 0.62.
The risk of the AUD falling into a downward spiral should raise the RBA's alert level. But will it happen?
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At the time of writing, the Aussie has pulled back to 0.6330, erasing the gains made early Tuesday. Technically, the Aussie remains in the hands of the bears as it makes a series of lower local highs and stumbles off the 50-day moving average. There is significant support at 0.63, from which the pair has been bought on the downtrend since the beginning of the month. A break below this level would open the door for a quick fall back below 0.62.
The risk of the AUD falling into a downward spiral should raise the RBA's alert level. But will it happen?
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The dollar's shallow correction may be over
After starting the week in retreat, the US dollar reversed sharply higher in the European session on Tuesday and is on the offensive on Wednesday. Dollar bulls have returned to active buying after a long but shallow correction from earlier this month's peak.
The Dollar Index (#DXY) peaked at 107 in early October after twelve weeks of gains. The market was then dominated by profit-taking. However, the pullback from the 107.1 peak was relatively shallow, and the DXY corrected 76.4% of the total upside amplitude, finding support at 105.2. Deeper corrections are seen as the norm, but there are truncated corrections in solid markets when there is sufficient reason to complete them.
After starting the week in retreat, the US dollar reversed sharply higher in the European session on Tuesday and is on the offensive on Wednesday. Dollar bulls have returned to active buying after a long but shallow correction from earlier this month's peak.
The Dollar Index (#DXY) peaked at 107 in early October after twelve weeks of gains. The market was then dominated by profit-taking. However, the pullback from the 107.1 peak was relatively shallow, and the DXY corrected 76.4% of the total upside amplitude, finding support at 105.2. Deeper corrections are seen as the norm, but there are truncated corrections in solid markets when there is sufficient reason to complete them.
On the news side, the reason for the resumption of buying in the US was the failure of the Eurozone PMIs. This starkly contrasted to the better-than-expected indices coming out of the US. These indices underlined that America is doing well with high interest rates, while Europe is losing traction, and its countries are likely to slip into recession one by one.
The technical reason for the sell-off was that the EURUSD touched its 50-day moving average as it approached 1.07. The dollar bulls did not let this vital trend indicator be taken away, proving once again that we are in a strengthening dollar environment.
The DXY index also approached its 50-day average but failed to touch it and was just minutes below its 76.4% retracement.
In general, it is too early to talk about a continuation of the dollar rally, and it is better to wait for confirmation in the form of an update of the previous local highs at 107.1.
The technical reason for the sell-off was that the EURUSD touched its 50-day moving average as it approached 1.07. The dollar bulls did not let this vital trend indicator be taken away, proving once again that we are in a strengthening dollar environment.
The DXY index also approached its 50-day average but failed to touch it and was just minutes below its 76.4% retracement.
In general, it is too early to talk about a continuation of the dollar rally, and it is better to wait for confirmation in the form of an update of the previous local highs at 107.1.
However, the bulls have two critical factors on their side. First, the Carry trade - playing the interest rate differential - is now entirely on the side of US assets, not to mention the attractive liquidity and reliability of the US market.
Secondly, we note the strong dollar buying impulses on Tuesday and 12 October, suggesting impressive demand on the downside.
Thus, barring any surprises from macro data and next week's FOMC meeting, it is only a matter of time before the Dollar Index reaches new highs.
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Secondly, we note the strong dollar buying impulses on Tuesday and 12 October, suggesting impressive demand on the downside.
Thus, barring any surprises from macro data and next week's FOMC meeting, it is only a matter of time before the Dollar Index reaches new highs.
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#WaveAnalysis
#EURUSD reversed from resistance level 1.0665
Likely to fall to support level 1.0515
EURUSD currency pair recently reversed down with the Bearish Engulfing from the key resistance level 1.0665 (former strong support from May and June) intersecting with the upper daily Bollinger Band.
The resistance level 1.0665 was strengthened by the 50% Fibonacci correction of the previous downward impulse from August.
Given the clear daily downtrend, EURUSD can be expected to fall further toward the next support level 1.0515 (low of the previous wave (B)).
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#EURUSD reversed from resistance level 1.0665
Likely to fall to support level 1.0515
EURUSD currency pair recently reversed down with the Bearish Engulfing from the key resistance level 1.0665 (former strong support from May and June) intersecting with the upper daily Bollinger Band.
The resistance level 1.0665 was strengthened by the 50% Fibonacci correction of the previous downward impulse from August.
Given the clear daily downtrend, EURUSD can be expected to fall further toward the next support level 1.0515 (low of the previous wave (B)).
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The #crypto market is holding its total cap above $1.27 trillion despite a frightening sell-off in equities overnight. Bitcoin and other major altcoins are again attempting to play the safe haven role.
There is also possible speculation that market turbulence in the week leading up to the FOMC meeting will force the regulator to soften its tone significantly, which is positive for crypto unaffected by the falling revenues from Google's cloud business or similar stories.
On Wednesday, #Bitcoin failed to break above $35K again. Still, we note a series of higher lows that brought the price closer to the upper bound of the consolidation range since Tuesday.
BTCUSD remains in low-density territory, with key resistance levels of $38K or even $48K. However, reaching the upper boundary in the coming weeks won’t be easy.
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There is also possible speculation that market turbulence in the week leading up to the FOMC meeting will force the regulator to soften its tone significantly, which is positive for crypto unaffected by the falling revenues from Google's cloud business or similar stories.
On Wednesday, #Bitcoin failed to break above $35K again. Still, we note a series of higher lows that brought the price closer to the upper bound of the consolidation range since Tuesday.
BTCUSD remains in low-density territory, with key resistance levels of $38K or even $48K. However, reaching the upper boundary in the coming weeks won’t be easy.
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A strengthening US dollar pushed the #USDJPY to 150.77 early Thursday. Except for just over 20 hours on 21 October 2022, the pair last traded higher in 1990.
Almost a year ago, a breach of the round 150 level triggered a decisive intervention by the Japanese Ministry of Finance, breaking the pair's bullish trend and pushing it back below 128 less than three months later.
Considering this history, the market failed to break through this round level, approached in early October. There were many sharp spikes in Yen gains during the month, raising whether these were interventions initiated by the Japanese Ministry of Finance. In contrast to developments last year, the short-term spikes were not followed by a continuation, raising doubts about the authorities' resolve.
There is a risk that it is not in Japan's interest to repeat last year's actions. The authorities are not targeting a specific level but are assessing volatility and the impact of the exchange rate on inflation.
Almost a year ago, a breach of the round 150 level triggered a decisive intervention by the Japanese Ministry of Finance, breaking the pair's bullish trend and pushing it back below 128 less than three months later.
Considering this history, the market failed to break through this round level, approached in early October. There were many sharp spikes in Yen gains during the month, raising whether these were interventions initiated by the Japanese Ministry of Finance. In contrast to developments last year, the short-term spikes were not followed by a continuation, raising doubts about the authorities' resolve.
There is a risk that it is not in Japan's interest to repeat last year's actions. The authorities are not targeting a specific level but are assessing volatility and the impact of the exchange rate on inflation.
Sharp movements in the exchange rate undermine economic activity, forcing exporters and importers to postpone transactions to a point of equilibrium if possible. This is why we often hear from officials that large exchange rate movements are undesirable. However, intervention only increases this volatility.
The impact on inflation is not the nominal yen exchange rate but the change compared with a previous period, such as a year ago. A year ago, the nominal yen exchange rate against a trade-weighted basket depreciated by 15% y/y; now, it is down by only 3% y/y, which means that its contribution to inflation is close to zero, although it is not an inflation-fighting regime.
So, it is possible that the enormous focus on the yen at 150 by traders and FX market commentators has not resonated in the hearts of Japan's policymakers, who see no immediate need to intervene in the situation, especially as it is not free.
The impact on inflation is not the nominal yen exchange rate but the change compared with a previous period, such as a year ago. A year ago, the nominal yen exchange rate against a trade-weighted basket depreciated by 15% y/y; now, it is down by only 3% y/y, which means that its contribution to inflation is close to zero, although it is not an inflation-fighting regime.
So, it is possible that the enormous focus on the yen at 150 by traders and FX market commentators has not resonated in the hearts of Japan's policymakers, who see no immediate need to intervene in the situation, especially as it is not free.
Unlike intervention to weaken the local currency, attempts to support the exchange rate are backed by the sale of foreign exchange reserves, depleting the country’s reserves. To make matters worse, the value of US government bonds (the most liquid instrument for intervention) has fallen sharply in recent months.
So, at current levels, it is safer to expect Japan’s MoF to turn the tide with intervention but will only limit USDJPY gains, even though the real effective yen exchange rate is at its lowest since 1970.
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So, at current levels, it is safer to expect Japan’s MoF to turn the tide with intervention but will only limit USDJPY gains, even though the real effective yen exchange rate is at its lowest since 1970.
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#WaveAnalysis
#USDCHF reversed from support level 0.8900
Likely to rise to resistance level 0.9085
USDCHF currency pair recently reversed up from the key support level 0.8900 (which has been reversing the pair from September) standing near the lower daily Bollinger Band.
The upward reversal from the support level 0.8900 stopped the previous sharp downward ABC correction (2).
Given the strength of the support level 0.8900, USDCHF currency pair can be expected to rise further toward the next resistance level 0.9085.
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#USDCHF reversed from support level 0.8900
Likely to rise to resistance level 0.9085
USDCHF currency pair recently reversed up from the key support level 0.8900 (which has been reversing the pair from September) standing near the lower daily Bollinger Band.
The upward reversal from the support level 0.8900 stopped the previous sharp downward ABC correction (2).
Given the strength of the support level 0.8900, USDCHF currency pair can be expected to rise further toward the next resistance level 0.9085.
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