FOREX: Powell Ripple Effect, CNY Fix Drive USD Lower
- The USD Index has stepped lower early Wednesday, prompting USD to fade further off the early October highs. This leaves the USD Index 0.8% off the October highs of 99.563, however still well toward the upper-end of the month's range. The USD is lower for a second session, with European markets taking the lead of the Wall Street close and Powell's appearance just after the close.
- Markets are growing in conviction that an October rate cut is far from the last at the Fed - and Powell's focus on the downside risk for the labour market raises focus for the 10y yield, which is narrowing in on 4.00%. A major break lower here could be the next trigger to extend the USD weaker. In tandem, the stronger-than-expected CNY fix has also proved USD negative. The PBOC set the reference rate at 7.0995, the strongest level in close to twelve months.
- Japanese political uncertainty has failed to keep JPY under pressure, with the currency broadly higher against the rest of G10. Opposition talks are scheduled over the coming days and while betting markets have shifted back in Takaichi's favour. A bullish trend condition in USDJPY remains intact and the pullback from last week’s high appears corrective. The next important support lies at 149.92, the 20-day EMA. On the upside, clearance of 153.27, the Oct 10 high, would resume the uptrend and open 154.39, a Fibonacci retracement point.
- EURUSD has made further progress as markets de-risk after the suspension of France's pension reform yesterday. Increased political stability is outweighing fiscal concerns, but rallies may be contained by potential ratings downgrades on any fiscal slippage. EURUSD printed 1.1645 just after the open, meeting the 100-dma in the process.
- US September CPI was originally set to print today, but with the government shutdown extending further (and looking likely to persist well toward the end of October / early November) it's set to be a quieter session for economic data. Canada's manufacturing sales data, NY Fed's Empire Manufacturing and the latest Beige Book are still due, however.
- This should keep focus on what's already been a busy week of central bank communications. Fed's Miran, Waller & Schmid are due, as well as BoE's Breeden, RBA's Bullock and ECB's Villeroy.
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COMMODITIES: Gold in a Clear Bull Cycle, Close to Recent Record Highs
The trend condition in WTI futures is unchanged - a bear cycle remains intact short-term gains are considered corrective. The pullback from the Sep 2 high highlights a possible recent reversal and the end of a corrective phase between Aug 13 - Sep 2. Initial resistance to watch is $66.03, the Sep 2 high. Key short-term resistance has been defined at $69.36, the Jul 30 high. A stronger resumption of weakness would open $57.71, the May 30 low. Gold remains in a clear bull cycle and continues to trade at its recent highs. The yellow metal traded to a fresh all-time high once again, last week. The break higher confirms a resumption of the primary uptrend and an extension of the sequence of higher highs and higher lows. The next objective is $3674.8, a Fibonacci projection. Initial firm support lies at $3504.1, the 20-day EMA.
- WTI Crude up $0.26 or +0.41% at $62.94
- Natural Gas up $0.02 or +0.82% at $2.964
- Gold spot up $1.54 or +0.04% at $3644.05
- Copper up $0.35 or +0.08% at $465.5
- Silver up $0.02 or +0.05% at $42.199
- Platinum up $3.49 or +0.25% at $1400.63
EQUITIES: E-Mini S&P Remains in a Bullish Price Sequence
A corrective bear cycle in Eurostoxx 50 futures remains in play. Recent weakness resulted in a breach of 5370.21, the 50-day EMA. A clear break of this average strengthens a short-term bearish threat and signals scope for a deeper retracement towards 5166.00, the Aug 1 low and a key support. On the upside, the contract has recovered above the 20-day EMA - a bullish development for now. The next resistance to watch is 5445.00, Aug 26 high. A bull cycle in S&P E-Minis remains intact and last week’s fresh cycle highs reinforce current conditions. The move higher confirms a resumption of the primary uptrend and maintains the bullish price sequence of higher highs and higher lows. Sights are on the 6685.25, a Fibonacci projection, and the 6700.00 handle. On the downside, initial support to watch is 6547.03, the 20-day EMA.
- In China the SHANGHAI closed lower by 10.094 pts or -0.26% at 3860.504 and the HANG SENG ended 58.4 pts higher or +0.22% at 26446.56.
- Across Europe, Germany's DAX trades higher by 137.47 pts or +0.58% at 23836.41, FTSE 100 lower by 2.69 pts or -0.03% at 9280.55, CAC 40 up 93.41 pts or +1.19% at 7918.65 and Euro Stoxx 50 up 47.55 pts or +0.88% at 5438.26.
- Dow Jones mini up 114 pts or +0.25% at 45967, S&P 500 mini up 7 pts or +0.11% at 6595, NASDAQ mini down 10.5 pts or -0.04% at 24102.75.
