Last Week’s Market WrapAfter last week’s immense volatility, yesterday was pretty quiet, owing to the absence of any important economic releases too.
Last Week’s Market Wrap
After last week’s immense volatility, yesterday was pretty quiet, owing to the absence of any important economic releases too. Last week we saw some wild moves due to the tensions in the Middle East, with crude Oil opening with a major gap higher and then surging again on Friday ahead of the weekend, as fears for further escalation remained high. But so far we haven’t had further escalation, although uncertainty remains high.
As a result, the volatility was low, with moves being small, although there was some risk revival as commodity currencies climbed higher, despite the comeback in treasury yields which climbed around 11 points higher together with the bullish gap in the opening.
The US Dollar and crude Oil were the losers of the day, as higher bond yields didn’t help the buck. Crude Oil opened with a $1.50 gap down and continued lower, as war jitters calmed down. The US Empire State Manufacturing Index turned negative again this month, although it came above expectations, but this is a volatile indicator anyway.
This Week’s Expectations
Today the economic data starts to come out, with the UK employment change which is predicted to be -195K vs -207K in September, with the unemployment rate remaining steady at 4.3%. The average earnings without bonuses are predicted to be 7.8%, up from 7.8% before, while the average earnings including bonuses are expected to be 8.3%, up from 8.5% previously. The Bank of England paused at its most recent meeting, and as Governor Bailey recently remarked, “future decisions are going to be tight,” so good readings might lead to another rate hike at the next meeting, especially if inflation data surprises to the upside later in the week.
The Canadian inflation report will be released next, with the headline CPI YoY first which is projected to remain unchanged at 4.0%, while the CPI MoM is forecast to be 0.1% vs. 0.4% in September. There is now no agreement on the Core measures, but those are the ones that the BoC will consider when it meets next week to decide what to do. As a reminder, underlying inflation has been surprising to the upside, and if this week’s readings continue elevated, the Bank of Canada is likely to raise interest rates again
The US Retail Sales are predicted to climb 0.3% in September vs 0.6% in August, while the Core measure is expected to rise 0.2% versus 0.6% previously. Keep an eye out for the Control Group, which is seen to be the best indicator of consumer spending. This data is unlikely to sway the Fed’s decision, as the central bank is projected to hold rates steady at its November meeting as well.
Yesterday week the price action was slow after the enormous volatility we saw last week and we saw a couple of reversals as well. Bond yields turned bullish again yesterday, so we opened a couple of long signals in the USD, But the USD didn’t follow bond yields higher, so let’s see if the correlation is really lost.
GOLD Rally Stalls at the 100 SMA
Gold has climbed more than $100 since its lows late last week, with a major surge on Friday last week which sent the price to the 100 SMA (green) on the daily chart. Around $50 increase was attributed to Middle East fears, but it also correlates with Treasury rates sliding back down on Friday after the Thursday surge. We said last week that geopolitical buy Gold trades should typically fade at some point because the reality of combat seldom matches the fear and the surge has stalled at the 100 SMA although let’s see if it will reverse back down.
XAU/USD – Daily chart
- Gold Buy Signal
- Entry Price: $1,905
- Stop Loss: $1,875
- Take Profit: $1,935
AUD/USD Heading Toward Previous Support
AUD/USD dropped roughly 150 pips to 0.63 lows late last week as the USD returned, ending the week around the lows from earlier this month. According to the most recent monthly CPI, the Reserve Bank of Australia kept interest rates steady in the past two meetings, as expected, since the current level of interest rates is leading inflation to return to target, with core inflation dropping. The US CPI came in stronger than expectations on the other hand, which sent this pair down but it was retracing higher toward the previous support yesterday.
Cryptocurrency Update
BITCOIN Retreating Back Below $30,000 After the Surge
BTC/USD – Daily chart
- BTC Buy Signal
- Entry Price: $26,248.2
- Stop Loss: $24,500
- Take Profit: $28,000
ETHEREUM Fails at the 50 Dily SMA Again
Yesterday ETH/USD also surged hgiher although the move was smaller. Late last month, Ethereum’s price began to surge above its support level, showing that there was some purchasing interest and demand for Ethereum at roughly $1,600. Buyers have regularly entered the zone above this level, but the daily chart’s 100 SMA (green) has acted as resistance. Following Sunday’s rise, this moving average reversed, wiping away all of September’s gains.
ETH/USD – Daily chart
- ETH Buy Signal
- Entry Price: $1,671.79
- Stop Loss: $1,371
- Take Profit: $1,971
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