2023-10-23 03:40

Global equity markets fell sharply in the week on escalating tensions in the Middle East and the surging US Treasury yields after the US Federal Reserve Chair Jerome Powell left open the door for further tightening. The MSCI All Country World index dropped 2.4%, the S&P 500 index fell 2.4%, and the Nasdaq 100 index declined 2.8%. The German DAX 40 fell 2.6% and the UK FTSE 100 dropped 2.6%. In Asia, the Hang Seng index fell 3.6%, while Japan’s Topix decreased 2.3%. Risk-sensitive currencies, including the Australian dollar and the New Zealand dollar, were mostly lower. Bitcoin jumped nearly 10% during the week. Past week market performance Source Data: Bloomberg; chart prepared in excel. Note: Global Bonds proxy used is Bloomberg Global Aggregate Total Return Index Unhedged USD; Commodities proxy used is BBG Commodity Total Return. The US Treasury 10-year yield hit the highest level since mid-2007 after Powell acknowledged the impact of tightening financial conditions but stopped short of closing the possibility of further tightening given the strength of the economy and tight labor markets. In recent weeks, the negative correlation between bonds and equities has hit the highest level in years, suggesting that the bond market is a leading indicator for stocks. Yields have risen despite mounting fears of an escalation in the Middle East conflict. Flight-to-safety has pushed up gold to the highest level in 5 months. Meanwhile, the third-quarter US earnings season is shifting to top gear, with 86 companies in the index having reported. While sales surprise has been mixed so far, earnings have surprised on the upside, possibly a reflection that earnings may have troughed in the cycle. The key focus next week is on the European Central Bank interest rate decision due Thursday. The central bank is widely expected to keep interest rates unchanged, but stresses that rates will stay high for an extended period. The Bank of Canada is also expected to remain on hold on moderating price pressures when it meets on Wednesday. Germany GfK Consumer Confidence, Germany HCOB Manufacturing PMI Flash, and UK jobs data are due on Tuesday, along with ECB President Lagarde's speech. Australia Q3 CPI, German Ifo Business Climate, and Bank of Canada interest rate decision are due on Wednesday. ECB interest rate decision, ECB President Lagarde's speech, Fed Chair Powell’s speech, US durable goods orders, and US Q3 GDP are due on Thursday. US Core PCE Price Index data is due on Friday. US Dollar Forecast: The Fed and US Yields Sustain USD Support Prominent Fed members came out in support of holding rates, allowing the bond market premium to keep financial conditions tight. Added safe haven appeal prop us USD. Oil Weekly Forecast: Technicals Hint at Further Upside but Geopolitics Holds the Key Oil prices look poised for further upside from a technical standpoint but tensions in the Middle East will remain the key driver of Oil prices in the week ahead. Will we see a fresh YTD high? Euro Weekly Forecast: EUR/USD, EUR/GBP Await ECB. Breakout or Breakdown Ahead? This article offers a detailed analysis of EUR/USD and EUR/GBP, considering both fundamental and technical viewpoints ahead of the ECB decision. It also examines important price levels that may come into play next week. Gold/Silver Weekly Forecast: A Dead-Cat Bounce or Game Changer? The sharp bounce in gold and silver recently has raised questions on whether it is time to reassess the bearish outlook. Is it time to reassess the broader outlook? USD/JPY Weekly Forecast: Japanese Yen Staggers Towards 150 JPY prices look vulnerable to another breach of the 150 resistance handle ahead of a US data focused week. Australian Dollar Forecast: RBA – From Implicit to Explicit – Crunch Time The Australian Dollar is struggling to gain traction but the RBA might be posturing toward a more hawkish stance and it may manifest in CPI remains robust. Where to for AUD/USD and EUR/AUD? British Pound (GBP) Weekly Forecasts: GBP/USD and EUR/GBP Sterling is drifting lower against a range of currencies and this looks likely to continue next week. Nasdaq 100, S&P 500 Weekly Forecast: Alphabet, Microsoft and Amazon Earnings Eyed Corporate earnings from tech mega-caps Alphabet, Microsoft, and Amazon could guide market sentiment and set the trading tone for the S&P 500 and Nasdaq 100 in the coming week. https://www.dailyfx.com/news/markets-week-ahead-s-p-500-gold-us-dollar-powell-ecb-boc-australia-cpi-germany-ifo-uk-jobs-20231022.html

2023-10-23 03:37

Gold, XAU/USD, US Dollar, Treasury Yields, iShares High Yield ETF, GVZ Index - Talking Points The gold price has backed away from the psychological US$ 2,000 mark While robust Treasury yields remain, US companies are facing a debt squeeze Implied and historical volatility is on the rise. Will XAU/USD break higher? The gold price eased to start the week after posting solid gains on perceived haven flows outweighing the higher yields on government bonds across most of the globe. While the geopolitical situation in the Middle East assisted in undermining growth and risk-orientated assets such as equities, parts of the fundamental macroeconomic backdrop could have also played a role in the precious metal’s rally. Using the iShares iBoxx High Yield Corporate Bond Fund Exchange Traded Fund (ETF) as a proxy for credit, we can see the deterioration in the outlook for corporate bonds. The ETF has fallen to levels that were seen in the aftermath of the Silicon Valley Bank collapse. The squeeze on credit also saw Wall Street equity indices take a bath and the lift in risks for other assets may have contributed to the benefit of the gold price. Unfortunately, the situation in the Middle East does not appear likely to find a peaceful resolution anytime soon and this might keep the bid tone for the yellow metal for now despite higher Treasury yields. The monetary policy-sensitive 2-year Treasury note traded at 5.25% last Thursday for the first time since 2006 before collapsing toward 5.10% to close out the week. Similarly, the benchmark 10-year note traded at its highest level since 2007, nudging over 5.0% before retreating to around 4.95%. Looking at the chart below, the elevated 10-year Treasury yields and DXY (USD) index are yet to impact the gold price, but it might be worth watching should those markets move abruptly. It’s possible that the sell-off in the iShares high-yield ETF could have broader implications for equities as debt financing becomes more expensive for companies. SPOT GOLD, DXY (USD) INDEX, US 10-YEAR TREASURY AND ISHARES IBOXX HIGH YIELD ETF Chart created in TradingView All this price action across markets has seen gold volatility tick higher as measured by the GVZ index. The GVZ index measures implied volatility in the gold price in a similar way that the VIX index gauges volatility in the S&P 500. At the same time, the width of the 21-day simple moving average (SMA) based Bollinger Bands. has expanded. The Bolling Bands represent historical volatility. To learn more about trading Bollinger Bands, click on the banner. SPOT GOLD, BOLLINGER BANDS AND GVZ INDEX Chart created in TradingView https://www.dailyfx.com/news/gold-price-slips-after-stellar-rally-despite-lofty-treasury-yields-higher-xau-usd-20231023.html

2023-10-23 03:35

CRUDE OIL, WTI, NATURAL GAS, NG - OUTLOOK The downward correction in crude oil could still be in play. Natural gas is approaching major support area. What is the outlook for crude oil and natural gas and what are the key levels to watch? Crude Oil: Correction still in force Momentum in the most recent rebound in crude oil isn’t looking strong enough to ensure a sustainable rally just yet. The implication is that the downward correction that started toward the end of September could still be in play. Oil has recovered from near quite strong converged support, including the 89-day moving average, slightly above the 200-day moving average, and the August low of 77.50. Earlier last month, oil pulled back from stiff converged barriers, including the Ichimoku cloud on the weekly charts and the October high of 93.00. This resistance remains crucial – a break above this barrier is needed to confirm that the rebound from June isn’t just a dead-cat bounce. Crude Oil Weekly Chart Chart Created by Manish Jaradi Using TradingView Earlier in September, crude broke out from the multi-month sideways zone triggering a double bottom (the March and May lows), pointing to a potential rise toward 103. The 77.00-81.00 support area continues to offer a strong cushion which could limit the immediate downside, and while the support remains in place, oil could still attempt another leg higher. Crude Oil Daily Chart Chart Created by Manish Jaradi Using TradingView Natural gas: Approaches strong support Natural gas has retreated from a stiff barrier around 3.25 (the 23.6% retracement of the November 2022-February 2023 fall). In the context of a slightly zoomed-out view, the retreat isn’t surprising given the steps forward one step back nature of recovery since early 2023. This follows a break higher from a multi-month sideway range is a further confirmation that the long road to recovery may have started, but the damage done in 2022 could take time to unwind. Natural Gas Daily Chart Chart Created by Manish Jaradi Using TradingView The break earlier this month above crucial resistance at the March & August highs of 3.03 triggered a significant break out from an eight-month-long sideways range, pointing to a rise to around 4.00-4.10, based on the price objective of the pattern. Importantly, for the first time since the end of 2022 natural gas has risen above the 200-day moving average and a decisive break above the 89-day moving average, suggesting that the base building may have taken place. For more details see “Bullish Natural Gas: Base May Have Been Built,” published October 9. Any break above 3.25 could open the door toward 4.20 (the 50% retracement). However, for the bullish view to remain intact, natural gas needs to stay above the August low of 2.40. https://www.dailyfx.com/news/crude-oil-correction-in-play-natural-gas-rebound-may-not-be-over-20231023.html

2023-10-20 03:20

OIL PRICE FORECAST: Oil Struggled in the European Session as Market Participants Weighed the Prospects of the US-Venezuela Deal. OPEC Remains Silent Following Iran's Calls for an Oil Embargo. IG Client Sentiment Shows Traders are 68% Net Long on WTI. A Sign of Further Downside Potential Given the Contrarian View to Client Sentiment Adopted at DailyFX? Oil prices spiked higher yesterday following calls from Iran regarding an Oil embargo put market participants on alert. However, a lack of comment from OPEC countries coupled with a deal with Venezuela has seen Oil prices decline today on hope of a spike in production. US-VENEZUELA DEAL AND MIDDLE EAST DEVELOPMENTS The US has agreed to an easing of sanctions on Venezuela with market participants hoping for n increase in Oil output. However, according to experts the lifting of sanctions will not quickly expand the country’s output but could boost profits by returning some foreign companies to its oilfields. Experts have also cited a lack of investment and deterioration of infrastructure as a key concern regarding the level of output that may be expected. According to sources, OPEC does not see any major impact from the easing of sanctions. The deal with the US saw Venezuela receive broad waivers from the US with many experts not expecting as much leeway as was announced. This is a move by the US to counter high Oil prices globally as OPEC have maintained output cuts through to the end of 2023. This could help Venezuela as the country looks to recover following years of sanctions that have largely crippled the economy. Drop in Venezuela Oil Production Source: Refinitiv Tensions in the Middle East continue to simmer but without any significant change we may not see any real impetus for Oil prices to move beyond the recent highs. As I have said for the majority of the wee, only the involvement of other Arab nations could have a material impact on Oil prices. With Iran being the most vocal at this stage, any developments around the Straight of Hormuz also needs to be monitored as this could have a major bearing on Oil prices. RISK EVENTS AHEAD The majority of US data has already been released today but we do have a busy evening ahead of us. There are a host of Fed Speakers on the docket today with Fed Chair Powell expected to kick things off. It will be interesting to gleam any new insights from Fed policymakers on the recent spate of data from the US and any comments around the FOMC meetings in November and December likely to stoke some form of volatility. For all market-moving economic releases and events, see the DailyFX Calendar TECHNICAL OUTLOOK AND FINAL THOUGHTS From a technical perspective both WTI and Brent have ben printing higher highs and higher lows since the tension in the Middle East erupted. Looking at WTI and early price action today hinted at a potential retracement which appears to be running out of steam at the time of writing. WTI has risen around $2 from the daily low of 85.50 with a daily candle close above the 88.30 mark could open up a move toward the recent highs. I do not think market participants have enough conviction to push on toward the 100.00 mark. However, given the many variables and surprises we have already seen in 2023 there is a chance that 100.00 a barrel could still come to fruition. WTI Crude Oil Daily Chart – October 19, 2023 Source: TradingView Key Levels to Keep an Eye On: Support levels: 85.50 84.17 82.00 Resistance levels: 88.30 90.00 92.42 Brent Crude also had a slight selloff today but has recovered faster than WTI to trade marginally in the green for the day around the 90.50 mark. This could be key given yesterday we did record a daily candle close above the 90.00 mark and today's candle currently trading as a hammer candlestick also supporting further upside. The daily close today could prove key and should be monitored. Brent Oil Daily Chart – October 19, 2023 Source: TradingView https://www.dailyfx.com/news/oil-slides-on-us-venezuela-deal-and-opec-silence-on-embargo-calls-20231019.html

2023-10-20 03:18

GOLD PRICE OUTLOOK Gold prices have been rallying this month despite the surge in U.S. Treasury yields Bond market dynamics are taking a back seat as trades shift their attention to geopolitics. This article looks at XAU/USD’s key levels to watch in the near term U.S. bond yields have been on a bullish tear recently, skyrocketing across the Treasury curve. The 10-year note, for instance, has soared past 4.95%, reaching its highest level since 2007. Against this backdrop, the U.S. dollar, as measured by the DXY index, has maintained a largely positive bias, trading near its best levels since late 2022. Despite the unfriendly landscape for precious metals, gold prices (XAU/USD) have managed to increase by roughly 8% from their October lows. Although the main fundamentals remain relatively bearish for bullion, geopolitics has become a major driver of strength in recent days following the Hamas attacks in Israel. Delving into specifics, traders are concerned that the Middle East situation may get worse before it gets better. The dominant view is that Israel will soon launch a ground invasion of the Gaza Strip in response to the recent terrorist events, a move that has the potential to increase tensions and draw other actors into the conflict, such as Lebanon or Iran. Any escalation of the Israeli-Hamas clash could raise the temperature in the region, creating volatility and heightened uncertainty. Gold tends to thrive in turbulent environments, so it would not be surprising to see further short-term gains, especially if fear grips the markets. In this particular setting, changes in yields may lack substantial impact. In terms of technical analysis, gold futures have embarked on a solid rally this month, successfully breaching several key levels. After the latest moves, XAU/USD is steadily approaching resistance in the $1,985, created by the 61.8% Fib retracement of the May/October slide. Traders should watch price action closely in this region, considering that a breakout may set the stage for a retest of $2,015. On the flip side, if sentiment improves and the risk premium on safe-haven assets fades, XAU/USD could correct sharply lower, especially with yields at multi-year highs. In the event of a pullback, support is located around the 200-day simple moving average at $1,940. On further weakness, sellers may initiate an assault on the $1,920 floor. GOLD PRICE CHART (FRONT-MONTH FUTURES) https://www.dailyfx.com/news/gold-price-forecast-geopolitics-steal-show-from-yields-as-xau-usd-eyes-breakout-20231019.html

2023-10-20 03:17

S&P 500 PRICE FORECAST: Heightened Volatility in the Afternoon Session has Dragged the S&P Lower. Is the Attack on an Air Base in Iraq a Sign of What is to Come? IG Client Sentiment Shows that Retail Traders are Long with 55% of Traders Currently Holding Long Positions. A Sign of Further Downside Potential Given the Contrarian View to Client Sentiment Adopted at DailyFX? The S&P 500 looked set to arrest its slide today following comments from Federal Reserve Chair Jerome Powell. The Fed Chair stated that the Fed would be proceeding carefully on further rate hikes as the rising yield environment is helping tighten financial conditions. The impact of Fed Chair Powell’s comments saw the probability of a hold from the Fed in December jump by around 10% to 69.5% helping risk appetite. Source: CME FedWatch Tool The bullish bounce proved short lived however, as the SPX turned red for the day as news filtered through that Israel had received the ‘green light’ for the ground offensive into Gaza. From my perspective I see this as the reason for the drop in the SPX as the US session progressed. A ground offensive into Gaza has the potential to widen the conflict in the Middle East. This was partially confirmed as an Iraqi resistance group claimed responsibility for an attack on a US base in Iraq called Ain Al-Asad. This could escalate matters quickly and volatility could rise during the Asian Session and continue into tomorrow's European Open. US EARNINGS US earnings yesterday (after market closed) saw two big names in Netflix and Tesla report earnings. They came in at opposite ends of the spectrum with Tesla missing estimates while Netflix surprised to the upside, rising around 13% in afterhours trade. Source: TradingView Earnings continued today with Blackstone slipping around 6% as the Q3 distributable earnings fell more than expected. This came about due to a decline in asset sales in its real estate business. AT&T on the other hand rose just above 7% as the Telecom company raised its free cashflow forecast. After market close today we have Intuitive Surgical before attention will turn to American Express and SLB expected to report prior to the market open tomorrow. S&P 500 TECHNICAL OUTLOOK Form a technical perspective, the S&P has bounced off a key area of support before rallying some 200 points toward the key resistance level resting at the 4400 mark. A further challenge for the S&P is the completion of a death cross pattern which would hint at further downside ahead as the 50-day MA crossed below the 100-day MA. The SPX failed to hold above the 20-day MA today dropping lower on its way toward the 200-day MA. A break lower here would bring the October 4 swing low at 4200 into focus. Key Levels to Keep an Eye On: Support levels: 4244 (200-day MA) 4200 4165 Resistance levels: 4325 4400 4417 (100-day MA) S&P 500 October 19, 2023 Source: TradingView, Chart Prepared by Zain Vawda https://www.dailyfx.com/news/s-p-500-extends-slide-on-heightened-volatility-as-iraqi-air-base-is-attacked-20231019.html