U.S. equities traded higher over the course of yesterday’s trading. The Dow Jones Industrial Average gained 1.34% to close at 31499.62. The S&P500 gained 1.19% to close at 3797.34. The tech-heavy Nasdaq Composite gained 0.86% to close at 10952.61. The Dow came back from its best 3-week stretch since Nov 2022 and closed at the highest level in 6 weeks, relieving the selling pressure of this year.
The benchmark U.S. 10-year treasury yield has dropped 0.04% from the highest and is currently trading at 4.228%, however, overall it’s recovering from the earlier decline on Friday when WSJ’s report strikes investors’ concern.
The U.S. CB Consumer Confidence comes out on Wednesday will reflex the DXY, with 108.00 in Sep and 103.6 in Aug, a higher expected reading should be taken as positive/bullish for the USD, while a lower-than-expected reading should be taken as negative/bearish for the USD.
Due to the Chinese leader Xi Jinping going for his third term as leader and unveiling a new leadership team, the Chinese technology companies suffered a huge impact on Monday, Tech giants Alibaba and Tencent closed down more than 11% in Asia, and Baidu was 12% lower while food delivery firm Meituan tanked more than 14%. Also, the came out of these two policies “zero-Covid” and “tightened regulation on the tech sector “, investors assume could be a negative for private firms.
Main Pairs Movement
The Dollar Index lost 0.02% over the course of yesterday’s trading. The release of the downbeat US S&P PMI data that landed at 49.9 with an estimation of 51.2, terminated DXY’s attempts of shifting into positive and restricted the upward trend in the DXY.
EURUSD gained 0.07% over the course of yesterday’s trading, and it even hits 0.99, this could be a sign that some investors are putting bets on the meeting on Thursday from European Central Bank.
GBPUSD gained 0.25% over the course of yesterday’s trading. The UK S&P Global PMIs for October didn’t show a good sign for the 4th quarter, however, the ends of the US Treasury yields on Monday show a positive side of the economy.
Gold gained 0.08% over the course of yesterday’s trading. The tepid growth-related gold markets corresponded with the DXY market and the market will continue being lacklustre before the US GDP data comes out.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair edged higher on Monday, advances steadily towards the 0.990 area and paired some of its earlier losses following the release of weaker US PMI data. The pair is now trading at 0.9870, posting a 0.14% gain on a daily basis. EUR/USD stays in the positive territory amid renewed US dollar weakness, as the disappointing PMI surveys dragged the greenback lower to the 112.0 area and provided some support to the EUR/USD pair. The US S&P Manufacturing PMI drops to 49.9 in early October, which fell short of market expectations of 51.2 and showed that business activity in the US manufacturing sector has contracted slightly. Moreover, the Services PMI and the Composite PMI both fell short of analysts’ projections. For the Euro, the downbeat PMI data in the Eurozone also further indicated that the Euro area economy is headed toward a recession. The ECB event on Thursday will be the focus this week as investors are anticipating a 75 bps rate hike by the central bank.
For the technical aspect, RSI indicator 61 figures as of writing, suggesting that the pair has limited upward potential as the RSI failed to push higher and consolidated around 60. As for the Bollinger Bands, the price failed to climb higher and started to decline, therefore some downside momentum can be expected. In conclusion, we think the market will be bearish as long as the 0.9874 resistance line holds. The technical indicators also remain directionless above their midlines.
Resistance: 0.9874, 0.9986, 1.0035
Support: 0.9757, 0.9667, 0.9551
GBPUSD (4-Hour Chart)
The GBP/USD pair was little changed on Monday, remained under slightly bearish pressure and steady hovered around the 1.1300 level amid the disappointing PMI data from the UK and the souring market mood. At the time of writing, the cable stays in negative territory with a 0.07% loss for the day. The lower-than-expected US PMI data makes it difficult for the US dollar to gather strength, but the GBP/USD pair failed to preserve its upside traction as investors remain cautious on the first day of the week. For the British pound, Rishi Sunak will become the new UK Primer Minister after winning a leadership contest and the transition from Liz Truss to Sunak could take place on Tuesday. As for now, investors are trying to figure out how PM Rishi Sunak will approach the fiscal plan. Meanwhile, the disappointing release of the flash UK PMI prints also fueled worries about a bleak outlook for the UK economy and weighed on the cable.
For the technical aspect, RSI indicator 51 figures as of writing, suggesting that the bullish bias stays intact in the near term as the RSI stays above the mid-line. As for the Bollinger Bands, the price remained under pressure and dropped towards the moving average, therefore the downside traction should persist. In conclusion, we think the market will be bearish as the pair is heading to test the 1.1228 support. Bears can have better chances if the pair extends its slide below that support.
XAUUSD witnessed a fresh supply near the $1670 region, over a one-week high set earlier this Monday and extends its intraday descent through the first half of the European session. The gold fell back around the $1650 level and erodes a part of Friday’s goodish rebound from the vicinity of the YTD low. On the data side, the US Manufacturing PMI figured 49.9, which is lower than the expected 51.0, seen as bullish traction for XAUUSD and attracted some buying in the earlier US trading session. Furthermore, the US dollar index made a comeback and rebounded from over a two-week low. Then lost upside momentum and slid to the 120.00 level as of writing, with reports that some Fed officials are signalling greater unease with an oversized rate hike. Apart from that, the European Central Bank and Bank of England are also expected to deliver a jumbo rate hike at the upcoming policy meetings. This turns out to be another headwind driving flows away from the non-yielding yellow metal. Also, a recovery in the risk sentiment – as depicted by a positive tone around the equity markets, was seen weighing on the safe-haven gold.
From the technical perspective, the RSI indicator 54 figured as of writing, suggesting that the gold price was mildly growing in the four-hour chart scale. As for Bollinger Bands, the yellow metal was priced above the 20-period moving average and the gap between the upper and lower bands was little changed, signalling the price have no clear tractions until breakthrough the resistance of $1662, also around the upper band.
