EURUSD
- The EUR/USD pair has initiated the new trading week on a relatively subdued note, oscillating within a narrow trading range around the mid-1.0600s during the Asian session. This suggests a period of consolidation and uncertainty in the market.
- The Euro's performance is being undermined by the European Central Bank's (ECB) recent dovish rate decision, which occurred last Thursday. This decision to maintain a dovish stance on monetary policy has further weighed on the EUR/USD pair.
- From a technical perspective, the negative outlook for EUR/USD is reinforced by the fact that the pair has been following a downward-sloping channel since its peak at around 1.1275, which was reached in July. This channel indicates a clear bearish trend.
- Recent data from Germany and the Euro area revealed that business activity in the private sector contracted at a slower pace in early August compared to July.
- Despite the contraction, there is still a degree of resilience and optimism among companies in the face of reduced demand, as stated by Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank (HCOB).
| SMA (20) | Falling |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | Neutral |
Closing statement: EUR/USD is currently in a consolidation phase, with a bearish trend indicated by the downward-sloping channel on the technical chart. The ECB's recent dovish stance and the ongoing challenges in the Eurozone's business sector are contributing to the Euro's weakened performance. Traders will likely closely monitor any developments that could provide clarity on the pair's direction in the coming sessions.
GBPUSD
- GBP/USD continues to face downward pressure, trading below the mid-1.2200s early on Monday. The pair is experiencing oversold conditions, which may indicate that a short-term reversal could occur. However, achieving a convincing recovery may be challenging.
- The recent decision by the Bank of England (BoE) to leave interest rates unchanged at 5.25% came as a surprise to the market. The majority of the Monetary Policy Committee (MPC) cited several factors for this decision, including a loosening labor market, soft inflation data in August, and declining business sentiment, as revealed in the BoE's policy statement.
- Despite this unexpected decision, market sentiment is shifting toward the expectation that the BoE will maintain the interest rate at its current level in November. According to Reuters' calculations, there is a 75% probability that the BoE will keep rates steady in the upcoming meeting.
- Major financial institutions, including BNP Paribas and UBS, have adjusted their terminal rate projections following the BoE's decision. Both institutions lowered their projections from 5.5% to 5.25%, reflecting the changing expectations for future rate hikes.
| SMA (20) | Falling |
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| RSI (14) | Falling |
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| MACD (12, 26, 9) | Falling |
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Closing statement: GBP/USD remains under bearish pressure, with the BoE's surprise decision to keep rates unchanged playing a significant role. Market sentiment now suggests that the central bank may maintain this stance in the next policy meeting. Analysts and financial institutions have also adjusted their projections accordingly. Traders will closely monitor any developments that could impact the pair's trajectory in the near term.
GOLD
- Gold price is encountering resistance just below the critical level of $1,926, which represents a significant zone where the 21- and 200-Daily Moving Averages (DMA) converge. This area has proven to be a key technical barrier.
- The US Dollar (USD) remains robust, hovering near a more than six-month peak. This strength is primarily attributed to elevated US Treasury bond yields, supported by the Federal Reserve's (Fed) hawkish outlook and the reduced expectations for the number of rate cuts in 2024.
- Market sentiment has turned cautious, with investors choosing to stay on the sidelines. They are assessing the "higher for longer" interest rate view of major central banks, including the Fed. Additionally, renewed concerns about China's property markets are denting risk appetite.
- Several US Federal Reserve (Fed) policymakers continue to express support for more interest rate increases. They argue that inflation remains "too high," which suggests a commitment to a tighter monetary policy stance.
- With a relatively quiet US economic calendar, gold's price action will be influenced by risk sentiment, the US Dollar's movements, and changes in US Treasury bond yields. These factors will likely determine the precious metal's near-term direction.
Closing statement: Gold is struggling to break through a critical resistance zone, with the strength of the US Dollar and cautious risk sentiment playing pivotal roles. The views of Fed policymakers regarding further interest rate increases and inflation will also impact Gold's trajectory in the near term.
CRUDE OIL
- Crude oil prices have seen an increase in Asian trade on Monday, recovering from their first negative week in four. This upward movement is primarily driven by the prospect of tighter supplies, which is offsetting concerns about a potential demand slowdown.
- Crude oil prices ended the previous week approximately 0.8% lower. This decline was influenced by hawkish messaging from the Federal Reserve, which projected higher interest rates for a longer duration. However, these losses are being balanced by supply-related factors.
- Russia suspended most of its fuel exports to address rising local gasoline prices. While Moscow has described this move as temporary, it is expected to significantly tighten oil markets in the coming weeks. The production cuts from Russia and Saudi Arabia have already led to a more than 15% rally in oil prices over the past month.
- The supply-related developments from Russia and Saudi Arabia are expected to keep crude oil trading within the range of $90 to $100 a barrel for the rest of the year. This price range is significant and could have implications for the energy market and global economy.
- Oil markets have also found support from the prospect of additional stimulus measures in China, the world's largest oil importer. These measures could potentially boost demand for oil.
| SMA (20) | Rising |
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| RSI (14) | Slightly Rising |
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| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: WTI crude oil is experiencing continued gains, driven by expectations of constrained production from key oil-producing nations. The focus remains on OPEC+ compliance with production cuts and the potential impact of higher interest rates on oil demand. Additionally, the recent Russian fuel export ban has added uncertainty to the market. The strength of the US dollar is also a factor to watch as it can influence oil prices for international buyers.
DAX
- German and Eurozone private sector Purchasing Managers' Index (PMI) data for September provided mixed signals on Friday. Germany's PMIs exceeded expectations, with the Eurozone composite PMI also higher than forecasted.
- Despite the better-than-expected PMIs, investor sentiment concerning the European Central Bank's (ECB) intention to maintain higher interest rates for a longer duration weighed on buyer appetite. This suggests concerns about the impact of potentially tighter monetary policy on economic growth.
- Chief Economist at Hamburg Commercial Bank (HCOB), Cyrus de la Rubia, expressed expectations of the Eurozone entering a contraction in the third quarter. Their nowcast, which considers PMI indices, points to a 0.4% drop compared to the second quarter. This suggests a potential economic slowdown.
- Commerzbank experienced a significant decline of 3.44% on the DAX. This drop was fueled by news that the bank plans to announce its new strategy plans in November. In contrast, Deutsche Bank saw a modest gain of 0.20%.
- Investors are likely to focus on the September German Ifo Business Climate Index numbers. Economists anticipate a decrease in the index from 85.7 to 85.0. This data will provide insights into business sentiment in Germany.
| SMA (20) | Neutral | |
| RSI (14) | Neutral | |
| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: The DAX faced mixed signals from PMI data, with concerns about the ECB's interest rate policy impacting buyer sentiment. Expectations of a Eurozone economic contraction in the third quarter and the performance of major banks like Commerzbank and Deutsche Bank are key factors to watch. The upcoming German Ifo Business Climate Index will also provide insights into the business sentiment in Germany, a critical driver of the DAX's performance.