Solana price continues to embrace support from an ascending trend line while reaching for a bullish breakout that may tag $38.00. All eyes are glued to its ability to crack the seller concentration area at $35.00, which might pave the way for a sustainable recovery.
Solana price started gaining momentum after bears respected confluence support around $33.00. Hosted within this area are the 200-day SMA (Simple Moving Average – purple), the 100-day SMA (blue) and the 50 SMA-day (red). It is worth mentioning that SOL’s forming uptrend enjoys the support of a rising trend line, which has been in place since September 22.
The MACD (Moving Average Convergence Divergence) indicator’s position above the mean line mirrors growing buyer aggression. Solana price resumed the uptrend as soon as the 12-day EMA (Exponential Moving Average – blue) lifted above the 26-day EMA (red). Now, buyers should focus on reclaiming ground above $35.00 to avoid possible bull traps and uphold Solana price’s move to $38.00.
SOL/USD four-hour chart
The OBV (On Balance Volume) on the same four-hour chart reinforces an emerging bullish influence. In other words, buyers seem to have more strength than sellers, as observed from the index’s consistent upward movement from the $79.65 million volume on September 19 to the prevailing $80.42 million.
Solana price may invalidate the uptrend in the region between $35.00 and $36.00. Buyers struggled to clear the same region early this month as SOL pushed to $38.00. Traders should consider exiting from their positions at $36.00 because failure to break out to $38.00 could result in a sharp trend correction.
SOL does not have a shortage of possible downside price targets (support area). The confluence support at $33.00, the rising trend line and the major support between $30.00 and $31.00 may come into play to thwart bearish advances to $26.00.Full Article
The EUR/USD pair started the week on the back foot, falling to a fresh 22-year low of 0.9535, changing course mid-week to post substantial gains and settle at around the 0.9780 threshold.
Volatility was once again triggered by inflation-related concerns and prospects for a global economic downturn amid central banks’ massive quantitative tightening (QT) effort. As price pressures continue, policymakers from around the world embarked on liquidity-draining processes, which in turn, undermine economic progress.
Government bond yields skyrocket as investors do not see inflation receding anytime soon. US Treasury yields reached multi-year highs on Wednesday, with the 2-year note yield peaking at 4.34% and the 10-year note reaching 4.01%. The higher yields go, the more bonds fall.
The situation is not exclusive to the United States. Last Wednesday, the Bank of England decided to intervene by buying long-dated debt to stabilize financial markets after GBP/USD plummeted to an all-time low of 1.0317. At the same time, the central bank announced it would maintain its QT program but delayed gilts selling to October 31st. The decision came after the UK’s new Prime Minister Liz Truss announced a mini-budget that included £45 billion in unfunded tax cuts triggering financial turmoil.
UK Government and BOE measures were evenly criticized, but stocks and bonds plummeted worldwide after the central bank’s decision. US government bond yields shed roughly 20 bps while US indexes fell to fresh 2022 lows. In turn, the overbought dollar began retreating as yields backed the way up for the USD.
Most of the weekly EUR/USD advance could be attributed to this financial turmoil, as there are no reasons to believe the EU is in better shape than the US. In fact, it faces challenges that could mean the steepest economic setback on record. Entrenched inflation in the Union was confirmed by the latest official releases. Germany’s Harmonized Consumer Price Index rose by 10.9% YoY in September, while the EU HCPI in the same period hit 10%, multi-decade highs.
Another factor negatively weighing on EU progress is the energy crisis. Since Russia embarked on a war with Ukraine, its gas flows to the Union have decreased by roughly 50%. Energy prices soared as the Old Continent struggled to secure enough gas to cope with the winter. The UK government’s controversial tax-cut is a direct consequence of rising energy prices and the dynamics of the European energy market.
The EU Commission proposed an emergency intervention in Europe’s energy markets “to tackle recent dramatic price rises.” The proposal includes the obligations to reduce electricity consumption by at least 5% during selected peak price hours, a temporary revenue cap on non-conventional electricity producers, and a temporary solidarity contribution on excess profits generated from activities in the oil, gas, coal, and refinery sectors.
But such a crisis is not only to blame on Russia but also on the rigged nature of the European wholesale energy market. Additionally, European governments have been forcing a transition from fossil and nuclear energy to renewable resources. Green policies have been at the top of the agenda for a decade now, and nuclear energy has suffered as a consequence, with some countries only now considering bringing them back to life.
Topping it all, policymakers from both shores of the Atlantic insist they will maintain the fast pace of quantitative tightening while surreptitiously menacing with more aggressive measures.
On the data front, German figures were scary. Wholesale food prices were up 19% in September. The IFO survey on Business Climate contracted to 84.3 in the same month, worse than anticipated, while the Gfk Consumer Confidence Survey plunged to -42.5 in October from -36.8 in the previous month. In the EU, the Economic Sentiment Indicator also missed expectations, down to 93.7 in September from 97.3 in August.
US figures were not what we could call encouraging but painted a more resilient picture. Durable Goods Orders were down a modest and better-than-expected 0.2% in August, while the core reading, Nondefense Capital Goods Orders ex-aircraft, improved a whopping 1.3%. Consumer Confidence in the country improved by more than anticipated, according to CB, while the Gross Domestic Product was confirmed to have contracted at an annualized pace of 0.6% in the three months to June.
Finally, the country released the core Consumption Personal Expenditures Price Index which saw a rise of 4.9% YoY in August, more than the 4.7% anticipated by the market. Higher-than-anticipated inflation fueled risk-averse trading, sending stocks down and yields up, helping USD to recover further ahead of the weekly close.
Next on Monday, S&P Global will release the final estimates of the September Manufacturing PMIs for the EU and the US, while the latter will publish the official ISM index, foreseen at 52.8, and unchanged from August. On Wednesday, it will be the turn of the ISM Services PMI, expected to have declined to 56.5.
Germany and the EU will publish their respective August Retail Sales data, while the US will close the week publishing the September Nonfarm Payrolls report. The country is expected to have added 250K new jobs in the month, while the Unemployment Rate is foreseen steady at 3.7%.
The EUR/USD pair hit 0.9853 before retreating on Friday. It ends up way below the 38.2% retracement of the 1.0197/0.9535 slide, at around 0.9790. The 23.6% Fibonacci retracement provides support at 0.9685.
Technical readings in the weekly chart show that EUR/USD has barely begun correcting extreme oversold conditions. Indicators remain at extreme levels with the RSI at 29, but losing bearish strength and are mostly flat. Meanwhile, the 20 SMA maintains its firmly bearish slope far above the current level, running parallel with a descending trend line coming from this year’s high at 1.1494. The trend line will provide resistance at around 1.0070 in the upcoming days.
Bears never lost control, according to the daily chart. The pair held throughout the week below a bearish 20 SMA, currently at around 0.9890. The longer moving averages kept heading south far above the shorter one. Meanwhile, technical indicators corrected extreme oversold conditions before resuming their declines within negative levels. They head into the weekend with a strong downward momentum that hints at further declines.
A break below the aforementioned 0.9685 level should confirm the bearish case, with the pair finding support later at 0.9600 and 0.9535. If the latter gives way, 0.9400 is the next probable bearish target. On the other hand, if the pair manages to run past 0.9870, chances are of another corrective advance towards the 1.0030/70 price zone.
The FXStreet Forecast Poll for the EUR/USD pair hints at an extension of the bullish correction, with the pair anyway seen trading below parity for the rest of the year. The near-term outlook is neutral, as bulls and bears are equally 42%. Bulls take the lead in the monthly and quarterly views but remain below 50% of the polled experts. On average, the pair is barely seen above 0.9800 in the next few weeks while approaching the 0.9900 level in the three-month view.
The Overview chart shows that the near-term moving average has lost its bearish strength and turned flat, but also that the longer ones maintain their bearish slopes. Dismissing some wild bets, the pair is seen on average between 0.9500 and 1.0400 in the upcoming months.
European Central Bank (ECB) Governing Council member Isabel Schnabel said on Friday that further increases in the ECB’s key rates will be needed, as reported by Reuters.
“The risks of a wage-price spiral are contained, provided inflation expectations remain anchored,” Schnabel further added. ECB policymaker explained that she continues to call for a “robust control” approach to monetary policy amid uncertainty about the persistency of inflation.
EUR/USD largely ignored these comments and was last seen trading at 0.9790, where it was down 0.23% on a daily basis.Full Article
It has been a crazy volatile week for the British pound following the presentation of the highly controversial mini-budget. After having plunged to a new all-time low of 1.0340 at the beginning of the week, GBP/USD reversed its direction and advanced beyond 1.1200 early Friday. Although the pair lost its bullish momentum ahead of the weekend, it ended up closing the week in positive territory. September jobs report from the US and political developments in the UK will be watched closely by market participants next week.
The British government’s plan to lower taxes and ramp up public borrowing revived fears over the fiscal policy pushing the economy toward an unsustainable debt path and triggering a brutal gilt sell-off. Following Friday’s 9% increase, the 10-year UK government bond yield rose 11% early Monday and reached its highest level since October 2008. Thin liquidity conditions during the Asian trading hours amplified the negative impact of the market reaction to the mini-budget on sterling, causing GBP/USD to lose over 500 pips in a few hours. The pair managed to erase a portion of its daily losses during the European trading hours amid market chatter suggesting that the Bank of England (BoE) was preparing to make a statement. Later in the day, the BoE said that they were monitoring developments in financial markets very closely while noting that they welcomed the government’s commitment to sustainable economic growth. The BoE’s inaction made it difficult for the British pound to find demand in the second half of the day.
Although the gilt sell-off continued on Tuesday, GBP/USD managed to hold its ground at around 1.0800. While commenting on the market turmoil, BoE Chief Economist Huw Pill reassured investors that they will deliver a significant monetary policy response. Meanwhile, the data from the US showed that the 1-year Consumer Inflation Rate Expectations of the Conference Board’s Consumer Confidence Survey declined to 6.8% from 7%, limiting the dollar’s gains and allowing GBP/USD to stay in a consolidation stage.
On Wednesday, the BoE announced that it will carry out temporary purchases of long-dated UK government bonds to restore market functioning. The immediate reaction provided a boost to the British pound. GBP/USD, however, failed to preserve its bullish momentum as the BoE noted that the new bond-buying programme will not affect the MPC’s annual target of £80 billion stock reduction. Nevertheless, the pair ended up gaining more than 1% on a daily basis. Meanwhile, Sky News reported that British Finance Minister Kwasi Kwarteng would not resign over the market’s response to the fiscal plan and that there were no plans for a reversal of the policy.
The renewed selling pressure surrounding the greenback helped GBP/USD extend its rebound in the second half of the week and the pair climbed above 1.1200 during the European trading hours on Friday. The weekly report published by the US Department of Labor revealed that the weekly Initial Jobless Claims declined to 193K from 209K but this data failed to support the dollar. Speaking again on Thursday, BoE Chief Economist Pill said that the intervention in the gilt market was not intended to cap or control longer-term interest rates or to offer more favorable underlying financing conditions to the institutions involved.
On Friday, the UK’s Office for National Statistics revised the annualized Gross Domestic Product growth for the second quarter to 4.4% from 2.9% in the flash estimate, allowing the pair’s bullish bias to stay intact. The US Bureau of Economic Analysis announced later in the day that the Personal Consumption Expenditures (PCE) Price Index declined to 6.2% on a yearly basis in August from 6.4% in July. The Core PCE Price Index, the Federal Reserve’s preferred gauge of inflation, edged higher to 4.9% from 4.7% in July in the same period. Markets largely ignored these figures and GBP/USD held its ground and closed the week in positive territory despite having retreated from Friday’s tops.
Despite GBP/USD’s decisive rebound, investors could see it risky to bet on further pound strength in the near term. The UK government made it clear that they don’t have any plans to adjust the mini-budget and some estimates suggest that rising mortgage costs will offset any potential financial relief provided to households via tax cuts and energy price caps. Citing data from Moneyfacts, the Guardian reported that more than 40% of available mortgages had been withdrawn from the market since the UK government’s unveiling of its mini-budget.
British Prime Minister Liz Truss and Finance Minister Kwasi Kwarteng will likely face heavy criticism and political pressure in the coming days. In case the UK government changes its stance and looks to adjust its fiscal plan so it doesn’t go against the BoE’s monetary policy, GBP/USD could gather bullish momentum. It’s worth noting, however, the BoE could back away from a super-size rate hike in that scenario and limit the pound’s potential gains.
Since there won’t be any high-impact data releases from the UK next week, political headlines and the developments in the UK gilt market will be watched closely by investors.
On Monday, the ISM will release its Manufacturing PMI report for September. The Price Paid Component of the survey, which dropped to 52.5 in August from 55.5 in July, could influence the dollar’s performance. A reading below 50 should weigh on the USD and an unexpected increase from the August level is likely to have the opposite effect.
The ADP’s private sector employment report will be released on Wednesday ahead of the US Bureau of Labor Statistics’ highly-anticipated Nonfarm Payrolls (NFP) data on Friday. Investors expect the NFP to rise by 250K following August’s better-than-forecast increase of 315K. The Fed is content with the tightness of the US labor market and policymakers are unlikely to shift their stance even if the NFP print falls short of experts’ projections. The Fed’s latest Summary of Economic Projections showed that officials see the year-end jobless rate at 3.8% in 2022 and 4.4% in 2023. The Unemployment Rate stood at 3.7% in August and it’s expected to stay unchanged at that level in September. Nevertheless, the initial market reaction should be straightforward with an upbeat NFP figure weighing on GBP/USD and vice versa.
The Relative Strength Index (RSI) indicator on the daily chart climbed out of the oversold territory on Wednesday and edged higher toward 40, suggesting that GBP/USD is currently in a recovery phase. On the upside, 1.1300 (Fibonacci 38.2% retracement of the latest downtrend, 20-day SMA) aligns as initial resistance. In case the pair rises above that level and starts using it as support, it could target 1.1460 (Fibonacci 50% retracement) and 1.1500 (psychological level) next.
On the downside, first support is located at 1.1050 (Fibonacci 23.6% retracement) ahead of 1.1000 (psychological level) and 1.0900 (static level, psychological level).
It was certainly a brutal month in Europe but stocks finished on a positive note and at the highs of the day
On the week:
European Central Bank (ECB) must continue to raise rates even though long-term inflation expectations remain anchored, ECB Governing Council member Ignazio Visco said on Friday, as reported by Reuters.
“Approach to policy tightening will be defined meeting by meeting based on data.”
“Euro area mid-term economic prospects important to establish more appropriate final level, proceeding gradually.”
“No obvious reason at present to tie our hands with idea of exceptionally high rate increases.”
“Rate hikes could have the biggest impact on inflation once economy has already significatly slowed down.”
“Significant worsening of economic outlook is cause for concern.”
“Impossible to fully offset impact of energy shock on wages, profits.”
“Fiscal policy can redistribute impact, but increasing debt would unfairly shift burden on future generations.”
These comments don’t seem to be having a noticeable impact on the shared currency’s performance against its rivals. As of writing, EUR/USD was down 0.2% on the day at 0.9795.Full Article
Gold started the week under selling pressure and declined toward $1,620 on Monday before staging a rebound and closing four straight days in positive territory. XAU/USD ended up snapping a two-week losing streak ahead of next week’s ISM PMI surveys and the September jobs report.
The turmoil in global bond markets caused by the UK gilt sell-off at the beginning of the week weighed on the low-yielding gold. With the benchmark 10-year US Treasury bond yield rising toward 4% on Monday, XAU/USD turned south and registered its lowest daily close since March 2020 at $1,622.
The yellow metal shook off the bearish pressure on Tuesday and closed the day modestly higher. The monthly data published by the Conference Board showed that the Consumer Confidence Index in the US improved to 108.00 in September from 103.6 in August. Although the dollar gathered some strength with the initial reaction, the underlying details of the publication revealed that the 1-year Consumer Inflation Rate Expectations declined to 6.8% from 7%, limiting the USD’s upside.
On Wednesday, the Bank of England (BoE) intervened in the gilt market and triggered a sharp decline in global bond yields. The UK central bank announced that it will carry out temporary purchases of long-dated government bonds to restore market functioning. Led by a 10% decline in the 10-year UK gilt yield, the 10-year US T-bond yield lost more than 5% and allowed inversely-correlated gold to gather bullish momentum. XAU/USD rose nearly 2% and posted its largest one-day gain since late March.
The BoE’s action pulled markets’ interest away from the greenback and paved the way for an overdue correction in the US Dollar Index (DXY). With the dollar facing strong bearish pressure, the DXY fell more than 2% in the second half of the week. During the Asian trading hours on Friday, the data from China showed that the NBS Manufacturing PMI rose into the expansionary territory above 50 in September from 49.4 in August and helped gold advance to its highest level in a week above $1,670 on Friday.
Meanwhile, the US Bureau of Economic Analysis (BEA) reported on Thursday that the real Gross Domestic Product (GDP) contracted at an annualized rate of 0.6% in the second quarter. This reading matched the previous estimate and the market expectation, failing to generate a noticeable market reaction. The BEA announced on Friday that the Personal Consumption Expenditures Price Index declined to 6.2% on a yearly basis in August from 6.4% in July. The core PCE inflation, however, rose to 4.9% in the same period making it difficult for gold to preserve its bullish momentum.
It’s also worth noting that the People’s Bank of China (PBoC) introduced measures to limit the CNY’s depreciation this week. The PBoC reinstated the reserve requirement rule for banks’ forward sales of CNY by raising the required ratio to 20% from 0%. In case this action has the intended impact on the CNY’s exchange rate, the Chinese demand for gold could improve and support the price.
Market participants will keep a close eye on global bond markets next week. The UK gilt market seems to have stabilized following the BoE’s intervention but investors could quickly lose confidence in case the UK government fails to address concerns over the economy getting pushed toward an unsustainable debt path. Another bout of the global bond sell-off could weigh on the precious metal. On the other hand, if the UK provides further relief to gilt markets by readjusting the fiscal policy, another leg lower in bond yields should help gold stretch higher.
The US economic docket will feature the ISM Manufacturing PMI data, which is expected to remain unchanged at 52.8 in September, on Monday. The inflation component of the survey, the Price Paid Index, fell to 52.5 in August and a reading below 50 in September would point to falling input prices for the manufacturing sector and lift XAU/USD. On Wednesday, the ISM will release the Services PMI report. Price pressures were relatively strong in the service sector in August with the Prices Paid Index arriving at 71.5. A significant deceleration in the service sector inflation is likely to hurt the dollar and vice versa.
On Friday, the US Bureau of Economic Analysis will publish the September jobs report. Nonfarm Payrolls are expected to rise by 250,000 following August’s increase of 315,000. Weekly Initial Jobless Claims have been steadily declining since mid-Summer but employment components of August PMI surveys showed a significant slowdown in employment growth in the private sector.
According to the latest Summary of Projections (SEP), Fed officials see an Unemployment Rate of 3.8% by year-end and 4.4% by the end of 2023. Policymakers made it clear that they will prioritize battling inflation and continue to hike rates until they see signs of unemployment rising steadily. Hence, labor market figures for September are unlikely to impact the Fed’s policy outlook in a significant way. Nevertheless, investors could see a weaker-than-forecast NFP growth as an excuse to sell the dollar and open the door for bullish action in XAU/USD ahead of the weekend. On the flip side, market participants could look to add to their dollar longs if the NFP increases at a stronger pace than projected.
Gold faces immediate resistance at $1,680, where the 20-day SMA is located. In case the yellow metal rises above that level and starts using it as support, it could target $1,690 (Fibonacci 38.2% retracement of the latest downtrend) and $1,700 (psychological level). Ideally, the Relative Strength Index (RSI) indicator on the daily chart would hold above 50 in that scenario and confirm the bullish shift in the technical outlook.
On the downside, $1,665 (Fibonacci 23.6% retracement) aligns as first support before $1,650 (static level). A daily close below the latter could be seen as a significant bearish development and cause XAU/USD to decline toward the end-point of the downtrend at $1,620.
The FXStreet forecast poll paints a mixed picture for gold in the one-week and one-month outlooks. Average targets for these time periods are located at $1,666 and $1,690, respectively.Full Article
The AUD/USD drops in the North American session as market sentiment improved, portrayed by US equities advancing, amid Fed officials crossing wires reiterating the need for higher rates after the Fed’s gauge of inflation for August surprisingly jumped.
At the time of writing, the AUD/USD is trading at 0.6445 below its opening price by 0.83%, after hitting a daily high of 0.6523 earlier during the European session.
The US Federal Reserve’s favorite measure of inflation, known as the PCE, jumped more than estimated, rising 0.3% MoM on August, 6.2% YoY, while core PCE, which strips volatile items, accelerated at a 0.6% MoM pace, up 4.9% YoY, the US Commerce Department said.
Therefore, given that unemployment claims for the last week edged lower and inflation keeps heading north, it cements the case for further tightening by the Federal Reserve. Meanwhile, money market futures see a 68% chance of the Fed hiking 75 bps at the November meeting, up from 61% before the US inflation report.
Later, the Fed’s Vice-Chair Lael Brainard said that the Fed needs to keep interest rates elevated for quite some time as part of the central bank’s effort to bring inflation towards the 2% goal. Brainard added that It’s too early to declare victory over inflation, said that they (Fed) would note pull back prematurely, and commented that the Federal funds rate (FFR) peak is not clear now.
Echoing her comments, the San Francisco Fed’s Mary Daly said that in inevitable to keep raising rates and emphasized that the Fed is “resolute” in its mission to bring inflation down.
Elsewhere, the University of Michigan Consumer Confidence Final reading came at 58.6, lower than previously reported. However, inflation expectations for one year jumped to 4.7% from 4.6%, while for five years, it decelerated to 2.7% from 2.8% previously.
On the Australian dollar side, China’s PMI was mixed, with the official report remaining in expansionary territory. Contrarily, the Caixin Manufacturing PMI missed expectations, in contractionary territory, blamed on Covid-19 containment measures.
The AUD/USD dropped from around weekly highs to around 0.6500, extending its losses, though it is headed to end the week near the mid-part of the weekly range. Nevertheless, it should be noted that the RSI is again pointing south, suggesting that sellers are gathering momentum. Short term, the AUD/USD one-hour scale might cap any rallies around the 0.6468-87 area, busy with the 100, 50, and 20-EMAs confluence around that region, further reinforced by the daily pivot point. Therefore, AUD/USD is bearish biased.
The USD moved higher into the month end/quarter end fixing at 4 PM/11 AM ET.
The dollar is moving higher along with stocks. The major indices are trading to new session highs on the day.Full Article
Back in July there was considerable hand-wringing about US oil demand cratering because of high prices. That went against decades of data showing the elasticity of oil demand.
In any case, the EIA is now out with revised estimates of demand and they show demand at 8.749 million barrels per day compared ot 8.460mbpd in 2020.
Moreover, because of spike in demand for flights and other products, total demand for US oil was way higher than 2020 and up compared to 2021 when crude prices were much lower.
The takeaway here is that gasoline demand is still highly inelastic and that a fresh spike in oil prices won’t cause a large degree of demand destruction.
WTI crude is trading down about 50-cents today as the market breathes a sigh of relief that Putin didn’t announce an escalation in Ukraine.Full Article
Gold prices remain in a strengthening downtrend, despite the recent respite afforded by the slump in USD. This trend is set to last, in the opinion of strategists at TD Securities.
“The risk of capitulation remains prevalent for the yellow metal moving into October, with strong data continuing to point to a more aggressive Fed rate path ahead.”
While rates markets are increasingly discounting a higher terminal, we find that gold prices aren’t pricing in the next stage of the hiking cycle. Historically, gold prices tend to display a systematic and significant underperformance in the latter stage of hiking cycles, as rates enter into restrictive territory.”
“Considering the increase in inflation’s persistence this cycle, a restrictive regime may last longer than historical precedents with the Fed likely to keep rates elevated for some time, even as recession risks rise, which argues for a prolonged period of pronounced weakness in precious metals.”Full Article
Recent indicators suggest a broad-based sharply deteriorating growth outlook. Therefore, economists at Danske Bank expect the EUR/NOK to edge higher over the next few months before easing back lower in 2023.
“We still think EUR/NOK is heading higher over the coming 3-6M driven by a slowdown in growth, a European recession, volatile asset markets and further spread tightening in the short-end of rates curves.”
“For 2023, we still pencil in a NOK rebound – but timing is tricky. Until we see global central banks signal a shift of policy towards a more dovish direction we prefer to play the weak leg in NOK.”
“We forecast EUR/NOK at 10.60 in 3M and 9.80 in 12M.”Full Article