Brent oil prices have recovered to $78.30 despite OPEC+ downgrading demand growth forecasts and falling Chinese imports. China’s oil imports fell for the fifth consecutive month in September stoking demand fears.  OPEC+ revised its global oil demand growth forecast for 2024 downwards for the third time. Most Read: Gold (XAU/USD) Price Outlook: China Sends Mixed Signals Keeping Gold Prices Steady Oil prices fell in early trade before recovering during the European session to trade at 78.300 at the time of writing. Brent has held firm which is a surprise given that OPEC + downgraded demand growth once more and Chinese imports fell for a fifth month. China’s oil imports fell in September by 0.6% from a year earlier. The drop is largely down to weaker fuel demand and narrowing export margins. According to the data, China brought in 11.07 million barrels per day which is the fifth straight month of declines and down from last month’s 11.13 million barrels per day.  The data came as a surprise given the new refinery by Shandong Yulong Petrochemical started one of its two 200,000 barrel per day crude units during September. It may be that we only see the changes from next month onward, however an uptick in domestic demand is sorely needed. Market participants will hope that the recent stimulus package may still lead to fruition and increase demand moving forward.  OPEC + Cuts Demand Growth Again OPEC + Meanwhile downgraded its global demand growth for 2024 and 2025. This is the producer groups third consecutive downward revision which faces a dilemma around rasing production quota from December onward. If you have been reading my oil articles over the past few weeks/months, I have stated my belief that an increase in output/production in December is unlikely given the downward pressure on Oil prices. Most OPEC + members do not benefit when Oil prices are low and thus an increase in production at a time when uncertainty around demand lingers may have a negative impact on prices.  In its monthly report, OPEC stated that global oil demand is projected to increase by 1.93 million barrels per day (bpd) in 2024, a slight decrease from the 2.03 million bpd growth forecasted last month. Until August, OPEC had maintained this forecast since it was initially made in July 2023. China was primarily responsible for the 2024 downgrade, with OPEC reducing its growth forecast for China to 580,000 bpd from 650,000 bpd. Although government stimulus measures are expected to bolster demand in the fourth quarter, OPEC noted that oil consumption is encountering challenges due to economic issues and a shift towards cleaner fuels.  The revision does bring OPEC + closer to the IEA estimates but the discrepancy between the two organizations are still abnormally large.  The Week Ahead There is a lack of high impact US data this week with eyes firmly focused on the geopolitical situation in the Middle East. China on the other hand does remain a point of interest, any clarity on the recent stimulus measure could have a positive impact on Oil prices.  Wednesday we get inventories data filtering through from the API and Thursday from the EIA, both of which could stoke some short-term volatility and moves for oil prices.  For all market-moving economic releases and events, see the MarketPulse Economic Calendar.  Download the Full OPEC Report HERE: https://momr.opec.org/pdf-download/ Technical Analysis From a technical perspective, Oil continued to hold the high ground today despite a indecisive candle close on Friday. At the moment sellers do appear to be winning the day as markets fhave failed to push oil prices beyond the days opening price.  A bearish close today would provide bears with some hope of further downside. However, as the geopolitical tensions rise in Israel and the Middle East, the risk of spike in prices to beyond the 80 a barrel mark continues to persist. In a similar vain to gold prices at the moment the risk for further upside appears to be outweighing the downside risks. Immediate resistance rests at 78.97 before the psychological 80.00 mark comes into focus. Beyond 80.00 markets will focus on 81.58 before the 100 and 200-day MAs come into focus. Conversely, a break lower here could lead oil back 76.35 support before the psychological 75.00 handle comes into focus. Brent Crude Oil Daily Chart, October 14, 2024 Source: TradingView (click to enlarge) Support 76.35 75.00 72.38 Resistance 78.97 80.00 81.58 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The Canadian dollar can’t find its footing and is trading at nine-week low against the US dollar. In the North American session, USD/CAD is trading at 1.3792 at the time of writing, up 0.21%. The Canadian dollar has recorded eight straight losing sessions and is down 1.9% in October. Canada’s job growth blows past expectations The week ended on a high note, as Canada’s employment growth jumped by 46.7 thousand, crushing the market estimate of 27 thousand and sharply higher than the August reading of 22.1 thousand. Full-time employment surged by 112 thousand, following a decline of 43.6 thousand in August, while the unemployment rate dropped from 6.6% to 6.5%. The impressive numbers couldn’t stop the Canadian dollar’s nasty slide but it will please Bank of Canada policymakers. The central bank has shifted its primary focus from inflation to risks to the labor market, now that inflation has been largely contained. In August, CPI dropped to 2%, its lowest level since February 2021. The BoC meets next week and has a tough decision to make. The drop in inflation raised the odds of a 50-basis point cut but Friday’s employment report was stronger than expected and supports the case for a modest 25-bps cut. The BoC has been aggressive in its rate-cutting cycle and has lowered rates three times this year in a bid to ease the pressure of elevated rates. The Federal Reserve has been late to the rate-lowering party, delivering its first rate cut in September. Still, the oversized 50-basis point cut in September signaled that the Fed means business and isn’t afraid to slash rates with large cuts. The Fed is expected to trim rates by an additional 50 or 75 basis points before year’s end. The most likely scenario is rate cuts of 25 bps in both November and December. The Fed could, however, deliver one more 50-bps cut if employment or inflation numbers are lower than expected. USD/CAD Technical USD/CAD has pushed above resistance at 1.3758 and is testing resistance at 1.3790. The next resistance line is 1.3817 1.3731 and 1.3699 are the next support levels  

The British pound is coming off a quiet week and the lack of activity has continued on Monday. Early in the North American session, GBP/USD is trading at 1.3040, down 0.14% on the day. It’s a busy week in the UK, with the release of employment, inflation and retail sales. These key reports will be key factors in determining whether the BoE cuts or maintains rates at the November 9 meeting. The central bank has lowered rates only once this year but is expected to cut by 25 basis points at each of the November and December meetings, followed by cuts of 125 basis points in 2025. The UK releases the September employment report on Tuesday. Job growth is expected to ease slightly to 250 thousand, compared to 265 thousand in August. The unemployment rate is expected to remain unchanged 4.1%. Wage growth, which has been high and putting upward pressure on inflation, is expected to ease, with average earnings excluding bonuses projected to drop from 5.1% to 4.9%. The BoE delivered its first rate cut in over four years in August but stayed on the sidelines in September. Governor Bailey said at the September meeting that the BoE had to be “careful not to cut too fast or by too much”. The BoE wants to trim rates gradually but there is growing pressure to get on with it – with inflation contained and running close to the BoE’s 2% target, interest rates are far too high at 5%. The new government has made economic growth a priority and lower interest rates will help kick-start the economy. The Federal Reserve has also lowered rates only once in the new cycle of rate-cutting, but its jumbo 50-basis point cut showed that markets that the Fed means business and can be aggressive. The Fed is expected to cut another 50 or 75 basis points before year’s end. With only two more rate meetings this year, the most likely scenario is rate cuts of 25 bps in November and December. The Fed could, however, deliver one more 50 bps cut if employment or inflation numbers are lower than expected. GBP/USD Technical GBP/USD is testing resistance at 1.3958. Above, there is resistance at 1.3095 1.3023 and 1.2986 are the next support levels

The Canadian dollar has edged lower on Friday. In the European session, USD/CAD is trading at 1.3767 at the time of writing, up 0.19%. The Canadian dollar has hit a rough patch and is on a seven-day slide in which it has fallen 1.6%. On Thursday, the Canadian dollar weakened to 1.3775, its lowest level against the US dollar since August 7. Canada’s job growth expected to rise slightly Canada releases the September employment report later today, with no dramatic changes expected. Job growth is expected at 27 thousand, compared to 22.1 thousand in August. The unemployment rate is projected to tick up to 6.7%, following 6.6% in August. The Bank of Canada has been a leader in the new rate-cutting cycle, having already cut rates by a quarter-point three times this year. This has brought the cash rate down to 4.25% but the economy has been slow to respond and the BoC is expected to continue cutting rates. The BoC doesn’t want rates to diverge to widely from those in the US and will be keeping a close eye on the Fed’s expected cuts in November and December. The US ends the week with the producer price index for September, which could be a mixed bag. Headline PPI is expected to tick lower to 1.7% y/y, compared to 1.6% in August. The core rate, however, is projected to rise to 2.7%, up from 2.4% in August. With inflation largely beaten, the Federal Reserve’s primary focus has shifted from inflation to employment. Still, an unexpected PPI reading in either direction could have an impact on the movement of the US dollar today. USD/CAD Technical There is resistance at 1.3782 and 1.3822 1.3735 and 1.3695 are the next support levels

The British pound is showing little movement on Friday in what has been a very quiet week for the currency. In the European session, GBP/USD is trading at 1.3071, up 0.10% on the day and its lowest level. The UK economy showed slight improvement in August with a 0.2% m/m gain, after no growth in both June and July. This was in line with expectations and the pound’s reaction has been muted. Services, construction and manufacturing were all in positive territory, as the economy continues to show signs of growth. On a yearly basis, GDP rose 1%, up from a revised 0.9% in August but shy of the market estimate of 1.4%. The slight rebound in the economy comes at a convenient time for the government, which will release the autumn Budget on October 30. The government is counting on the Bank of England to continue cutting rates in order to boost economic growth. Finance Minister Rachel Reeves has said that kick-starting the weak UK economy is the “number one priority. The Bank of England delivered its first rate cut of the new cycle in August but stayed on the sidelines in September. The next meeting is on November 7 and the UK releases inflation and employment data ahead of the meeting, which will likely determine whether Bank policy makers feel comfortable making another quarter-point cut. The US wraps up the week with the producer price index for September. Headline PPI is expected to tick lower to 1.7% y/y, compared to 1.6% in August. The core rate, however, is projected to rise to 2.7%, up from 2.4% in August. With inflation largely beaten, the Federal Reserve’s primary focus has shifted from inflation to employment. Still, an unexpected PPI reading in either direction could have an impact on the movement of the US dollar. GBP/USD Technical GBP/USD is testing resistance at 1.3058. Above, there is resistance at 1.3095 1.3023 and 1.2986 are the next support levels

The US Dollar Index (DXY) is in an intriguing position after mixed price action and ahead of PPI data. The future of the dollar may be influenced by external factors like oil prices and Middle East tensions. Technically, the DXY is facing resistance and a potential pullback, but underlying fundamentals remain supportive. Most Read: Gold (XAU/USD) Prices Hold Above $2600/oz.. Will US CPI Lead a Recovery in Price? The US Dollar Index (DXY) continued its ascent yesterday to tap a fresh high before finishing the day flat. Some mixed price action thus far this morning leaves and PPI data ahead leaves the Dollar in an intriguing position.   The FED minutes and US CPI releases have kept the greenback largely supported this week as safe haven demand waned. The data itself was a mixed bag but has raised questions about Fed rate cuts moving forward, which has been a positive for the greenback. CPI inflation came in higher than expected, with the core rate increasing from 3.2% to 3.3% year-on-year, thanks to a second straight 0.3% monthly rise. In ideal trading conditions, this would boost the dollar, but this did not materialize. US Core Inflation Rate YoY Source: TradingEconomics The explanation could be down to the shifting focus to the jobs market. This seems to be the narrative since the downward revisions in jobs data a few months back. In such an instance CPI figures matter less. The unexpected rise in jobless claims could possibly due to the extreme weather, had a  negative effect on the dollar. It appears the US Dollar could be entering a new phase of ‘wait and see’ which would leave the DXY caught in a range. At present outside influences and developments could impact the longer term trajectory of the US Dollar and Fed rate path.  A continued rise in Oil prices or an attack on Iranian energy facilities could lead to a surge in inflationary pressure and remains a key concern in the near term. An escalation in Middle East tensions is a double edged sword, as it could help stir up inflation, while at the same time potentially seeing the US Dollar benefit from safe haven demand.   Developments around the US Dollar and Dollar Index (DXY) have a wide impact on markets. Interesting times ahead for market participants with the US elections drawing near as well.  Technical Analysis – US Dollar Index The US dollar’s rally has been an impressive one, rising from the ashes to wipe out around six weeks of losses in around a week and a half (9 days). The DXY has however run into a key confluence area and is facing the growing threat of a pullback. Yesterday saw the daily candle close as a doji, which does hint that a potential reversal may be on the way. As mentioned the overarching fundamentals do continue to keep the US Dollar supported and could limit any potential downside.  Immediate resistance rests at 102.95 before the key confluence area around 103.200 comes into focus. A break above the 100-day MA could be a big deal given that we traded below it since the middle of July. Would a break above be the start of a similar two and a half month trend to the upside? Conversely, support is provided by 102.64 and 102.165, while particular attention should be given to the breakout area around 101.80.  US Dollar Index Chart, October 11, 2024 Source: TradingView (click to enlarge) Support 102.64 102.16 101.80 Resistance 102.95 103.20 103.70 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

Gold prices are consolidating above $2600/oz, supported by uncertainty in the Middle East. Upcoming US CPI data will impact gold prices, with a softer print potentially boosting gold and a higher print strengthening the USD. Technically, gold is rangebound, with immediate resistance at 2624 and support at 2600. The geopolitical situation and CPI data will likely provide short-term clarity. Most Read: GBP/USD Consolidates as Bulls Eye a Potential Short-Term Pullback Gold prices consolidated in early European trade following another attempted push toward the $2600/oz handle yesterday. For now though, bears have been unable to sustainably push the precious metal price below the $2600/oz handle.  As discussed in my Gold Piece earlier this week, the precious metal continues to find support on the uncertainty in the Middle East. Concern continues to shift back and forth as markets await a potential Israeli response to Iran, The fear that a wider regional war may breakout has resulted in safe haven demand and Gold continues to benefit. The longer term picture for Gold also favors the bulls, however, the aggressive nature of the rally from the mid 2500’s means a pullback has been sorely needed.  The US Dollar and Dollar Index have been enjoying a stellar run of late but could it be time for a pullback or potential midweek reversal? As things stand, markets are now pricing in just a 74% chance of a 25 bps cut in November, this is down from 80% yesterday. The FED minutes release last night played a role in this change as it was revealed that quite a few policymakers were skeptical about a 50 bps cut in September. The fact that some policymakers were concerned in September, the recent jobs report is only going to further strengthen their resolve at the November meeting.  Source: CME FedWatch Tool Economic Data Ahead – US CPI the Catalyst? US CPI will be released shortly and any signs of an uptick in inflation could add fuel to the USD fire. This in turn could weigh on Gold prices as it would have an impact on rate cut expectations as well.  Gold bulls on other hand will be eyeing a softer CPI print, preferably below estimates to take some steam out of the USD rally. This would also work in favor of higher Gold prices.  Barring such a development, the only other saving grace for Gold bulls could come in the form of an Israeli attack on Iran. As the fighting rages on between Hezbollah and the IDF on the Israeli-Lebanon border, the risk premium has largely remained constant. The re-emergence of the Iran-Israel dynamic however is sure to result in some safe haven demand and thus higher prices for the precious metal.  For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge) Technical Analysis Gold (XAU/USD) From a technical analysis standpoint, Gold prices have been rangebound since breaking below the 2624 handle on Tuesday. Since then the precious metal has made a push for the 2600 psychological level but bears have yet to take control. All the technical aspects point to further downside but the overarching geopolitical narrative is what is keeping buyers in play. As the CPI approaches, it could well prove to be the catalyst the precious metal needs for some short-term clarity. Immediate resistance rests at the 2624 handle before the 100-day MA at 2634 comes into focus. Conversely a push lower from here first needs to find acceptance below the 2600 handle. If this fails to materialize than any brief push below 2600 is likely to face significant buying pressure. GOLD (XAU/USD) Four-Hour (H4) Chart, October 10, 2024 Source: TradingView (click to enlarge) Support 2600 2591 2577 (200-day MA) Resistance 2624 2634 2650 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

This is a follow-up analysis of our prior report “GBP/USD Technical: Sterling bulls are in control” published on 27 August 2024. Click here for a recap.  Since our last publication, the price actions of the GBP/USD have rallied and hit the lower limit of the first medium-term resistance zone of 1.3400/3505 (printed an intraday high of 1.3434 on 26 September). A flip of BoE’s less dovish stance to “outright” dovish Since the Bank of England (BoE) first interest rate cut of 25 basis points (bps) to reduce its key policy interest rate to 5.00% in August, its messaging and guidance on its accommodative monetary policy have been cautiously dovish where services inflation in UK remains sticky. Thus, market participants have priced in a shallower and slower interest rate cut cycle in the UK versus the US where the US dollar has been weakest against the British pound sterling among other major currencies; the US dollar recorded its worst 2024 year-to-date loss of -5.2% against the pound sterling on 26 September. However, the US dollar weakness has started to reverse in the past four weeks; further enhanced by a UK media interview with BoE Governor Bailey published on 3 October. BoE’s Bailey has a “sudden” change of his cautiously dovish rhetoric to outright dovish as he raised the prospect of more aggressive rate cuts by BoE in the coming months. The GBP/USD recorded a decline of 1.08% on 3 October, its worst daily performance in almost a year. All in all, the pound sterling has shed 2.8% from its recent 26 September high to Wednesday, 9 October low of 1.3055. Despite the four weeks of softness, the GBP is still the strongest among the major currencies and it still has a positive year-to-date return of 2.7% against the US dollar at this time of writing. Longer-term UK OIS spreads have started to inch higher Fig 1: UK overnight indexed swap spreads as of 8 Oct 2024 (Source: MacroMicro, click to enlarge chart) The overnight indexed swap (OIS) spread is the difference between the interest rate on long-term overnight indexed swaps and 1-month overnight indexed swaps. Rates on OIS swaps can also be used as an indicator of the market’s expected central bank target interest rate. Widening OIS spreads indicate that the market expects the central bank to raise the interest rate in the short term, and vice versa. The UK 6-month and 12-month OIS spread has started to trade higher since 3 October (media publication of BoE Bailey’s interview) which suggests that the interest rate swaps market has priced out some of the “dovish vibes” inherent in the past four weeks. 1.3000 remains the key medium-term support on the GBP/USD with 1.3260 as an upside trigger Fig 2: GBP/USD medium-term trend as of 10 Oct 2024 (Source: TradingView, click to enlarge chart) The recent four-week slide of 2.8% (high to low) seen in the GBP/USD has reached its 50-day moving average. In conjunction, the daily RSI momentum indicator has also hit a parallel ascending trendline support at the 40 level. In addition, the 2-year yield spread of the UK sovereign bond (gilt) over the US Treasury note has just started a rebound right above its key medium-term support of 0.07% Hence in the lens of technical analysis, these positive elements suggest a potential bullish reversal in the GBP/USD to renew its impulsive up sequence within its medium-term uptrend phase. Watching the 1.3000 key medium-term pivotal support and clearance above 1.3260 (also the 20-day moving average) increases the odds of the potential bullish reversal scenario to revisit 1.3400/1.3505 before the next medium-term resistance comes in at 1.3750. However, failure to hold at 1.3000 invalidates the bullish expectation for an extension of the corrective decline to expose the next medium-term supports at 1.2860 and 1.2635.

The yen is calm on Thursday after sharp losses a day earlier. In the European session, USD/JPY is trading at 148.88, down 0.28%. Fed minutes: next cut will likely be 25 bps The Federal Reserve released the minutes from the September meeting on Wednesday. That meeting was dramatic as the markets were uncertain right up to the rate announcement whether the Fed would cut by 25 or 50 basis points . The Fed opted for the oversized cut and only one FOMC member dissented. The minutes, however, indicated that there were other members who preferred a more gradual pace of lower rates although they went along with the 50-bps cut. The September decision came after two consecutive employment reports that were softer than anticipated, which may have swayed some dovish members to vote for a 50-bps cut. The takeaway is that Jerome Powell shouldn’t expect the same degree of support for a 50-bps cut at the November or December meetings. The labor market bounced back in September with a nonfarm payrolls report that blew past the forecast and the markets have priced in a 25-bps cut in November. US inflation will play a crucial part in the Fed’s rate path and September CPI will be released today. Headline inflation is expected to ease to 2.3%, compared to 2.5% in August, while core CPI is forecast to remain unchanged at 3.2%. In Japan, the BoJ has dampened expectations for another rate hike and is expected to maintain rates at 0-0.25% at the October 31 meeting. New Prime Minister Shigeru Ishiba has supported a monetary policy but has changed his tune since being elected. Earlier this week, Ishiba said there was no need to raise rates, perhaps trying to avoid any controversial statements ahead of the snap election on October 27. USD/JPY Technical USD/JPY tested resistance at 148.61 earlier. Above, there is resistance at 149.01 147.97 and 147.57 are providing support

GBP/USD is currently range-bound, consolidating within a narrow 30-pip range. US CPI and PPI data releases on Thursday and Friday could introduce some volatility. From a technical standpoint, the medium-term outlook still favors USD bulls, but a short-term bounce in GBP/USD is looking appealing. Most Read: S&P 500, Nasdaq 100 – Futures Hold High Ground as US Considers a Breakup of Google GBP/USD is in uncharted territory if i may so with the pair confined to a 30 pip range since early Monday morning. Cable is notorious for its significant moves in comparison to its major counterpart, EUR/USD. However, As markets have grappled with shifting rate cut expectations from both the Federal Reserve (FED) and the Bank of England (BoE), GBP/USD has been relatively subdued to say the least. Of course the lack of high impact UK data releases has not helped matters, while a strong US Dollar and lack of US Data in the early part of the week have contributed as well. Markets have already started preparing for the first budget from new Chancellor Rachel Reeves, expected October 30. Given the changes of late on the outlook for both Central Banks it appears the US Dollar will continue to find support ahead of the US election. This may leave cable vulnerable to further downside in the coming weeks.  Economic Data Ahead There is quite a bit of data ahead this week which could impact GBP/USD. A busy end to the week starts with the Fed minutes release later in the day which to me seems to be shaping up as a non-event.  Market participants may be keen to gauge the debates that led to a 50 bps cut in September, however the minutes are unlikely to have an impact moving forward. Given that the jobs data sent markets on a 360 roundabout, the entire narrative has since shifted, rendering the minutes somewhat irrelevant at this stage.  Thursday and Friday will bring US CPI and PPI data which could stoke a bit of volatility. Barring any significant uptick in inflationary pressures, this release is unlikely to alter the medium term narrative. For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge) Technical Analysis Looking at GBP/USD from a technical standpoint, the four-hour chart below shows the red box within which price has been confined since Monday morning.  A four-hour candle close to either side of the box could be seen as a potential breakout. However, given the fact that the US Dollar has been on a tear this week, could we be in for a potential midweek reversal?  Should a midweek reversal come to fruition on the US Dollar, then we could see GBP/USD break to the upside. Any rally higher does face significant hurdles but my gut says that this could materialize in the next day or two.  Immediate resistance on the upside rests at 1.31050 before the 1.3143 handle and the 200-day MA at 1.3200 come into focus. Conversely, a move lower here needs to navigate past the previous swing low around 1.3040 before the psychological 1.3000 handle is reached. All in all the medium term outlook still favors USD bulls. However, looking at the price action picture and a short-terms retracement higher is beginning to look more and more likely. GBP/USD Four-Hour H4 Chart, October 9, 2024 Source:TradingView.com Support 1.3040 1.3000 1.2942 Resistance 1.3100 1.3143 1.3200 (200-day MA) Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The yen has edged lower on Thursday in what has been a quiet week. In the European session, USD/JPY is trading at 148.72, up 0.36%. Will Fed minutes provide clues for November meeting? The Federal Reserve will release the minutes of the September meeting later today. That meeting was a milestone as the Fed delivered an oversized rate of 50 basis points, the first cut in over four years. The minutes should provide some insights into the Fed’s reasoning for the jumbo rate cut and perhaps clues as to its rate path. The September cut came after back-to-back employment reports were weaker than expected. What can we expect from the Fed moving forward? Last week’s nonfarm payroll report of 254 thousand was much stronger than expected and the unemployment rate ticked lower to 4.1%. These latest figures have put Fed policy makers in a bind – employment is showing resilience while inflation has been falling. Fed member Philip Jefferson said on Tuesday that the risks to inflation and employment were evenly balanced. Jefferson added he was making decisions on a monthly basis and it’s likely that other Fed members are doing the same. Market rate pricing continues to swing and currently, the probability of a 25-bps stands at 86%. That could change after Thursday’s inflation report, which is expected to fall to 2.3% in September, down from 2.5% in August. In Japan, voters will head to the polls on October 27. New Prime Minister Shigeru Ishiba called the election just eight days after taking office. The yen has slumped during his short tenure, as Ishiba has backtracked on monetary policy, saying there is no need to raise interest rates. USD/JPY Technical USD/JPY tested resistance at 148.61 earlier. Above, there is resistance at 149.01 147.97 and 147.57 are providing support

Gold prices fell in the US session after a positive European session, influenced by renewed US Dollar strength and concerns about China’s economic slowdown. Despite the pullback, ETF demand for gold remains strong, and geopolitical risks in the Middle East persist, suggesting buying pressure remains. From a technical analysis perspective, gold has broken out of a recent range, and further support and resistance levels are identified. Most Read: USD/CHF Technical Outlook: Confluence Area Hints at Bullish Breakout Gold prices tumbled in today’s US session having enjoyed a positive European session to say the least. The precious metal rallied from a low of 2628 in the European session to trade at a high of 2652 before the US open.  The US session however brought some renewed US Dollar strength, as Gold’s appeal appears to be waning. This was also the first US trading session since the National Development and Reform commission in China provided a briefing on the recent stimulus measures. The address today however failed to deliver any new measures and concern still lingers among many market participants.  China, the largest global consumer of metals, has dampened metals demand for over two years. Despite the Peoples Bank of China buying significant amounts of Gold there have been growing concerns of a widespread economic slowdown, especially the property sector crisis, has pressured copper and other industrial metals. Despite numerous property support measures this year, they have yet to significantly boost metals demand. This renewed concern around China could not have come at a worse time for Gold Bulls. The aggressive repricing of rate cuts over the last few days coupled with the lack of response to the Iranian missile attack has formed the perfect cocktail for a pullback in Gold prices.  The question is whether this is the end of the bullish rally? ETF Demand Remains Strong and Geopolitical Risks Remain  That is a very nuanced question given the various factors at play. For one though, the Middle East crisis is far from being resolved and the chance of escalation is certainly higher following the Iranian missile attack last week. There is bound to be an Israeli response which Iran has vowed will be met by a new attack as well.  These dynamics mean the Middle East situation could still blowover reigniting the safe haven appeal of Gold. Looking even further down the line, the World Gold Council September report was released today.  According to the latest World Gold Council (WGC) report, net ETF inflows increased again in September. ETF flow levels are often seen as a strong indicator of future demand trends. Gold-backed ETFs added 18 tonnes of gold in September, bringing total holdings to 3,200 tonnes. This led to cumulative inflows of $1.4 billion for the month, marking the fifth consecutive month of inflows. This data follows similar trends in August, when Gold ETFs saw $2.1 billion in inflows, and July, which recorded $3.7 billion—the highest since April 2022. Source: WGC Report (click to enlarge) This coupled with the World Gold Council survey of Central Banks earlier this year hint that Gold demand is to remain strong in the medium to longer term. This would suggest that support for Gold remains and thus the current pullback could just be another false dawn. Either way i am intrigued to see how far today’s pullback may run.  Economic Data Ahead FOMC minutes will be released tomorrow in what I expect to be a non-event following the jobs data release last week. The Fed meeting on September 18 would likely have been dominated by concern around an ailing labor market which last week’s jobs report put to bed for the time being.  US CPI on Thursday is likely to be the next major market moving event, however tomorrow’s list of Fed Speakers may also contribute to some volatility. For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge) Technical Analysis Gold (XAU/USD) From a technical analysis standpoint, Gold had been caught in a tight range of around $30 since the start of October. There were brief tests below the 2640 handle in recent days but the four-hour candle always closed back inside the range low at 2640.  The breakout today has been quite aggressive with Gold reaching a low around the 2604 handle before bouncing to trade around 2614 at the time of writing. As mentioned technically Gold is due for a deeper pullback but the fundamental risks continue to underpin prices and keep selling pressure at bay. If the selloff continues tomorrow, immediate support rests around 2600 before the 2574 handle comes into focus. 2574 could prove a tough hurdle to clear as just below it rests the 200-day MA making this a key area of confluence that could find some buying pressure. Alternatively, a recovery from here may face a challenge at 2624 before the 100-day MA at 2630 becomes key. Beyond that and the previous H4 range low at 2640 could be key for bulls to regain control of the narrative moving forward. GOLD (XAU/USD) Four-Hour (H4) Chart, October 8, 2024 Source: TradingView (click to enlarge) Support 2600 2574 2550 Resistance 2624 2630 2640 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The New Zealand dollar is down for a sixth straight day and has fallen 3.6% during that time. NZD has stabilized on Tuesday and is trading at 0.6120 in the North American session, down 0.07% on the day. RBNZ expected to chop rates by 50 bps The Reserve Bank of New Zealand meets on Wednesday and is widely expected to a cut rates, but by how much? The markets have priced in an oversize rate cut of 50 basis points, but a modest cut of 25 bps cannot be ruled out. The RBNZ joined the rate-cutting club of major central banks in August after holding rates for over a year. The August cut which brought the cash rate down to 5.25%, marked the first rate cut in over four years. That move surprised the markets as the central bank had projected its first rate cut would not take place until mid-2025. Why would the RBNZ slash by 50 bps? Elevated interest rates have weighed on economic activity and GDP contracted by 0.2% in the second quarter. Inflation eased to 3.3% in the second quarter, closer to the RBNZ’s upper band of the 1-3% target range. The RBNZ’s latest projections have inflation falling to 2.3% in Q3. The inflation report won’t be released until next week and if the RBNZ chops rates by 50 bps and inflation is higher than the RBNZ estimate, it will put the central bank in an awkward position. Another factor which supports a 50-bps cut is that the Federal Reserve lowered rates by 50 bps in September, which allows the RBNZ to do the same without risking a sharp decline in the value of the New Zealand dollar. NZD/USD Technical NZD/USD is testing resistance at 0.6137 and 0.6161 There is support at 0.6100 and 0.6076

The Japanese Yen faces uncertainty due to a new PM, snap elections, and shifting market sentiment. Despite a strong US Dollar and GBP, the Yen saw a temporary boost from safe-haven flows amid geopolitical risks. USD/JPY is range-bound, with a potential breakout above 146.37 hinting at a run toward 150.00. Most Read: EUR/USD Update – Euro Vulnerable on Rate Cut Bets and Safe Haven Flows The Japanese Yen is going through a bumpy week with a new PM incoming, snap elections and modest safe haven gains. The list of issues facing the currency continues to expand as markets assess the monetary policy path of the incoming PM. Comments thus far do not suggest any significant changes with incoming PM Ishiba today stating he expects monetary easing trend to stay in place. The PM also mentioned that he expects to work closely with the BoJ to overcome deflation and improve the economy. Governor of the BoJ Kazuo Ueda who was brought in largely to facilitate a normalization in policy looks likely to continue his work without too much outside influence. At present markets are still unsure as to when the BoJ may raise rates again and this is in part responsible for recent Yen weakness. The Yen did catch a bid on Tuesday as heightened geopolitical risks saw a flood into haven assets as the risk-off mood began to take hold. However, today we are seeing a strong US Dollar and GBP in particular which has pushed yen pairs higher on the day.  Economic Data Ahead On the economic data front there is nothing major expected this week from Japan, EU or the UK. The biggest data release is the NFP and jobs report on Friday out of the US which could affect USD/JPY but could also have a knock on effect on overall market sentiment. Beyond that it is key to keep an eye on developments in the Middle East. Any changes could see a flood into safe havens once more which could work in the Yens favor, even if it only proves to be temporary.  Source: For all market-moving economic releases and events, see the MarketPulse Economic Calendar.  (click to enlarge) Technical Analysis USD/JPY The USD/JPY pair has been hovering in a range of about 500 pips for the last 8 trading days. The return of USD strength has helped the pair stave off a retest of the psychological 140.00 handle. At the time of writing USDJPY is eyeing a candle close above a key resistance area which could open up a run toward the 150.00 psychological mark. A rejection at the 146.37 handle could however lead to a push toward the most recent lows.  On the daily timeframe price action is messy as well with a higher high followed by a lower low and change in structure. A daily candle close above the 145.00 is enough to see another change in structure which would suggest that favor currently rests with the bulls. Support 145.00  143.65 141.67 Resistance 146.37 147.20 150.00 USD/JPY Daily Chart, October 2, 2024 Source: TradingView.com (click to enlarge) GBP/JPY GBP/JPY is at a key confluence area which could help define the upcoming price action for the pair. Having been stuck in a range since Monday it was nice to see a bit of GBP strength return and push the GBP/JPY to closer to the 200.00 psychological mark. Immediate resistance rests at 195.859 which is provided by the 100-day MA. A break beyond this level opens up a potential run toward 200.00.  GBP/JPY Daily Chart, October 2, 2024 Source: TradingView.com (click to enlarge) Support 192.77 190.00 185.00 Resistance 195.86 198.00 200.00   EUR/JPY The EUR/JPY is almost identical in terms of price action to the GBP/JPY. The increasing rate cut bets where the ECB are concerned has failed to dampen the spirits of EUR/JPY bulls. Technically speaking, following the significant selloff in EUR/JPY which began on July 11, EUR/JPY has yet to retrace even 50% of that move.  This means room for a deeper recovery remains in EUR/JPY and given the lack of data expected out this week we could very well get a continuation of the recent bullish price action. Immediate resistance rests at 161.85 with a break higher facing a key confluence zone around the 163.50-164.00 handles. EUR/JPY Daily Chart, October 2, 2024 Source: TradingView.com (click to enlarge) Support 160.00 158.00 156.72 Resistance 161.85 163.50 165.00 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The Australian dollar is considerably lower on Tuesday. In the North American session, AUD/USD is trading at 0.6869, down 0.63%. The Aussie has looked strong lately and on Monday hit a high of 0.6942, its highest level since February 2023. Australia’s retail sales rise, manufacturing slips Tuesday’s Australian data was a mixed bag. Retail sales continue to accelerate and hit 0.7% m/m in August, up from a revised 0.1% in July and beating the market estimate of 0.4%. This was the strongest level since January, as consumers took advantage of unusually warm weather and special sales events. Australia’s manufacturing sector has struggled and there is no relief in sight. The September manufacturing PMI slowed to 46.7, down from 48.5 in August and in line with expectations. This was the eighth straight month of contraction and the weakest level since May 2020. Domestic and external demand both decreased, resulting in a sharp drop in new orders. Powell says smaller rate cuts coming The Federal Reserve joined the rate-cutting club in September and with inflation largely contained, there are expectations that Powell & Co. will be aggressive in lowering rates. However, Powell poured cold water on these expectations on Monday, saying that the economy was performing well and there was no rush to cut rates quickly. Powell added that if the economy performs as expected, there would be two more quarter-point cuts by year’s end. Market rate pricing ahead of the September meeting showed sharp swings and the same is true for the November meeting. Currently, the markets have priced in a 50-bps cut at 38%, down sharply from 58% just one week ago, according to the FedWatch tool. AUD/USD Technical AUD/USD is testing support at 0.6879. Below, there is support at 0.6821 There is resistance at 0.6960 and 0.7018

The Japanese yen has steadied on Monday after posting huge gains on Friday. USD/JPY is trading at 142.43 in the European session, up 0.15%. Incoming PM Ishiba says he’ll call snap election The yen soared on Friday but it was in response to political rather than economic developments. The ruling Liberal Democratic Party (LDP) unexpectedly chose Shigeru Ishiba as its new leader and he will take over as Prime Minister on Tuesday. Ishiba’s win was a surprise as Economic Minister Sanae Takaichi was expected to win the LDP leadership race. The financial markets reacted sharply – the Japanese yen soared 2.1% on Friday while the Japanese stock market is sharply lower today. Takaichi is a strong supporter of lower interest rates while Ishiba favors the Bank of Japan’s moves towards normalization. Ishiba said today that he will call a snap election on October 27, which he is almost certain to win. Ishiba’s election would be a green light for the BoJ to continue tightening policy which would make the yen more attractive to investors. Overshadowed by the political drama was Monday’s Japanese data, which was a mix. Industrial production slid 3.3% m/m in August, after a 3.1% gain in July and well short of the market estimate of -0.9%. Yearly, industrial production declined 4.9%, compared to a 2.9% gain in July. There was better news from retail sales, which rose 0.8% m/m in August, up from 0.2% in July and a three-month high. Yearly, retail sales climbed 2.8%, up from a revised 2.7% in July and above the market consensus of 2.3%. US Core PCE drops to 0.1% Inflation remains under control and this was reiterated on Friday by the US Core PCE Price Index, the Fed’s preferred inflation indicator. The index rose 0.1% m/m in August, a three-month low. This was down from 0.2% in July and below the market estimate of 0.2%. Yearly, Core PCE ticked up to 2.7%, after three consecutive months at 2.6% and in line with expectations. USD/JPY Technical USD/JPY tested resistance at 142.86 earlier. Above, there is resistance at 143.19 There is support at 142.26 and 141.93

Aggressive interest rate cuts by PBoC coupled with potential expansionary fiscal policies that target consumer spending have stoked positive animal spirits. Market breadth has improved on China CSI 300 and Hong Kong Hang Seng Index. Watch the key medium-term support of 18,290 on the Hang Seng Index. Since the start of last week, a change of fortunes has occurred in the China and Hong Kong stock markets due to a revival of positive animal spirits driven by a fresh aggressive monetary policy stance adopted by China’s central bank, PBoC together with hints of upcoming expansionary fiscal policies that target consumer spending. CSI 300 and Hang Seng Index outperformed Fig 1: Monthly performance of global benchmark stock indices as of 27 Sep 2024 (Source: Macro Micro, click to enlarge chart) Based on a month-to-date performance as of 27 September, the China CSI 300 (+13.44%) and Hang Seng Index (+16.62%) outperformed the regional stock markets excluding Japan (+7.67%), and other major benchmark stock indices such as US S&P 500 (+1.59%), and Japan Nikkei 225 (+2.92%) (see Fig 1). A significant portion of the gains seen in the China and Hong Kong benchmark stock indices came from last week when the CSI 300 recorded a weekly return of 15.70% and the Hang Seng Index rose by 13%, notching their biggest weekly gains since November 2008 and 1998 respectively. Desperate times call for more aggressive accommodating policies Recent key economic data such as PMI (manufacturing and services), retail sales, industrial productions, consumer inflation, and producers’ prices have indicated persistent internal demand weakness in China that will be a challenge for China to hit its annual 2024 economic growth target of 5%. In an attempt to halt the deflationary spiral in China, PBoC has announced a slew of simultaneous interest rate cuts on its key monetary policy tools this week; 50 basis points (bps) cut to banks’ reserve requirement ratio (with a possibility of an additional 25 bps to 50 bps in the near future), 20 bps cut on its seven-day repo rate to lower it to1.5%, reduced the one-year medium-term loan rate by 30 bps to 2%, and lowered housing mortgage rates. In addition, PBoC has announced at least 500 billion yuan of liquidity support for stocks via a swap facility that allows securities, fund management, and insurance companies to tap the PBoC to buy stocks that include a stock stabilization fund. Also to cushion the potential rising level of non-performing loans of Chinese commercial banks that are tied to the weak real estate market, China’s top policymakers are considering injecting up to 1 trillion yuan of capital into the biggest state banks to shore up their respective balance sheet to support the struggling economy. Expansionary fiscal policies are needed to prevent a liquidity trap Fig 2: China’s total loans growth & Credit Impulse Index as of 30 Aug 2024 (Source: Macro Micro, click to enlarge chart) Due to lacklustre consumer and business confidence in China, credit growth in China has declined significantly as seen in the total loans from banks that have plummeted from 12.5% y/y in April 2023 to 8.50% in August 2024. A similar downtrend can also be seen in the Credit Impulse Index (see Fig 2). Hence, opening more of the liquidity floodgates via an aggressive accommodating monetary policy may not be able to have an additional positive impact on economic growth due to a liquidity trap issue that arises from a lack of credit demand from consumers and businesses. To address the crux of reversing the deflationary spiral environment in China, expansionary fiscal policies need to be implemented alongside aggressive interest rate cuts. After almost a year-long of piecemeal expansionary policies, China’s Politburo (the top leadership) concluded its monthly September last Thursday, 26 September with much more “forceful” tonality in the ex-post meeting statement such as a vow to make the real estate market “stop declining”. Also, there is a potential issuance of 2 trillion yuan of special sovereign bonds to be allocated for fiscal spending where there is a possibility for the proceeds to be utilized to boost consumer spending as a rare one-off cash handout for needy Chinese residents was announced last Wednesday, 25 September. The deployment of such one-time handouts within a short period has appeared to be a change in stance from China’s top policymakers who in the past eschewed consumer welfarism, prompting potentially more forceful expansionary fiscal policies to be enacted soon to stimulate consumer spending and confidence that have been dragged down by a persistent weak property market. Market breadth has improved for China and Hong Kong Fig 3: Month-on-month comparison on the percentage of stocks above 200-day MA for global benchmark stock indices as of 27 Sep 2024 (Source: Macro Micro, click to enlarge chart) Several market breadth indicators have improved for the China and Hong Kong stock indices such as the percentage of component stocks that are trading above the key long-term 200-day moving average. Measured on a month-on-month basis as of 27 September 2024, the percentage of stocks above their respective 200-day moving averages in the CSI 300 and Hang Seng Index have increased from 38% to 56% (+18 percentage points), and from 54% to 78% (+24 percentage points) respectively (see Fig 3). The CSI 300, Hang Seng Index, together with the Singapore STI Index have seen the most significant improvement in the percentage of stocks above their respective 200-day moving averages versus other global major benchmark stock indices. Weekly MACD trend indicator of the Hang Seng Index has turned bullish Fig 4: Hang Seng Index medium-term & major trends as of 30 Sep 2024 (Source: TradingView, click to enlarge chart) The clearance of the 20 May 2024 swing high of 19,706 on the Hang Seng Index coupled with a higher low reading being flashed out on its weekly MACD trend indicator above its centreline suggests that the Index is likely undergoing a new medium-term (multi-week) uptrend phase. Key medium-term pivotal support stands at 18,290 with next medium-term resistances coming in at 22,690 and 26,200 (also the long-term secular descending trendline from the January 2018 all-time high) (see Fig 4). On the other hand, a break with a daily close below 18,290 invalidates the bullish scenario for another round of corrective decline to revisit the next medium-term support at 16,725 (also close to the 200-day moving average).

Fed policymakers maintain a dovish stance, and market participants are pricing in a potential 50 basis point rate cut in November. The US dollar hit a fresh YTD low, while Gold and Silver continued to advance. The week ahead features key data releases, including Eurozone inflation and US nonfarm payrolls, which could shape central bank policies and market sentiment. Read More: US Dollar Index (DXY) Slides to Fresh Lows Post PCE Data Week in Review: Fed Policymakers Deliver Dovish Rhetoric As the week wraps up, US data continues its downward trend, with the Fed’s preferred inflation measure maintaining pressure for a potential 50 basis point rate cut in November. Market participants are increasingly factoring in this cut, with the probability now exceeding 50%. Source: CME FedWatch Tool (click to enlarge) The week started with a stimulus package from China which helped propel Emerging Market (EM) stock indexes on track for their best week in 4 years. From South Africa to India emerging markets and EM currencies have done well and the Shanghai composite index logged its biggest weekly gain since 2008.  Source: LSEG Workspace (click to enlarge) Comments from Fed Policymakers have struck a rather dovish chord of late which has emboldened market participants. The softer data from the US and uncertain geopolitical risks and tensions are also playing a key role in the current market dynamic. No surprise that the precious metals arena continues to rise with both Gold and Silver rising this past week to fresh highs. Gold reaching a high of $2685/oz this week before a pullback has it languishing in the mid 2650’s at the time of writing. Oil prices struggled to hold onto early week gains despite OPEC + updating its longer term outlook. The cartel says it sees peak oil demand to only be reached in 2050 as a result of emerging market demand. Brent traded at a low of around 71.00 on Thursday before a modest bounce ahead of the weekend.  On the FX front the US Dollar hit a fresh YTD low on Friday and struggled for the majority of the week. As things stand markets are now more dovish on the Fed than the ECB and BoE which have helped both currencies eke out impressive gains to the greenback.  This sets up an interesting week for Global Markets with the Euro Area inflation release and the US jobs report. Both events could be key in shaping the respective policies of each of the Central Banks with market participants fully pricing in a rate cut from the ECB in October. Will the Euro Area inflation report and US jobs report confirm such moves? The Week Ahead: EU Inflation and US Jobs Data The week ahead is packed with high impact data releases in both developed and emerging markets. Next week, investors will have the chance to hear from numerous Fed members, including Fed Chair Powell on Monday. However, since the dot plot already provides a clear indication of the Fed’s future plans, upcoming data, particularly Friday’s non-farm payrolls, might garner more attention. Asia Pacific Markets In Asia, On Monday, China will release the official PMIs for September. In August, the composite PMI was at 50.1, barely above the 50 threshold that distinguishes expansion from contraction. It remains to be seen if business activity improved this month or slipped into contractionary territory. Of course it’s way too early to see if the stimulus will have an impact on actual production numbers as that will take some time to filter through to the data but the print will be an intriguing one nonetheless and could set the early risk tone for the week. Japan has a new Prime Minister who is seen as someone who will support policy normalization by the BoJ and support Governor Ueda in his endeavor. The week ahead brings the release of the BoJ summary of opinions from the most recent Central Bank meeting. Governor Ueda stated that the BoJ will continue to raise rates if the economy aligns with their outlook. Consequently, investors might scrutinize the summary for clues about the likelihood of another rate hike before year-end.  Japan’s employment data for August, set to be released during the Asian session on Tuesday, along with the Tankan survey on Thursday, could also influence investors’ perspectives. Europe + UK + US In developed markets, Eurozone inflation numbers will be in focus as markets expect to see a further slowdown in inflationary pressure. This has ramped up bets of another rate cut from the ECB at its October meeting.  Unemployment figures are due next week and have remained at historically low levels for some time. While no immediate changes are expected, the labor market outlook appears to be softening, with labor shortages becoming slightly less of an issue. In the UK, it’s a relatively quiet week with GDP data on Monday the only highlight. As cable holds the high ground, the week ahead could see a potential pullback ahead of the NFP release. US markets are the most intriguing with ISM services and manufacturing data coming out before the all important NFP report. When it comes to the job market, recent benchmark revisions have shaken confidence in the data, while leading surveys on hiring demand are declining. Additionally, consumer confidence readings indicate that households are beginning to feel the effects of a cooling economy. A significant downside miss could weigh heavily on the US Dollar and thus reignite recessionary fears.   Unemployment rate at or below 4.4% would be ideal. Any uptick could further complicate matters going forward for the Federal Reserve and may have a massive impact on the size of the rate cut the Central Bank deliver in November.  For all market-moving economic releases and events, see the MarketPulse Economic Calendar. Chart of the Week This week’s focus is on the S&P 500 given the recent rally and technical patterns at play. The S&P is on course for its third consecutive week of gains and could face some form of correction next week. However the overall trend remains extremely bullish with the recent triangle pattern breakout hinting at a bullish target around the 6170 area.  The index may retest the top of the triangle pattern which rests around the 5650 handle before a potential move higher. This would be ideal for would be longs looking to get involved.  Immediate resistance on the upside rests around the 5910 handle before the psychological 6000 handle comes into focus.  S&P 500 Daily Chart – September 27, 2024 Source: TradingView.Com (click to enlarge) Key Levels to Consider: Support: 5669 5650 5538 Resistance: 5771 5910 6000 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

US Dollar Index hits new yearly low after PCE inflation report came in softer than expected. PCE data shows personal income rose less than expected, PCE price index increased by 0.1% MoM, and core PCE increased by 0.1%, below expectations. DXY is on the edge of a cliff as rate cut bets and dovish Fed rhetoric weigh on the greenback. Most Read: Japanese yen soars as Tokyo Core CPI falls to 2% The US Dollar Index (DXY) slid to a fresh yearly low in the aftermath of the US PCE inflation report. A softer than expected PCE print across the board ramped up bets for another 50 bps cut from the Fed in November.  The initial impact has seen the US Dollar lose ground to major counterparts and commodities like Gold and Silver tested recent highs. The DXY appears to be on the edge of a cliff as rate cut bets and dovish Fed rhetoric weigh on the greenback.  The PCE data showed that US personal income rose by less than expected. In August 2024, the US personal consumption expenditure (PCE) price index rose by 0.1% month-over-month, following a 0.2% increase in July, aligning with expectations. Service prices saw a 0.2% rise, while goods prices fell by 0.2%. The core PCE index, which excludes food and energy, also increased by 0.1%, down from 0.2% in July and below the anticipated 0.2%. Food prices went up by 0.1%, whereas energy prices dropped by 0.8%. On an annual basis, the PCE inflation rate decreased to 2.2%, the lowest since February 2021, from 2.5% in July, and was below the expected 2.3%. The core rate slightly increased to 2.7% from 2.6%, meeting forecasts. Source: Bureau of Economic Analysis Markets will now keep an eye on the Michigan sentiment final numbers but barring any surprises this should not have much impact. Looking ahead, market attention will switch to US job numbers.  Traders are favoring a 50 bps cut in November but at this stage it is far from a certainty with Job numbers next week likely to play a major role.  Technical Analysis – US Dollar Index The US dollar has been flirting with fresh lows since the Fed meeting on September 18. A brief push lower post the PCE release followed but the index has since bounced back to trade at 100.308 at the time of writing. The 100.00 psychological level is growing ever more vulnerable especially with the jobs data lined up next week. I had actually hoped for a slight bounce from the index today and Monday potentially as we enter the last day of the week, month and quarter. However, it would appear that for now the bearish pressure is to be maintained with a late bounce on Monday still a possibility ahead of the NFP report on Friday US Dollar Index Chart, September 27, 2024 Source: TradingView (click to enlarge) Support 100.00 99.500 99.000 Resistance 100.61 101.18 101.80 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The Japanese yen edged higher earlier but has pared those gains and is almost unchanged on the day. USD/JPY is trading at 144.81 in the North American session. Tokyo Core CPI expected to fall to 2% Japan releases Tokyo Core CPI, a leading indicator of inflation trends, early on Friday. The index has accelerated for four straight months and hit 2.4% in August, a six-month high. However, the markets are expecting a decline in September, with the market estimate at 2.0%. The Bank of Japan has said that underlying inflation needs to rise to 2% before it will raise rates and investors are keeping an eye on every inflation release. Core CPI rose in August from 2.7% to 2.8%, comfortably above the BoJ’s2% target. The BoJ has signaled that it although it plans to raise rates it isn’t in any rush – Governor Ueda said this week that the central bank can afford to wait and will be keeping a close eye on service inflation releases in October. Will the Federal Reserve deliver another jumbo rate cut in November? The Fed’s dot plot from this month’s meeting forecasts 50 basis points in cuts before year’s end, while the money market has priced in 75 bps points until the end of the year. With only two Fed rate meetings left in 2024, this would mean that one of the meetings would see a 50-bps cut. The Fed started the new rate-cutting cycle with a 50-bps reduction earlier this month. On Friday, the US releases the Core PCE Price Index, which is considered the Fed’s preferred inflation indicator. The index is expected to creep up to 2.7% in August after remaining unchanged at 2.6% for the past three months. A surprise reading would likely swing the rate-cut odds for the November meeting. Currently, the market have priced in a 54% chance of a 50-bps cut and a 46% likelihood of a modest 25-bps cut. USD/JPY Technical USD/JPY tested support at 144.17 earlier. Below, there is support at 143.69 There is resistance at 145.42 and 146.10