Market Update by Solidecn.com

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Gold - Chart of the Day

GOLD quotations continue the dynamic downward momentum initiated earlier this week. Bullion, for that matter, is responding directly to declines in the EURUSD and weakness in US debt securities, which, in the case of TNOTE, broke out to new lows.

These movements largely reacted to the rise in expectations for one more potential Fed hike. Now, market sentiment has further deteriorated as a result of the sell-off in equity and derivatives markets, which have been dominated over the past week by increasing exposure to short positions. It is worth remembering, however, that since the last FOMC decision, the valuation of the implied interest rate has begun to fall, which not a little reduces the overtones of hawkish comments from bankers.



Gold has broken out below the support set by the 200-day EMA (orange curve) and is currently slightly below the $1,900 per ounce barrier. The previously mentioned levels could be the most important zones to watch if we were to see a rebound on this instrument. On the other hand, the most important support zone at the moment is the $1885 zone, where the local minimums of August are located.

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EURUSD

Several economic reports from the United States were released at 3:00 pm BST today. The most anticipated was the Conference Board report, which was projected to show a slight decline compared to August. However, the actual report revealed a more significant drop than expected, from 106.1 to 103.0.

In addition to the Conference Board data, investors also received the Richmond Fed index for September and new home sales data for August. The Richmond Fed index was a pleasant surprise, while the new home sales data was slightly lower than anticipated.





- **Conference Board consumer confidence index for September**: 103.0, lower than the expected 105.5 (previous figure was 106.1)
- **New home sales for August**: 675k, lower than the expected 700k (previous figure was 714k)
- **Richmond Fed index for September**: +5, significantly better than the expected -6 (previous figure was -7)

Following the release of this data, the USD experienced a slight decline. However, the market reaction was minimal, with EURUSD increasing by approximately 0.05% in the initial minutes of trading, while USDJPY fell by around 0.1%. The stock markets largely disregarded the data.

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Tesla

Tesla (TSLA.US) and other European automakers that import from China into the EU will be part of an investigation into whether the electric vehicle industry receives unfair subsidies, the Financial Times reported, citing Valdis Dombrovskis, the EU's executive vice president.

The EU is "open to competition" in the electric vehicle sector, the official added, but "competition must be fair," adding that other countries have already imposed tariffs on electric vehicles from China. The investigation will cover all companies (not just Chinese) that receive subsidies on the production side.




This situation for Tesla (TSLA.US) itself could prove problematic, as nearly 20% of all the brand's electric vehicles sold in Europe are manufactured in China, including at a factory in Shanghai.

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US30 Chart of the day

Investor confidence in the US stock market has been declining since the latter half of the third quarter. This is partly due to the Federal Reserve's aggressive stance and Chairman Powell's statements, which have led to a rise in bond yields. In fact, 10-year treasury yields have hit a 16-year high of 4.54%. If the economy remains stable, these yields could continue to rise.

The stock market, including the Dow Jones Industrial Average (DJIIA or US30), is losing value as the risk-free rate increases and the economic growth outlook becomes uncertain. Major institutions like S&P and the Conference Board predict a slowdown in US GDP growth in 2024.




There are also concerns about China's real estate market, particularly the default of Evergrande, and potential political crises in the US over the federal budget. A government shutdown, which has happened 18 times since 1977, could slow economic growth and delay the release of economic data. Credit rating agency Moody's warns that such events could lead to a downgrade of the US credit rating.

Looking at the US30 chart, the price is close to the 200-day Simple Moving Average (SMA200) level, which is around 33,932 points. The price has also fallen below the 100-day Simple Moving Average (SMA100) for the first time since May. If the price doesn't rebound, it could test the 23.6% Fibonacci retracement of the March 2020 upward wave at 32,400 points. Historically, the price's behavior around the SMA100 and SMA200 has often indicated buying opportunities or periods of weakness.

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EURUSD Analysis

The German Ifo Institute, a research group that studies economic trends, released its latest indices today at 9:00 am BST. These indices are a measure of the business climate in Germany and are based on a survey of about 7,000 companies.

The main index, known as the Business Climate Index, remained unchanged from last month, coming in at 85.7 for September. This was higher than the expected figure of 85.2, indicating a more positive business sentiment than anticipated.

Here's a breakdown of the Ifo indices for August:

• Business Climate: The index came in at 85.7, which was the same as the previous month and higher than the expected 85.2. This index measures the overall business sentiment in Germany.
• Current Conditions: This index, which assesses the current business conditions, was 88.7, slightly higher than the expected 88.0 but lower than the previous month's 89.0.
• Expectations: This index measures business expectations for the next six months. It came in at 82.9, slightly lower than the expected 83.0 but higher than the previous month's 82.6.

In summary, the indices suggest that the business climate in Germany is stable, with expectations for the future slightly improving.

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USD 100 - Chart of the day

With the BoJ's decision, the cycle of publishing monetary decisions of major central banks this week comes to an end. The markets reacted volatile to them, but overall, the indices recorded losses on a weekly basis. The relatively hawkish Fed and its published new dot-plot indicated the possibility of one more hike this year and the postponement of the first-rate cuts. The overtones of this conference broadly affected sentiment around the US100 index and TNOTE.

The US100 index has been recording declines, which have reached, from the perspective of technical analysis, important support zones set by the 100-day exponential moving average (purple curve), which, it is worth mentioning, have not been tested for nearly 6 months. Moreover, the declines themselves are directly driven by the selloffs observed in the debt market, which has historically shown a correlation with the listings of technology companies.

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GBPUSD Analysis

The GBPUSD, also known as Cable, dropped to its lowest level since May 26 on Tuesday. This was due to the UK's inflation rate in August being lower than expected.

The yearly CPI (Consumer Price Index) fell to 6.7%, which is the lowest it's been since February 2022. This was a drop from 6.8% in July and was lower than the predicted increase of 7.0%. The core inflation rate, which doesn't include fluctuating components, also fell to 6.2% in August. This was lower than the predicted 6.8% and the 6.9% from the previous month.

Even though inflation is still high (more than three times the target of 2%), the data from August gives some hope. It also gives some relief to the Bank of England, which was expected to raise interest rates for the 15th time in a row at a policy meeting on Thursday. Now, there's a 50-50 chance that they might not raise rates this time.

However, there's still a risk of inflation increasing again. This is because oil and food prices are still going up, which keeps adding to inflation and might lead to more policy tightening.



The daily chart shows a bearish trend. However, the price is nearing a key short-term support level at 1.2307 (the lowest point on May 25), and this could slow down the downward trend because the market is oversold.

Any increase in price is likely to be limited by the broken 200-day moving average (1.2432) to keep the overall downward trend intact. If the price falls below the 1.2307 level, it could lead to a deeper correction of the larger uptrend from 1.0348 to 1.3141, and could potentially reach 1.2074 and 1.2000 (a key psychological level).

On the other hand, if the price consistently stays above the 200-day moving average, it could signal a stronger correction. A rise above the important 1.2500 level could indicate a possible trend reversal.

The market is waiting for the Federal Reserve's decision (expected later today and likely to remain unchanged) and a more important decision from the Bank of England on Thursday. The British pound could face more downward pressure if the Bank of England decides not to raise interest rates this time. However, if the central bank decides to raise rates again and maintains a hawkish stance, it could boost the currency.

Resistance levels: 1.2432; 1.2482; 1.2504; 1.2522.
Support levels: 1.2332; 1.2307; 1.2274; 1.2190.

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EURUSD Technical Analysis

The euro has been moving sideways and has had trouble getting past the 1.0700 mark. People are waiting for the FOMC statement today. The cost of living in the Eurozone has dropped a little, from 5.3% to 5.2%, which might mean inflation is slowing down. This could make the euro weaker. People think the Fed will stop increasing interest rates in September, but some believe there might be one more increase this year. This is helping the dollar.




The EURUSD is trading above a level that it's been below for a long time; if it goes above 1.0700, that's a good sign for the euro. The MAACD and RSI indicators suggest the trend might be changing.

The levels to watch are:

Resistance (where it might have trouble going higher): 1.0700, 1.0760.
Support (where it might bounce back up): 1.0640, 1.0540.

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USDCAD Technical Analysis

Inflation rates have increased due to a rise in gasoline prices. The inflation rate for the year ending in August was 4.0%, up from 3.3% in July. This was slightly higher than what economists predicted, which was 3.8%. From July to August, inflation increased by 0.4%, which was a bit more than the expected 0.3%, but less than July's 0.6%.

Core inflation, which excludes volatile items like food and energy, also increased to 3.3% from 3.2% in July, but it was less than the expected 3.5%. On a monthly basis, core inflation decreased to 0.1% from 0.5%.

Despite these changes, it's still expected that the Bank of Canada (BoC) will not change interest rates at their next meeting. However, the chances of a rate increase have gone up to about 43%. But with unemployment rates rising since May and signs of slower economic growth, a rate hike is still not likely.




The USDCAD currency pair has recently experienced a bounce from the support area at 1.338. This upward movement suggests that bullish traders might be gearing up to test the resistance level at 1.35. However, it’s important to note that the overall trend appears to be bearish.

The bearish outlook remains valid as long as the pair continues to trade within the daily downward channel. This means that despite the recent bounce, we could still see a continuation of the downward trend.

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