Market Update by Solidecn.com

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USDJPY Technical Analysis

The USDJPY is currently around the middle of Tuesday's range of 150.16 to 147.29. This movement was caused by signs that Japan might step in to help their weakening currency, the yen.

Recent reports from the Bank of Japan say there was no such intervention. However, people are still wary because the chance of intervention is high. They're waiting for the US September NFP report, which will give more information about the US job market and what the Federal Reserve might do next.

Daily technical studies are still positive, but the 4-hour structure has weakened. This suggests there's a risk of a downturn, even though strong bids on Tuesday have offset some of this risk.

The NFP report could trigger new activity and provide fresh signals for direction. If the September numbers are solid (at or above the expected 170K), it would ease the Federal Reserve and allow for higher interest rates for a longer time.



On the other hand, if hiring in September is weaker than expected, it would mean that the tight job market is being hurt by high borrowing costs. This could lead to worries about a major economic slowdown and require a more careful approach from the Federal Reserve.

We can expect new direction signals if either pivot point is broken. If it drops below 147.29 (Tuesday's low), there's a risk of a deeper drop. If it breaks above 150, it could signal a continuation of the bullish trend, although there's still a risk of intervention.

Resistance: 148.72 - 149.31 - 149.7
Support: 148.25 - 147.29 - 146.10 - 145.9

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GBPUSD Technical Analysis

The GBPUSD pair started to lose value early on Thursday. The recovery it made on Wednesday was halted by the 10-day moving average (10DMA) at 1.2173. The UK's construction sector performed poorly in September, which is a negative sign. The pair might continue to lose value, with a risk of falling to 1.20 or even 1.1988. It might move within the range of 1.2074 to 1.2173 before falling again. A break above the 10DMA could reduce this downward pressure.



It might move within the range of 1.2074 to 1.2173 before falling again. A break above the 10DMA could reduce this downward pressure.

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WTI Oil

WTI oil is set to continue its downward trend after a brief consolidation period on early Thursday. This follows a significant drop the previous day, marking the largest daily loss since July 5, 2022.

The sentiment has been affected by concerns over demand following recent weak economic data, suggesting a potential further slowdown in global economic growth.

The OPEC+ group, in their meeting on Wednesday, decided to maintain their current oil output policy. Saudi Arabia and Russia have chosen to keep their voluntary output cut unchanged for the rest of the year. Oil prices have dropped to a one-month low, with Wednesday's sharp fall contributing to a reversal pattern on the daily chart.

The price has broken through a key Fibonacci support level at $84.31, indicating that the major downtrend from the 2023 high of $95.00 may continue.



Despite strong bearish momentum, there are signs that the downtrend may start to weaken. However, any price increases should be limited and present better selling opportunities. The previous consolidation floor and broken Fibonacci level at $88.00/40 should limit any significant price increases.

Resistance: 84.90; 86.00; 87.54; 88.00.
Support: 83.88; 81.71; 81.00; 80.00.

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EURUSD

As we move into the second half of 2023, traders have seen the EURUSD fall steadily since mid-July. This downward trend is clearly marked by parallel black lines, showing a strong bearish trend. This has led to opportunities for consistent bearish positions.

Looking at the trend, it's clear that the pair is weak, especially with the repeated tests of the lower boundary of the channel in recent times. Each time it falls towards this key support level, buyers' step in, temporarily stopping the bearish momentum and hinting at a possible break from the continuous fall.

Despite this bearish trend, there are signs of potential bullish activity. The EURUSD seems to be forming a 'double bottom', marked by yellow rectangles that represent two significant lows in the pair's movement. This pattern often signals a possible reversal, particularly when it appears after a significant downtrend.



Traders are eagerly waiting for a key breakout above the upper black line of the downward channel and an important green horizontal resistance. This line serves as the neckline of the suggested double bottom and is a critical level for those hoping for a bullish turn. A strong daily close above these resistances could signal an exciting move into bullish territory, while a rejection could reinforce the current downtrend.

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USDJPY Update

On Wednesday, the USDJPY pair stayed above 149 after a lot of ups and downs on Tuesday. It even crossed the 150 mark due to a good US jobs report, reaching a nearly one-year high. But then it fell sharply, possibly because Japan stepped in to help their falling currency.



The pair quickly recovered from its lowest point (147.29), suggesting the dollar is still in demand. Daily trends show a chance for the pair to try breaking the 150 marks again. But Japan might step in again, which could push the pair down. The first sign of this would be if it falls below 148.72, and it's confirmed if it closes below 147.29.

• Resistance: 149.31; 149.70; 150.00; 151.04.
• Support: 148.72; 148.29; 147.32; 146.10.

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Asia Market Wrap:

Asian markets are seeing a downturn, reflecting a global bond market sell-off due to fears of prolonged high interest rates. This has affected various assets, with global equities taking a significant hit.

The ISM manufacturing data and the JOLTS report suggest a hawkish outlook. The US factory sector, in contraction for 11 months, shows signs of potential expansion. The JOLTS report highlighted a large gap between labour supply and demand, leading to increased wages.

Amid strong economic data and predictions of higher rates from experts like Jamie Dimon and Ray Dalio, bondholders are nervous. Navigating such bond markets requires courage.

The US economy remains strong, with an estimated annualized growth rate of 4.2% in Q3, up from 2.1% in Q2. This is surprising given the Federal Reserve's aggressive monetary policy tightening. Factors like pent-up pandemic demand, job creation, and wage increases contribute to this growth.

However, the US economy is expected to slow down significantly, potentially below 1% in Q4 and may stall next year. This is due to the impact of the Federal Reserve's large interest rate hikes last year. The housing market is particularly affected, with 30-year mortgage rates at a 23-year high of over 7%, leading to low home sales and affordability issues. Bank lending standards are tightening. Services could be affected as households cut back on non-essential purchases and many have depleted their pandemic savings. Additionally, many student loan borrowers have resumed repayments after a 3.5-year break, adding to consumer financial pressures.

The current economic slowdown aligns with the Federal Reserve's aim to control inflation. However, rising oil prices have paused the steady decrease in inflation, which had fallen from a peak of 9.1% in summer 2022 to 3.0% in June, then rose to 3.7% in August. On the bright side, core inflation, excluding food and energy, has remained stable at near two-year lows of 4.3%, down from 6.6% last fall. This is due to smoother global supply chains and slower wage growth. But services inflation remains high, suggesting a return to the Fed's 2% target won't likely happen until early 2025.

The theme of "higher for longer" has pushed 10-year Treasury yields up by 130 basis points over the past five months, reaching a 16-year high of 4.8%. It's expected that yields will drop to 4.25% by year-end and further to 3.75% in late 2024, but this will likely need US data to show a downturn, a looser labour market, and lower inflation to convince investors.

The quick reversal of the US Treasury yield curve is significant. This change could lead to imminent recession warnings. If the unemployment rate increases even slightly, it could trigger recession alarms.

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USDJPY Takes a Dive, Is Bank of Japan Stepping In?

The USDJPY pair saw a significant drop this afternoon. The shift was swift and substantial, happening just as the pair reached the 150.00 mark - a peak not seen since October 2022! This level is crucial as it's often considered the trigger point for intervention by the Bank of Japan, as has happened in the past. Before this drop, the pair was climbing due to a strengthening US dollar, spurred on by a rise in JOLTS job openings data for August.





The USDJPY fell from around 150.00 to approximately 147.30 - a nearly 2% drop. Although much of this decline has been recovered, the pair is still trading close to the 149.00 mark.

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Oil Analysis


Oil prices have been dropping for four days straight after reaching their highest point in 13 months. The price of a barrel of WTI oil almost hit $94, as buyers tried hard to keep prices high.


This seems to be the third increase in prices since they fell in June. Starting from last Thursday, any attempts to raise the price during the day have been stopped by large sell orders. On Tuesday, WTI's price briefly fell below $87, which is 7.5% less than the highest point last week.


Worries about a slowing world economy led to large sell orders that stopped any attempts to raise the price during the day. This constant pressure seems to be more than just a temporary cooling off of the market and fits the usual pattern of three downward movements.


Last month, there was a divergence on the daily RSI timeframe when a higher price peak happened at the same time as a lower oscillator peak. This often means that bullish momentum is running out. It's also worth noting that the index has already moved away from the overbought zone, which shows the start of the decline.


The next potential drop in price could be to the $84.4 per barrel area. The 50-day moving average is around this area, as are the price peaks from early August and mid-April.





However, oil prices could drop even further. The slowing global economy and decreasing final demand are now working against it. Moreover, oil has been rising against a rising dollar and falling markets for a long time. And now it might catch up with the falling markets with even greater force.


An important signal from exporters: there were reports last month of increased oil exports from Russia and Saudi Arabia, which reduced the market deficit and raised questions about whether the cartel's production limit is really as strict as it seems.


More solid support for oil might only come with a drop to $78. That's the 50-week moving average, but we wouldn't be surprised to see a drop to $75 by the end of the year. These are high levels by historical standards, but they no longer seem like they're holding back the economy or a good reason for further policy tightening.


From a global perspective, lower oil prices will now be good for equity indices rather than a sign of decreasing risk appetite, as is usually the case.

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Yield Curves Rise as US Shutdown Averted, Inflation Remains High

The yield curves have steepened this week, with the 10-year UST and Bund yields reaching new highs. This comes after a potential US government shutdown was avoided, leading to higher yields and firmer riskier assets. Despite this, inflation remains high, with the core PCE release for September close to 4% and the core CPI estimate for the Eurozone at 4.5%.



ECB Cautious on Inflation, Italian Spreads Recover

Luis de Guindos, Vice President of the European Central Bank (ECB), confirmed in a recent interview that discussions about rate cuts are premature. He highlighted the challenges posed by increased oil prices on inflation expectations. Meanwhile, Italian government bond spreads have recovered, with the BTP Valore sale attracting significant demand.

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Tesla

Wall Street is expected to open lower, with futures indices erasing earlier gains. Investors are shifting towards lower-risk positions as US 10-year bond yields surge and the dollar strengthens.

Final PMI data indicates a contraction phase in major economies despite better-than-expected results from Europe. US Manufacturing PMI improved due to increased employment and better supply availability, but inflation concerns persist due to rising producers' costs.

US ISM Manufacturing PMI shows contraction for the 11th month in a row, despite some recovery signs. While demand remains soft, production improved, and suppliers retained capacity. Discrepancies between ISM and PMI prices underscore the rapidly changing environment.


Goldman warns of the impact of rising rates on US corporate profits. Kevin McCarthy faces pressure from Joe Biden to fund Ukraine and from Matt Gaetz to cut government spending. Bill Ackman plans to pursue a deal with Elon Musk's X through Pershing Square's SPARC.

The US500 index is trading at 4320 points, down 0.20%, with selling pressure preventing recovery. It's set to retest the critical 4300 support zone.

Tesla's shares fell 4.0% as Q3 deliveries and production fell short of estimates. The company delivered 435,059 vehicles and produced 430,488, attributing the decline to planned factory upgrades. However, Tesla's 2023 volume target of 1.8 million vehicles remains unchanged.