Candlestick charts are a popular tool used in technical analysis. They are often used to determine possible price movements based on past patterns, during both bull and bear markets.
The concept originated in 1700 when a Japanese man named Honma Munehisa discovered that while supply and demand mainly determined the cost of rice, the market was also influenced by emotion.
(Honma Munehisa)
How to read Japanese Candlesticks?
Japanese candlesticks display the following four types of price levels during a single trading session:
High price
Low price
Opening price
Closing price
A green candlestick suggests that the opening price on that day was lower than the closing price, which meant that demand exceeded supply.
Meanwhile, a red candle stick reflects that the closing price on that day was lower than the opening price, which reflects that supply was more than demand.
Japanese candlesticks also contain a real body, and two tails.
Thereal body of a candlestick represents the range between the open and the close price within a single trading session. It is a reflection of the price sentiment during that specific period.
Meanwhile, thetails (upper shadow and lower shadow)represent the highest or lowest price reached during the trading session.
Examples of Japanese Candlestick patterns
There are many different kinds of candlestick patterns such as bullish patterns, bearish patterns, and continuation patterns.
Bullish patterns indicate that price is likely to rise, while bearish patterns suggest that the price is likely to fall.
Bullish Pattern
Bearish Pattern
However, it is important to remember that candlestick patterns should only be used as a reference. Traders will still have to do their own due diligence whenever they trade the markets.
U.S. equities extended their gains into the second trading day of the week. The Dow Jones Industrial Average rose 1.12% to close at 30523.8. The S&P 500 gained 1.14% to close at 3719.98. The tech-heavy Nasdaq Composite edged 0.9% higher to close at 10772.4. Equities continued to be buoyed by better-than-expected earnings releases. Netflix reported earnings after the bell last night. The company reported an earnings beat of $3.1 EPS, beating market consensus by 43%. United Airlines also reported better-than-expected earnings of $2.28 EPS, beating market consensus by 23.1%.
The benchmark U.S. 10-year treasury yield continues to trade above 4% and was last seen at 4.009%.
Of the 9.15% of S&P 500 companies that have reported earnings so far this season, 70% of them have posted positive surprises, according to data from FactSet. Earnings expectations have been lowered considerably and the market is braced for a good amount of negative news in earnings season, thus an average performance from corporate America may well be the breakaway from recent bear market price movements market participants are waiting for.
Main Pairs Movement
The Dollar index lost 0.06% throughout yesterday’s trading. The Dollar has continued to lose steam for the second straight day as risk sentiment continues to improve due to better corporate earnings results and the recent UK policy reversal.
EURUSD gained 0.17% throughout yesterday’s trading. The broad-based weakness of the Dollar has put EURUSD on a solid upward trajectory; furthermore, the upside surprise of economic sentiment in Germany has provided a boost of confidence for the Euro.
GBPUSD retreated 0.28% throughout yesterday’s trading. The British Pound fared worse against a weakening Dollar. The newly appointed minister of finance, Jeremy Hunt, is scheduled to deliver tax and spending measures on next Monday.
Gold edged 0.08% higher throughout yesterday’s trading. The non-yielding metal continues to find appreciating headroom as the Dollar weakens.
Technical Analysis
EURUSD (4-Hour Chart)
EURUSD looks to extend an auspicious start of the week against the backdrop of the inconclusive price action around the greenback, all within a context of persevering appetite for the riskier assets. The pair was wandering in a range from 0.9820 to 0.9880 as of writing. Meanwhile, the prevailing risk-on mood continues to support the pair’s upside bias despite German yields now giving away initial gains and returning to negative territory. In addition, extra support for the European currency also came after the Economic Sentiment measured by the ZEW institute in Germany and the Euroland unexpectedly came in above estimates in October reversing at the same time the previous downtrend. Furthermore, the price action around EURUSD is expected to closely follow dollar dynamics, geopolitical concerns, and the Fed-ECB divergence. Following the latest results from key economic indicators, the latter is expected to extend further amidst the ongoing resilience of the US economy.
From the technical perspective, the RSI indicator is 62 as of writing, suggesting EURUSD stands firmly and remains well bid in the upper-0.9800 level in the near term until the RSI hit above 70, an overbought area. As for Bollinger Bands, the pair was priced in the upper area stably, and the size between the upper and lower bands remained. We think the EURUSD will retain mild upside momentum in the near term unless the price fell below the 20-period moving average.
Resistance: 0.9921, 0.9986, 1.0040
Support: 0.9666, 0.9543
GBPUSD (4-Hour Chart)
The GBP/USD pair although rebounded a few pips from the daily low and climbs back above the 1.1310 level during the North American session, erasing almost half the gains on Monday. The modest recovery is sponsored by the emergence of some US dollar selling, though lacks bullish conviction and the UK political uncertainty. Rebels within the ruling Tory Party are coming together to replace the newly-elected UK Prime Minister Liz Truss in the wake of the recent tax cut fiasco. Apart from this, reports that the Bank of England is set to further delay quantitative tightening to help stabilise bond markets act as a headwind for sterling and cap the pounds. However, according to a Bloomberg report on Tuesday, the long-term bearish bias on the pound has eased at the fastest pace since June 2016 amidst the UK government’s fiscal policy U-turn, as depicted by the options market. Meanwhile, one-year risk reversals in cable, a measure of the spread between call and put prices rallied on Monday in favour of calls by the most since June 2016.
For the technical aspect, the RSI indicator is 55 as of writing, suggesting that the price remains modest bullish momentum. As for the Bollinger Bands, the pair was pricing around the 20-period moving average, and the gap between upper and lower bands became smaller, indicating that the pair now has no clear traction, and favoured hovering around the 1.1300 level.
Resistance: 1.1476, 1.1566, 1.1714
Support: 1.1162, 1.0797, 1.0968, 1.0392
XAUUSD (4-Hour Chart)
As the US dollar witnessed some dip-buying amid the elevated US Treasury bond yields on Tuesday, the pair XAU/USD failed to preserve its upside traction and dropped to the $1,646 level during the US trading session. XAU/USD is trading at $1651 at the time of writing, rising 0.09% daily. The hotter US consumer inflation figures released last week have reaffirmed the prospects for a more aggressive policy tightening by the Fed, which continued to provide support to the greenback and exerted bearish pressure on the precious metal. Moreover, the better tone of global equities and the risk-on market mood is acting as a headwind for the safe-haven gold. The market focus now shifts to the Building Permits and Housing Starts for September, as a significant decline in these data could cause the US dollar to lose strength and lift the XAU/USD pair higher.
From the technical aspect, RSI is 44 as of writing, suggesting that the downside is more favoured as the RSI stays below the mid-line. For the Bollinger Bands, the price failed to preserve its upside strength and retreated from the moving average, therefore the downside momentum should persist. In conclusion, we think the market will be bearish as the pair is heading to test the $1643 support line. Sustained weakness below that level might increase the risk of a downward extension and open the door for additional near-term losses.
U.S. equities rallied on the first trading day of the week. The Dow Jones Industrial Average gained 1.86% to close at 30185.82. The S&P 500 jumped 2.65% to close at 3677.95. The tech-heavy Nasdaq Composite soared 3.43% to close at 10675.8. Equities rallied as Q3 earnings from the financial sector have boosted investing sentiment. Bank of America reported better-than-expected results, sending the stock up 6%. As previously mentioned, Q3 earnings are not expected to reflect the full effect of the two consecutive 75 basis point hikes by the Fed; instead, earnings will begin to slow as Q4 heads around the corner.
Netflix, Tesla, and IBM are scheduled to release earnings later this week.
Monday’s equity rally was also aided by political developments in Britain. Prime Minister Truss has replaced Finance Minister Kwasi Kwarteng with Jeremy Hunt, who has announced that almost all planned tax cuts would be scrapped. The reversal in fiscal spending has also backed the British Pound as Gilts rallied.
Main Pairs Movement
The Dollar Index dropped 1.09% over the previous trading day. The U.S. Greenback lost bidding as market participants rotated into a red-hot equities market. The benchmark U.S. 10-year treasury yield continues to hover around 4% and was last seen trading at 3.998%.
EURUSD rose 1.22% over the previous trading day. The Euro took full advantage of the weaker Dollar and reached its highest level in over a week. On the economic docket, Germany’s economic sentiment is set to release during today’s European trading session.
GBPUSD gained 1.53% throughout yesterday’s trading. The British Pound found support as the reversal of the “mini-budget” fiscal plan has eased some concerns; however, the economic outlook for Britain remains bleak as the nation combats soaring inflation and soaring energy costs.
Gold rebounded 0.38% throughout yesterday’s trading. The non-yielding metal found some breathing room amid a weaker Dollar.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair surged higher on Monday, reversing Friday’s pullback from a one-week high and refreshing its daily high above 0.9820 level amid an improved market sentiment. The pair is now trading at 0.9844, posting a 1.29% gain daily. EUR/USD stays in the positive territory amid a weaker US dollar across the board, as the haven greenback is losing ground and retreated to the 112.0 area amid an absence of major data/events. Moreover, the newly appointed British Finance Minister also announced the U-turn on the mini-Budget Tax cuts, which provided a strong boost to investors’ mood. For the Euro, the European Central Bank (ECB) Vice President Luis de Guindos said on Monday that he expects the US dollar to stabilize in the coming months and Eurozone inflation to start easing in 2023. But the tussle with Russia, over Ukraine, might limit the recovery of the shared currency.
For the technical aspect, RSI indicator 64 as of writing, suggests that the pair is preserving its bullish momentum as the RSI climbs towards 70. As for the Bollinger Bands, the price gains upward strength and moves out of the upper band, so a strong trend continuation can be expected. In conclusion, we think the market will be bullish as the pair is testing the 0.9836 resistance. The rising RSI also reflects bull signals.
Resistance: 0.9836, 0.9921, 0.9986
Support: 0.9666, 0.9551
GBPUSD (4-Hour Chart)
The GBP/USD pair advanced sharply on Monday, gaining positive traction and recovered strongly towards the 1.1420 mark as investors assess UK Chancellor Hunt’s fiscal statement. At the time of writing, the cable stays in positive territory with a 1.97% gain for the day. The modest pullback in the US Treasury bond yields and the risk-on mood both exerted some downward pressure on the safe-haven greenback, meanwhile lifting the GBP/USD pair higher. For the British pound, the new Chancellor of the Exchequer Jeremy Hunt is making an emergency statement this Monday on the mini-budget, which aimed to stabilize financial markets and restore investors’ confidence. He said that almost all tax measures announced in Sept 23 growth plan will be reversed, which eased fears of the UK market’s collapse. However, the bleak outlook for the UK economy should keep weighing on the cable amid the BoE’s prediction of a recession this year.
For the technical aspect, RSI indicator 67 as of writing, suggests that the upside is more favoured as the RSI rises towards the overbought zone. As for the Bollinger Bands, the price witnessed consistent buying and climbed towards the upper band, therefore a continuation of the bullish trend can be expected. In conclusion, we think the market will be bullish as the pair is heading to test the 1.1476 resistance. Sustained strength beyond that level could pave the way for a further near-term appreciating move.
Resistance: 1.1476, 1.1566, 1.1714
Support: 1.1162, 1.0797, 1.0968, 1.0392
XAUUSD (4-Hour Chart)
XAUUSD attracts some buying on the first day of a new week and reverses a major part of Friday’s downfall to over a two-week-low. The gold has stuck to its intraday gains since the first half of the European session and was currently priced at $1,663 as of writing. The US dollar struggles to capitalize on Friday’s strong intraday positive move and meets with a fresh supply on Monday amid a modest pullback in the US Treasury bond yields. A weaker greenback offers some support to the dollar-denominated gold, though a combination of factors could act as a headwind and warrants caution for bullish traders. The markets have priced in a nearly 100% chance for another supersized 75 bps Fed rate hike move for the fourth consecutive meeting in November. The aforementioned fundamental backdrop suggests that the path of least resistance for gold is to the downside.
From the technical perspective, in the four-hour scale, the RSI 50 as of writing, supplying that the price turned out to be relatively stable. As for Bollinger Bands, the gap between upper and lower bands remains unchanged, and the yellow metal price was hovering around the 20-period moving average, indicating a mild move in the near term could be expected.
Key economic reports are due for release this week starting with the US Empire State and Philly Fed Manufacturing Index.
Several countries will also release their Consumer Price Index, including the UK, Canada, and New Zealand. Australia will release its employment figures and meeting minutes earlier in the week.
US Empire State Manufacturing Index (17 October)
In August 2022, the New York Empire State Manufacturing Index rose by 30 points to -1.5.
According to a recent survey of businesses, firms were not optimistic that business conditions would improve over the next few months. Analysts expect this month’s unemployment figure to come in at around -1.
New Zealand Consumer Price Index (18 October)
In the first quarter of 2022, the Consumer Price Index in New Zealand rose 1.8%. Analysts expect that CPI in New Zealand will rise another 1.7% for the second quarter of 2022.
Analysts predict that CPI in New Zealand will rise 1.6% for the third quarter of 2022.
Australian Monetary Policy Meeting Minutes (18 October)
The Reserve Bank of Australia (RBA) raised its benchmark interest rate by 25bps to 2.6%, surprising market analysts who had expected the central bank to increase the cash rate by 50 basis points.
Policymakers plan to raise interest rates further, with size and timing to be determined. The committee remains committed to its long-run goal of price stability and will continue to do so until that time comes.
UK Consumer Price Index (19 October)
In August of 2022, the Consumer Price Index in the UK rose 0.5% month-on-month, the smallest gain in seven months.
Analysts expect the figure to rise by 0.30% in September.
Canada Consumer Price Index (19 October)
The consumer price index in Canada fell 0.3% in August, the steepest monthly drop since April 2020. Analysts expect prices to remain unchanged in September.
Australia Employment Change (20 October)
The Australian labour market continued its upward trend in August this year, as employment increased by 33,500 to a new high of 13.59 million. The unemployment rate was at 3.5% in August.
Analysts expect that the Employment report for September will show an increase in jobs of 40,000, accompanied by a return to the unemployment rate of 3.4%.
US Philly Fed Manufacturing Index (20 October)
The US Philadelphia Fed Manufacturing Index fell from 6.2 in August to -9.9 in September.
Analysts predict that the index will fall again this month to -5.
U.S. stocks edged lower on the last trading day of the week. The Dow Jones Industrial Average lost 1.34% to close at 29634.83. The S&P 500 dropped 2.37% to close at 3593.07. The tech-heavy Nasdaq Composite slumped 3.08% to close at 10321.39. Equities reversed gains from Thursday’s turbulent trading as U.S. short-term yields soared. The benchmark U.S. 10-year treasury yield, once again, soared past 4% and was last seen trading at 4.022%.
Market turmoil resumed amid the major reversal in fiscal policy from the U.K. Prime Minister Truss has, for the second time, go back on her “mini-budget” policy, which originally slashed corporate tax increases planned by the previous administration, and has now decided to increase tax rates in only a few industries but those increases will not come until April 2023.
On Friday, JPMorgan Chase & Co. and Wells Fargo & Co. reported Q3 earnings results. While JPMorgan Chase saw revenue climb by 8.4% and net interest margin came in above market estimates, the bank saw a drop in investment banking fees, home lending, and corporate securities investment. Wells Fargo & Co., on the other hand, reported a revenue drop to $18.77 Billion, sliding 3.5% quarter over quarter; however, net interest income spiked 36% as interest rates increased over the course of Q3 and mortgage-backed securities were amortized at a lower rate.
Main Pairs Movement
The Dollar index rose 0.79% over the course of last Friday’s trading. The U.S. Greenback wiped away last Thursday’s losses as yields closed above 4% on Friday. Demand for the Dollar resumed amid a turbulent Gilt market and a broad market sentiment reversal.
EURUSD dropped 0.59% over the course of last Friday’s trading. The Euro fared worse against the Dollar as market participants come to grips with the soaring CPI data from the U.S. Short-term outlook on the Euro remains bearish.
GBPUSD lost 1.22% over the course of last Friday’s trading. The British Pound weakened as the Truss administration, once again, reversed course on their “mini-budget” policy. Gilt yields were slightly down, weakening the Pound.
Gold lost 1.3% over the course of last Friday’s trading. The non-yielding metal could not compete against the Dollar even though market sentiment took a sharp dive on last Friday. The soaring U.S. short-term interest rate expectations will continue to weigh on the yellow metal.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair declined lower on Friday, failing to extend its intra-day rebound and dropping towards the 0.9710 area after the mixed data from the US showed that Retail Sales remained virtually unchanged in September. The pair is now trading at 0.9736, posting a 0.41% loss on a daily basis. EUR/USD stays in the negative territory amid a stronger US dollar across the board, as the greenback rebounded back slightly towards the 113.00 area despite the retreating US Treasury bond yields. The stronger US consumer inflation figures released on Thursday reaffirmed market expectations that the Fed will continue to tighten its monetary policy at a faster pace, which should act as a tailwind for the greenback. For the Euro, the European Central Bank President Christine Lagarde said that the ECB’s Governing Council expects to raise interest rates further over the next several meetings as inflation in the euro area is far too high.
For the technical aspect, the RSI indicator is 50 figures as of writing, suggesting that the pair is struggling to gather bullish momentum as the RSI stays near 50. As for the Bollinger Bands, the price lost its upside traction and dropped towards the moving average, therefore some downside momentum can be expected. In conclusion, we think the market will be bearish as the pair is heading to test the 0.9735 support. Sellers could show interest if the pair falls below that support and confirms that level as resistance.
Resistance: 0.9836, 0.9921, 0.9986
Support: 0.9735, 0.9667, 0.9551
GBPUSD (4-Hour Chart)
The GBP/USD pair tumbled with 0.98% losses for the day and priced at 1.1205 as of writing since a combination of factors promoted aggressive selling on Friday. The British pound is pressured by the latest UK political developments, wherein reports confirmed that financial minister Kwasi Kwarteng has been sacked, making him the shortest-serving chancellor since 1970. This comes amid the emergence of aggressive US dollar buying, exerting more downward pressure on the cables. On Friday, British Prime Minister Liz Truss said that they have decided to keep the corporation tax rise and added that this would act as a downpayment on the medium-term fiscal plan. However, this move failed to help the pound find demand, as investors may lose their faith in the UK government. Furthermore, the strong US consumer inflation data released on Thursday almost confirmed the speculation that another supersized 75 bps rate hike at the next FOMC meeting in November, which is underpinning the greenback.
From the technical perspective, the RSI indicator figured 52, suggesting that the cables remained mild bullish momentum until RSI fell down below 50, we think the pounds would turned weak and confront some selling pressure. As for Bollinger Bands, the pair fell from above the upper band to around the 20-period moving average area, and the gap between the upper and lower bands became larger, which is a signal that the upside traction was weaker and when the price fell below the average support, the pair would witness some downside tractions.
Resistance: 1.1327, 1.1476, 1.1714
Support: 1.0956, 1.0797, 1.0632, 1.0387
XAUUSD (4-Hour Chart)
The XAUUSD extends its losses, while the greenback recovered some ground following Thursday’s US inflation report, which will keep the Fed’s pedal to the metal as traders brace for big rate hikes in November and December FOMC’s meetings. The gold was priced at $1641 as of writing. US equity indices opened in the red, portraying a negative sentiment, and high US T-bond yields support the US dollar, which weighs on XAUUSD. Meantime, a slew of Fed policymakers is crossing the newswires. They all clearly expressed that inflation is not cooling and unacceptable. The San Francisco Fed Mary Daly reiterated the need to get policy restrictive and foresees the Federal funds rate (FFR) to peak at around 4.5% – 5%, which now sits at 3.25%. Investors need to keep eye on next week’s US economic docket featuring the Philadelphia Fed Index, Industrial Production, and unemployment claims. Additionally, Fed speakers will continue to dominate the headlines.
From the technical perspective, the RSI indicator figured 35 as of writing, indicating that the gold was amid heavy selling pressure until the RSI fell below 30, an oversold area, then may attract some bargain hunters. As for Bollinger Bands, the pair fell below lower bands and the gap between upper and lower bands became larger, implying the downside trend would persist. If the price fell below the $1640 psychology level, then the bearish momentum would test the two-year low $1616 mark.
Resistance: 1680, 1712, 1725
Support: 1640, 1616, 1600
Economic Data
Currency
Data
Time (GMT + 8)
Forecast
NZD
CPI (QoQ) (Q3)
05:45
1.6%
AUD
RBA Meeting Minutes
08:30
CNY
GDP (YoY) (Q3)
10:00
3.4%
CNY
Industrial Production (YoY) (Sep)
10:00
4.5%
EUR
German ZEW Economic Sentiment (Oct)
17:00
-66.0
Written on October 17, 2022 at 12:54 am, by anakin
U.S. equities experienced a volatile trading session with the release of U.S. CPI data. The Dow Jones Industrial Average rose 2.83% to close at 30038.72. The S&P 500 gained 2.6% to close at 3669.91. The tech-heavy Nasdaq Composite climbed 2.23% to close at 10649.15. U.S. equities futures continued to rise after the bell as U.S. treasury yields retreated below their intraday high of above 4%.
U.S. CPI data came in above expectations at 8.2%, year over year; however, core inflation, which strips out food and energy costs, jumped to its highest level since 1982—suggesting a broad-based rise in prices. The risk-off sentiment during the early American trading session quickly reversed as market participants bought in after the initial steep drop.
Looking ahead, as the third-quarter earnings season approaches, market participants should brace themselves and expect lowered earnings and lowered forward guidance. However, the hit to earnings could be mild as the Fed’s tightening has yet to be fully reflected on income statements. The financial sector will kick off the Q3 earnings season with JP Morgan Chase, Wells Fargo, Morgan Stanley, and Citigroup set to release their earnings before today’s American trading session. September’s retail sales will be released at 8:30 (EST).
Main Pairs Movement
The Dollar Index lost 0.71% over the course of yesterday’s trading. The Dollar experienced a turbulent trading session with the U.S. CPI data release and the subsequent equity market rally. The weakened Dollar came after the Dollar index broke above 113. Respite for Dollar bears came after market participants decided to “buy the dip”, despite inflation continuing to run hot.
EURUSD gained 0.76% over the course of yesterday’s trading. The Euro-Dollar pair reversed its downward trajectory, but the Euro is still plagued by slowing economic growth and soaring energy costs.
GBPUSD soared 1.98% over the course of yesterday’s trading. Reports of the British government reversing its course on the mini-budget policy have acted as a tailwind for the Pound’s rise.
Gold lost 0.42% over the course of yesterday’s trading, despite a broadly weaker Dollar. The Dollar denominated metal’s drop came as short-term U.S. treasury yields spike above 4%
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD has gathered bullish momentum and climbed toward 0.9800 during the American trading hours on Thursday. The positive shift witnessed in risk sentiment causes the greenback to lose interest as a safe haven despite the hot September inflation report. US core CPI reached a 40-year high at 6.6% YoY, exceeding forecasts, cementing the case for further Fed tightening at November’s meeting. However, as sentiment shifted positively, US equities are trading in the green. In the Eurozone, the Bundesbank and Belgium’s central bank chiefs, Joachim Nagel and Piere Wunsch prompted the ECB for more interest rate hikes due to high inflation levels in the Eurozone. During the EU trading session, German inflation figures rose as expected but persisted at high levels, as shown by HICP at 10.9%, while German CPI remained at 10%.
From the technical perspective, the RSI indicator figures 57 as of writing, suggesting that the EURUSD would continue the upside tractions until RSI reach 70, an overbought level. As for Bollinger Bands, the pair is now priced above the upper band, and the gap between the upper band and the lower band became larger, indicating the bullish momentum could persist until the price fell back below the 20-period moving average.
Resistance: 0.9927, 0.9986, 1.0035, 1.0155
Support: 0.9664, 0.9551
GBPUSD (4-Hour Chart)
The GBP/USD pair gains strong positive traction for the second straight day on Thursday and builds on the previous day’s goodish rebound from a nearly two-week low. The bullish momentum lifts spot prices to a one-week high, though falter near the 1.1300 mark following the release of hotter US consumer inflation figures. The British pound gets a strong lift amid talks that the new UK government could reverse its vast tax cuts announced in the mini-budget in September. The intraday positive move, however, runs out of steam amid a strong pickup in the US dollar demand, bolstered by a stronger US CPI report and hawkish Fed expectations. Apart from that, the bank of England can still send a message by ratcheting up to a 75 bps hike in November. The pair was priced at the 1.134 level as of writing.
For the technical aspect, the RSI indicator figured 68, suggesting the bullish momentum could persist until the RSI indicator hit 70 and may slow down. As for the Bollinger Bands, the pound price broke through the upper bound, and the gap between the upper band and lower band became larger, implying the upside trend would persist until the price fell back to the Bollinger band area.
Resistance: 1.1485, 1.1715, 1.1853
Support: 1.0968, 1.0632, 1.0392
XAUUSD (4-Hour Chart)
The XAUUSD has dropped on the back of the main event for the week’s outcome in the US Consumer Price Index, gold was priced at the $1658 mark as of writing. Critical US CPI figured 8.2%, higher than the expected 8.1%, and core CPI reads 6.6%, also bigger than the forecast 6.5% level. Once again, hotter-than-expected US inflation numbers for both the core and headline measures are not seen as good news for the Federal Reserve or the US economy. It’s worth noting that inflation’s rising persistence suggests the Fed is unlikely to stop hiking preemptively, which points to a prolonged period of restrictive rates. In the meantime, the US dollar index shot to a high of 113.888 following the consumer data release, then confront heavy selling transactions and fell back to a low level of 112.530 as of writing. Overall, the gold price will likely prevail in a sustained downtrend.
From the technical perspective, on the four-chart scale, the RSI indicator figured 42, implying the yellow metal was sitting at a mild downside trend until the RSI indicator hit above 50, then it will attract some upside tractions. As for Bollinger Bands, the gap between the upper band and lower band became closer and the price is wander in the lower area, suggesting a slow bearish momentum weight on the yellow metal.
US equity fell on Wednesday, with investors bracing for Thursday’s reading on consumer prices. Producer Price Index figures of 0.4% on Wednesday showed prices paid to US producers rose in September by more than expected ahead of a key measure of consumer inflation due Thursday that’s set to return to a four-decade high. It’s also worth noting that on the corporate side, PepsiCo Inc. jumped the most in more than two years after lifting its forecast for the year on the back of better-than-estimated third-quarter profit as drink and snack sales buck inflation. Moderna Inc. surged after Merck & Co. said it would exercise an option to work in partnership with the biotech on a messenger RNA cancer vaccine.
In the Eurozone, a selloff in long-maturity UK debt gathered pace after the Bank of England damped hopes it would extend its bond-buying support into next week. The yield on 30-year gilts surged above 5%, nearing levels that just last month drew the central bank’s invention, before easing again after the BOE snapped up billions in its daily operations. Elsewhere, oil in New York dropped below $88 a barrel on slowdown fears, and OPEC trimmed projections for the amount of crude it will need to pump this quarter.
The benchmarks, the S&P500 slipped into the negative area in the final minutes of trading, capping six days of losses to close at the lowest level since November 2020 and surpassing the previous low on Sep. 30. Seven out of eleven categories stayed in the negative territory, as Utilities got the worst performance among all groups, tumbled with 3.42% losses on daily basis. The Dow Jones Industrial Average and the Nasdaq 100 were little changed on Wednesday. The MSCI world index fell 0.3% for the day.
Main Pairs Movement
The US dollar was little changed on Wednesday, failing to preserve its upside traction and flirted with the 113.00 area following the release of FOMC meeting minutes. Fed officials determined that they needed to adopt and maintain a more restrictive policy stance to fight elevated inflation. But once the policy had reached a sufficiently restrictive level, it would be appropriate to keep it there for a period of time. As for now, investors await US inflation data for fresh clues about future rate hikes.
GBP/USD surged sharply on Wednesday with a 1.20% gain after the cable refreshed its daily top above the 1.112 mark amid the latest emergency program. On the UK front, reports showed that the Bank of England might be willing to extend its purchases beyond Friday and provide a boost to the GBP/USD pair. Meanwhile, EUR/USD remained stable and capped below the 0.9710 level after European Central Bank President Lagarde’s speech. The pair was down almost 0.05% for the day.
Gold advanced with a 0.42% gain for the day after climbing higher to touch the $1,677 mark during the US trading session, as the less hawkish FOMC minutes hint to moderate the hiking pace and underpinned the dollar-denominated gold. Meanwhile, WTI Oil retreated further with a 1.70% loss for the day after dropping to the $86.5 area ahead of the key event of the week in the US CPI report, as higher interest rates and recession fears both acted as a headwind for the oil price.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair edged lower on Wednesday, failing to preserve its recovery momentum and remained under pressure below the 0.9700 mark ahead of the key FOMC minutes. The pair is now trading at 0.9692, posting a 0.12% loss on a daily basis. EUR/USD stays in the negative territory amid a stronger US dollar across the board, as the greenback gained momentum after the release of the US Producer Price Index and exerted bearish pressure on the EUR/USD pair. The US Producer Price Index rose 0.4% in September, above the 0.2% of market consensus. Meanwhile, the annual rate fell from 8.7% to 8.5%. Market participants await the FOMC minutes for new clues about the latest US Federal Reserve (Fed) monetary policy decision. For the Euro, the European Central Bank President Christine Lagarde said that the Governing Council has started discussions on quantitative tightening and further noted that the interest rate is the most appropriate tool in current circumstances.
For the technical aspect, RSI indicator 40 as of writing, suggests a neutral-to-bearish stance as the RSI head nowhere but stands below the mid-line. As for the Bollinger Bands, the price came under selling pressure and dropped towards the lower band, therefore the downside traction should persist. In conclusion, we think the market will be slightly bearish as the pair tests the 0.9677 support line. Technical indicators also consolidate within negative levels, reflecting the absence of directional strength.
Resistance: 0.9766, 0.9836, 0.9921
Support: 0.9677, 0.9551
GBPUSD (4-Hour Chart)
The GBP/USD erased two successive day losses and approached the 1.1125 level following the FOMC minute. The Federal Open Market Committee minutes of September’s meeting released that “Several participants noted that it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.” Which market regarded it as a relatively dovish comment, driving the cables surge with 50 points to a level above 1.1120. Apart from that, the Bank of England (BoE) accepted 2.3754 billion sterling of offers in the daily purchase operation of conventional long-dated gilts according to Reuters reported on Wednesday. The news suggested that the British Government could be contemplating a U-turn on the mini-budget that rattled financial markets have eased negative pressure on the sterling. However, in the macro view, the UK economy shrunk by 0.3% in the three months prior to September, according to NIESR GDP Estimate. This is a larger contraction than the 0.1% forecast, also a signal that the UK may confront a more severe recession.
For the technical aspect, RSI indicator 51 as of writing, suggests a bullish tilt in the near-term technical outlook as the RSI fell back below 50. As for Bollinger Bands, the gap between the upper and lower bands became smaller and the cable pricing broke through the 20-period moving average to the upper area. The bullish tractions would persist if the price stands firmly above the upper band level of 1.1146, then the bulls could challenge the 1.1366 resistance. On the contrary, if the price lost upside momentum, then the pound would test the 1.0958 support.
Resistance: 1.1366, 1.1485, 1.1715
Support: 1.0958, 1.0797, 1.0632, 1.0392
XAUUSD (4-Hour Chart)
The XAUUSD kept trading around the $1,670 mark as has been the case since the beginning of the European session, as it is moving sideways after US PPI and ahead of the FOMC minutes. Following the release of the US Producer Price Index (PPI), gold approached daily lows but it quickly bounced back to the upside. The PPI rose 0.4% in September, above 0.2% of market consensus. The annual rate fell from 8.7% to 8.5%. The US dollar gained some upside tractions after the figures, but just for a few minutes, continuing to wander in a range from 113.2 to 113.6 level. Most market participants were waiting for the FOMC minutes to shed light on the trajectory of US monetary policy. The document will trigger volatility if it contains surprises. The next FOMC meeting is in November and another 75 bps rate hike seems likely according to the current market price.
From the technical perspective, the RSI indicator fell below 50 as of writing, implying a bearish momentum in the near-term technical outlook. As for the Bollinger Bands, the price was hovering around the 20-period moving average, suggesting gold would move sideways ahead of any surprising transactions. The yellow metal was priced at the $1,670 mark as of writing, and bulls needed to challenge the short-term resistance at $1,680 to gain more upside traction. On the contrary, the bears needed to test the $1,665 support to attract more sales.
Resistance: 1680, 1700, 1725
Support: 1665, 1644, 1620
Economic Data
Currency
Data
Time (GMT + 8)
Forecast
USD
EIA Short-Term Energy Outlook
00:00
USD
FOMC Meeting Minutes
02:00
EUR
German CPI (YOY) (Sep)
14:00
10.0%
USD
Core CPI (MoM) (Sep)
20:30
0.5%
USD
CPI (YoY) (Sep)
20:30
8.1%
USD
CPI (MoM) (Sep)
20:30
0.2%
USD
Initial Jobless Claims
20:30
225K
USD
Crude Oil Inventories
23:00
1.750M
Written on October 13, 2022 at 12:01 am, by anakin
U.S. equities edged lower throughout yesterday’s trading. The Dow Jones Industrial Average, however, was able to edge slightly higher by 0.12% to close at 29239.19. The S&P 500 lost 0.65% to close at 3588.84. The tech-heavy Nasdaq Composite retreated 1.1% to close at 10426.19. The risk-off sentiment was driven by comments from BoE governor Andrew Bailey, who said the central bank would end its special support of the gilt market. Governor Bailey urged market participants to unwind positions they may not have the ability to maintain.
The benchmark U.S. 10-year treasury yield continued to edge higher and was last seen trading at 3.947%.
Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion. The bombing from Russia was sparked by the attack on the Crimea bridge last week. Escalating tensions between Russia and Ukraine continue to weigh on investing sentiment and global energy supplies.
On the economic docket, Britain is set to release its GDP figures during today’s European trading session, and the U.S. will release PPI figures during the American trading session today. The FOMC meeting minutes will be released during the latter part of the American trading session today as well.
Main Pairs Movement
The Dollar index gained 0.1% throughout yesterday’s trading. The Dollar has continued to gain traction ahead of the key PPI data release and FOMC meeting minutes release. Markets are now pricing in further tightening of 75 basis points by the Fed as inflation continues to run rampant.
EURUSD gained 0.08% throughout yesterday’s trading. The Euro-Dollar pair was able to maintain its intraday gains despite a broadly stronger Dollar. Economic data releases by the U.S., however, can once again send the pair lower.
Cable lost 0.82% throughout yesterday’s trading. The British Pound dropped as BoE governor Bailey’s comment on pulling back the emergency purchasing of Gilts. Today’s British GDP release will be closely observed.
XAUUSD lost 0.12% throughout yesterday’s trading. The precious metal fared worse against a strong Dollar.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair edged higher on Tuesday, witnessing some recovery momentum and flirted with the 0.968~ 0.974 area despite the dismal mood that dominated financial markets. The pair is now trading at 0.9762, posting a 0.66% gain daily. EUR/USD stays in the positive territory amid a weaker US dollar across the board, as the retreating US bond yields exerted bearish pressure on the greenback and lifted the EUR/USD pair higher. The Sentiment remains deteriorated amidst fears that global central bank tightening would slash corporate earnings while dampening the economic outlook, but a scarce macroeconomic calendar and US first-tier events scheduled for later in the week limit further volatility. The Euro, the currency is likely to remain under pressure amid the fierce Russia-Ukraine tussles which raise doubts about the economic health of the old continent.
For the technical aspect, RSI indicator 48 as of writing, suggests that the pair is regaining upside strength as the RSI rose sharply towards 50. As for the Bollinger Bands, the price witnessed fresh buying and crossed above the moving average, therefore the upside traction should persist. In conclusion, we think the market will be bullish as long as the 0.9677 support line holds. Additionally, technical indicators recovered from oversold readings and the case for recovery will be firmer if the pair extends gains above 0.9836.
Resistance: 0.9836, 0.9921, 0.9986
Support: 0.9677, 0.9551
GBPUSD (4-Hour Chart)
The GBP/USD pair surged on Tuesday, regaining upside momentum and refreshed its daily high above the 1.1160 mark in the US session following the outcome of the Bank of England’s gilt purchase operations. At the time of writing, the cable stays in positive territory with a 0.94% gain for the day. The US dollar trims a part of its intraday gains and turns out to be a key factor lending some support to the GBP/USD pair. For the British pound, the Bank of England announced earlier in the day that it intends to purchase index-linked gilts and reiterated that it stands ready to purchase up to 10 billion sterling of gilts each day until the end of the week. The announcement is acting as a tailwind for the GBP/USD pair today. Moreover, the latest news reported that the BoE accepted 1.957 billion sterling of offers in the first purchase operation of index-linked gilts.
For the technical aspect, the RSI indicator is 52 as of writing, suggesting the bullish tilt in the near-term technical outlook as the RSI has risen above 50. As for the Bollinger Bands, the price preserved its upside traction and climbed above the moving average, therefore a continuation of the bullish trend can be expected. In conclusion, we think the market will be bullish as the pair is heading to test the 1.1220 resistance. A four-hour close above that level could open the door for additional gains and favour the bulls.
Resistance: 1.1220, 1.1366, 1.1476
Support: 1.1023, 1.0797, 1.0392
XAUUSD (4-Hour Chart)
The XAUUSD price trims earlier losses and reclaims above $1680 as of writing, due to high US T-bond yields, alongside a strong US dollar, ahead of crucial US inflation figures to be released on Thursday, which could provide some clues regarding the need for Fed aggressive hikes. Even though yellow metal rebounded drastically, the market sentiment remains deteriorated amid fears that global central bank tightening would slash corporate earnings while dampening the economic outlook. The US 10-year Treasury bond yield is down by four bps but around year-to-date highs of 3.92%. The International Monetary Fund (IMF) cuts its forecast for the next year to 2.7% from 2.9%in July, almost 1% less than in January. Furthermore, the IMF said that the US would extend at 1% next year, unchanged from its previous forecast, but cut its outlook from 2.3% in July to 1.6%, which adds to fears about global growth.
From the technical perspective, the RSI indicator is from 30 to 45 as of writing, indicating a rebound in the near term could be expected till RSI fell back to below 30. As for Bollinger Bands, yellow metal rebounded back to the lower area of bands and kept bullish momentum to test the 20-period moving average of around $1688. If the four-hour chart closed above that level, the bulls could expect to challenge the month-high around $1723.
Resistance: 1688, 1723, 1761
Support: 1661, 1644, 1620
Economic Data
Currency
Data
Time (GMT + 8)
Forecast
GBP
BOE Gov Bailey Speaks
02:35
GBP
GDP (YoY)
14:00
2.4%
GBP
GDP (MoM)
14:00
0.0%
GBP
Manufacturing Production (MoM) (Aug)
14:00
0.2%
GBP
Monthly GDP 3M/3M Change
14:00
USD
PPI (MoM) (Sep)
20:30
0.2%
EUR
ECB President Lagarde Speaks
21:30
Written on October 12, 2022 at 12:50 am, by anakin
U.S. equities fell for the fourth straight day as growth fears and geopolitical risks weigh on market sentiment. The Dow Jones Industrial Average lost 0.32% to close at 29202.88. The S&P 500 shed 0.75% to close at 3612.39. The tech-heavy Nasdaq Composite dropped 1.04% to close at 100542.1.
Washington’s decision to further restrict China’s access to U.S. technology added sins of slowing chip demand worldwide. Market participants remain cautious ahead of the FOMC meeting minutes and CPI data, scheduled, respectively, to be released during the second half of the U.S. trading session on Wednesday and the U.S. trading session on Thursday.
The benchmark U.S. 10-year treasury yield has soared past 3.9% and was last seen trading at 3.955%.
The upcoming earnings season has been tainted by the relentless rate hikes by the Fed. JPMorgan Chase and Citigroup are among the big banks that will unveil earnings later this week. While economic data releases, so far this year, have brought great volatility to markets, the upcoming earnings season could be another bullet that will drag equities even lower.
Main Pairs Movement
The Dollar Index rose 0.38% throughout yesterday’s trading. Dollar demand resumed as bonds sold off and short-term interest rates soared. Trading at 113.17, the Dollar Index still has room above ahead of the key inflation data release on Thursday.
EURUSD retreated 0.43% throughout yesterday’s trading. The higher demand for the Dollar continues to weigh on the shared currency as market participants brace for another round of tightening by the Fed.
Cable lost 0.34% throughout yesterday’s trading. The British Pound fared worse against the Dollar as market sentiment turns risk off. Market participants will now turn their attention to the British average earnings index, scheduled to be released during today’s European trading session.
Gold slumped 1.5% against the Dollar as market participants for the Dollar outpaced Gold demand. As market participants prepare for another round of Fed tightening, Gold continues to stay on the backfoot as yield expectations rise.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair declined further on Monday, remaining under pressure and extended its decline for a fourth consecutive day near the 0.9680 level amid a risk-off market mood. The pair is now trading at 0.9701, posting a 0.41% loss daily. EUR/USD stays in the negative territory amid a stronger US dollar across the board, as another solid print from Nonfarm Payrolls last Friday continued to provide further strength for the greenback. The US Federal Reserve (Fed) is likely to maintain the aggressive quantitative tightening as the Nonfarm Payrolls report hinted at healthy job creation, therefore triggering the dismal market mood. For the Euro, the escalation of the geopolitical conflict continued to exert bearish pressure on the EUR/USD pair as Russia launched a massive attack which targeted the energy and communications infrastructure of Ukraine.
For the technical aspect, the RSI indicator is 35 as of writing, suggesting that the downside is more favoured as the RSI stays below the mid-line. As for the Bollinger Bands, the price remained under pressure and moved alongside the lower band, therefore the downside traction should persist. In conclusion, we think the market will be bearish as long as the 0.9735 resistance line holds. Additionally, technical indicators hover near oversold readings and the risk is also skewed to the downside.
Resistance: 0.9735, 0.9836, 0.9921
Support: 0.9664, 0.9551
GBPUSD (4-Hour Chart)
The GBP/USD pair edged lower on Monday, preserving its downside momentum and failing to stage a steady rebound despite the Bank of England announcing new support measures. At the time of writing, the cable stays in negative territory with a 0.44% loss for the day. The reports of Russia launching missile attacks on Kyiv and other cities in response to the Crimea bridge attack over the weekend have weighed on investors’ sentiment, which provided a boost to the US dollar and dragged the GBP/USD pair lower. For the British pound, the Bank of England announced a raft of new measures to smooth market functioning, including raising the limit of its government bond-buying scheme from £5B to £10B per day. But it seems like the additional support measures from BoE failed to lift the cable higher as concerns about the UK government’s fiscal policy and recession fears remained.
For the technical aspect, the RSI indicator is 35 as of writing, suggesting that buyers stay on the sidelines for the time being as the RSI indicator on the four-hour chart stays below 40. As for the Bollinger Bands, the price witnessed consistent selling and continued to drop towards the lower band, therefore a continuation of the bearish trend can be expected. In conclusion, we think the market will be bearish as long as the 1.12200 resistance line holds. On top of that, a steeper decline could be expected if the ongoing slide extends below the 1.0797 support.
Resistance: 1.1220, 1.1366, 1.1476
Support: 1.0797, 1.0649, 1.0392
XAUUSD (4-Hour Chart)
XAUUSD extends last week’s retracement slide from the $1730 mark region and continues losing ground for the fourth successive day on Monday, which tumbled to the $1667 mark as of writing. In the past week, Fed officials reiterated their commitment to bringing inflation to the Fed’s 2% target. On Monday, the Chicago Fed President Charles Evans said that he expected the Federal funds rate (FFR) to end at around 4.5% early in 2023, which FFR now sits at 3.25%, and then to remain around that level for “some time.” He sounds optimistic that the Fed could achieve a soft landing due to Fed projections of the unemployment rate hitting 4.4% by the end of the next year, while the Fed’s inflation measure to fall to 2.8% from August’s 6.2%. In addition, last week’s US Nonfarm Payrolls report figured more than forecast, further justifying Evan’s case for the Fed to continue tightening at a large size. The markets are now pricing in a greater chance of the fourth consecutive supersized 75 bps rate increase at the next FOMC policy meeting in November.
From the technical perspective, the RSI indicator was below 30, indicating the yellow metal was going to get into an oversold area. As for the Bollinger Band, the prices were breaking through the lower band and the gap between the upper and lower band was larger, showing that the gold would continue the bearish momentum, and test the lowest since October $1660 mark. Once the price fell below the $1660 mark, the next support would be a two-year low of $1615.
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