This week will bring several major economic indicators to watch out for, including the release of the US Non-Farm Employment Change, Unemployment Rate, and Average Hourly Earnings. 

The US JOLTS report for August and ISM Manufacturing PMI and ISM Services PMI will also be released.

Other crucial data releases include Switzerland’s Consumer Price Index and Canada’s Employment figures.

• Swiss Consumer Price Index data (3 October)

The Consumer Price Index in Switzerland increased 0.30% in August 2022 over the previous month. Economists are predicting that the index will increase by 0.2% in September.

• US ISM Manufacturing PMI (3 October)

The ISM Manufacturing PMI, a gauge of the health of the manufacturing sector in the US, held steady in August of 2022 at 52.8—the same level it registered in July. It is expected to remain around the same level in September at 52.8.

• RBA Rate Statement (4 October)

The Reserve Bank of Australia (RBA) has raised the cash rate by 50bps to its highest level since January 2015. It was the board’s fourth consecutive rate hike since May, with analysts predicting another increase this month. The move is aimed at bringing inflation down to the 2-3% range while keeping the economy stable. Analysts anticipate that the RBA will raise its benchmark interest rate by another 50bps at this month’s meeting.

• US JOLTS report (4 October)

The US Department of Labor and Statistics report on Job Openings and Labor Turnover Survey (JOLTS) stated that job openings increased by 199,000 to 11.2 million in July 2022. Analysts expect that job openings will remain at around the same level as forecasted.

• OPEC Meetings (5 October)

Oil prices have fallen since June 2022, and OPEC countries have been seeking ways to raise the cost. This month, talks on supply cuts will be a key topic at the organisation’s meetings.

• RBNZ Rate Statement (5 October)

In its August meeting, the Reserve Bank of New Zealand increased its official cash rate to 3.0%, which marks the highest level in seven years. The decision was based on forecasts that inflation would fall as fuel prices stabilised, with the bank estimating that inflation will only return to the target range by mid-2024 at the earliest. It also noted that monetary tightening would be necessary. Analysts are forecasting another 50bps interest rate hike.

• US ADP Non-farm Employment Change (5 October)

The US ADP Non-Farm Employment Change came in at 132,000 for August, down from 268,000 in July. Analysts expect the ADP Non-Farm Employment Change to rise by 135,000 for September.

• US ISM Services PMI (5 October)

The Institute for Supply Management’s Services Purchasing Managers’ Index unexpectedly jumped to 56.9 in August of 2022 from 56.7 in July, indicating a revival in services activity in the US. Analysts expect the ISM Services PMI to be around 56.5 this month.

• Canada Employment Data (7 October)

Canada’s unemployment rate increased to 5.4% in August of 2022 from the record-low of 4.9%, as the economy lost 39,700 jobs in the month. According to analysts’ forecasts, another 15,000 jobs will be lost in September, bringing the unemployment rate to 5.3%.

• US Non-farm Employment Change (7 October)

US average hourly earnings rose 0.3% in August, adding 315,000 jobs and increasing the unemployment rate to 3.7%, its highest level since February. According to the latest projections, this month’s average hourly earnings will rise by 0.3%, with 250,000 additional jobs and a 3.7% unemployment rate.

Dear Client,

Please note the adjustment on the following products due to the international holiday in October:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

US stocks tumbled on Thursday, suffering from heavy daily losses and plunged to the lowest since November 2020 as another group of Federal Reserve officials struck a hawkish tone on policy tightening. Federal Reserve (Fed) Bank of Cleveland President Loretta Mester cited on Thursday that they are not yet at a point where they could start thinking about stopping interest rate hikes, meanwhile San Francisco Fed President Mary Daly also said the central bank should curb inflation in a manner that avoids a difficult downturn. On the economic data side, US Real GDP contracted by 0.6% in Q2 and remained in line with the estimates.

In the Eurozone, tensions between the Union and Moscow over gas deliveries escalated after the suspected sabotage of the Nord Stream pipelines, which result in Germany’s relief package in response to higher gas and electricity prices. On top of that, today’s German Retail Sales data, which is expected to decline firmly by 5.1%, which be closely watched by traders as European Central Bank President Christine Lagarde is looking to hike interest rates by 125 basis points in the coming monetary policy meetings.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined on Thursday as the S&P 500 fell as much as 2.9% during Thursday’s session but trimmed losses as markets closed. The S&P 500 was down 2.1% on a dailyDow Jones Industrial Average also dropped lower with a 1.5% loss for the day. All eleven sectors in S&P 500 stayed in negative territory as the Utility sector and the Consumer Discretionary sector is the worst performing among all groups, losing 4.07% and 3.38%, respectively. The Nasdaq 100 meanwhile dropped the most with a 2.9% loss on Thursday and the MSCI World index was up 1.1% for the day.

Main Pairs Movement

The US dollar declined lower on Thursday, extending its downside momentum and remained under pressure near the 112 area despite Wall Street resuming its slump and trimming all Wednesday’s gains. The falling US Treasury bond yields were acting as a headwind for the safe-haven greenback. However, the fact that US central bank officials reiterated the need for higher rates should limit the losses for the US dollar.

GBP/USD surged on Thursday with a 2.09% gain after the cable refreshed its daily high above the 1.110 mark as a slight improvement in sentiment keeps most G8 currencies higher against the greenback. On the UK front, Prime Minister Liz Truss said that she was willing to take controversial decisions, doubling down on the economic plan. Meanwhile, EUR/USD also advanced for the second consecutive day and refreshed its daily high above 0.980 level amid US dollar weakness. The pair was up almost 0.80% for the day.

Gold was nearly unchanged with a 0.03% gain for the day after rebounding from a daily low that was touched during the European session, as the precious metal cheered the softer US dollar but failed to respect the market’s grim conditions. Meanwhile, WTI Oil retreated lower with a 0.37% loss for the day after retreating from the weekly top surrounding $82.50 the previous day.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD has continued to rise for the second straight day as the Dollar continues to retreat. However, the recent upward correction of the Euro is not due to a change in fundamental economic reasons, rather the Euro was able to advance due to fatigue from buying the Dollar. Economic data released from Europe has continued to paint a harsh outlook. The German consumer price index rose at an annual pace of 10.9%, and the EU economic sentiment indicator printed 93.7 in September, missing the 95 market expectation. U.S. GDP for Q2 came in in line with market expectations at -0.6%.

On the technical side, EURUSD has continued to move towards our previously estimated support level of 0.98. Consolidation should happen around this level as the EURUSD eyes recover above parity. RSI for the pair sits at 44.09, as of writing. On the four-hour chart, EURUSD currently trades above its 50-day SMA but below its 100 and 200-day SMA.

Resistance:  1.0011, 1.0055

Support: 0.98, 0.96

GBPUSD (4-Hour Chart)

Cable has continued to rise on the back of the upward momentum of the previous trading day. The British Pound was saved by the BoE’s announcement that it would begin purchasing long-dated Gilts at stable exchange rates. After falling to historical lows on the 26th, Cable has recovered more than 6.5%. The weaker Dollar over the past two days has also acted as a tailwind for the British Pound. However, the long-term economic outlook for Britain grows worse by the day due to, previously mentioned, the widening fiscal deficit and price impacts from its European neighbours. Long-term credit risk could cause financial turmoil in the U.K. should the BoE play its cards wrong.

On the technical side, GBPUSD has found support at our previously estimated support level of 1.053 and is heading towards the next level of support for the pair at 1.12. RSI for the pair sits at 62.48, as of writing. On the four-hour chart, GBPUSD currently trades above its 50-day SMA but below its 100 and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.08, 1.053

XAUUSD (4-Hour Chart)

The Dollar denominated gold rose more than 1.8% over the previous trading day. The non-yielding metal continues to find bidding as the Dollar weakens. Global markets continue to be extremely risk-averse as equity indices around the globe struggle. Geopolitical events happening around the globe have also acted as tailwinds for the precious metal. The U.S. 10-year treasury yield has fallen for the second straight day and is last seen trading at 3.72%. Much of the rise in Gold prices, however, should be attributed to the weakened Dollar. The non-yielding metal, despite being a traditional inflation hedge asset, has been proven to underperform under a rising interest rate environment; in fact, the idea of Gold being an inflation hedge tool only becomes true over a 50-plus year horizon.

On the technical side, XAUUSD has rebounded strongly off of our previously estimated support level of $1640 per ounce and is heading towards the next level of support at $1,660 per ounce. RSI for the pair sits at 41.4, as of writing. On the four-hour chart, XAUUSD currently trades above its 50-day SMA but below its 100 and 200-day SMA.

Resistance: 1695, 1724

Support: 1660, 1640

Economic Data

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

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US stocks rallied on Wednesday, regaining upside strength and ending their six-day slide after the Bank of England’s decision to stage a market intervention boosted UK bonds and tentatively calmed markets. The BOE decided to buy long-dated UK government bonds starting today to restore market conditions and later confirmed that it could buy just £1.025 billion in the emergency QE operation.

Therefore, the BoE’s decision supported the market sentiment and global markets enjoyed a break from the brutal selling that has gripped them since the Fed embarked on the most aggressive path of interest-rate hikes since the 1980s.

However, several US Federal Reserve officials lined hawkish, repeating the well-known message of another 75 bps coming up next. In the Eurozone, ECB President Christine Lagarde participated in a US-European GeoEconomics forum and said they would continue to hike rates in the next several meetings. Other ECB Governing Council members also openly favoured a 0.75% rate hike in the next meeting.

The benchmarks, S&P 500 and Dow Jones Industrial Average both advanced higher on Wednesday as the S&P 500 snapped a six-day rout and rose the most since early last month. The S&P 500 was up 2.0% daily the Dow Jones Industrial Average also climbed higher with a 1.9% gain for the day. All eleven sectors in S&P 500 stayed in positive territory as the Energy and Communication Services sectors are the best performing among all groups, rising 4.40% and 3.18%, respectively. The Nasdaq 100 meanwhile advanced with a 2.0% gain on Wednesday and the MSCI World index was down 0.1% for the day.

Main Pairs Movement

The US dollar declined sharply on Wednesday, failing to preserve its upside traction and dropped to a daily low below the 112.70 mark in the late US session after a positive turnaround in the global risk sentiment. But the downside for the US dollar seems limited amid the prospects for a more aggressive policy tightening by global central banks, including the Federal Reserve. The market focus now shifts to the German inflation data.

GBP/USD rebounded higher on Wednesday with a 1.42% gain after the cable touched a daily top above the 1.090 mark amid the Bank of England’s (BoE) efforts to cap the fixed income market. On the UK front, the Bank of England entered the bond market on Wednesday which aimed to stimulate the economy. Meanwhile, EUR/USD also staged a goodish rebound and refreshed its daily high near 0.974 level amid US dollar weakness. The pair was up almost 1.45% for the day.

Gold surged higher with a 1.91% gain for the day after climbing to a daily top above the $1,660 mark during the late US trading session, as a sharp pullback in the US bond yields weighed on the greenback and underpinned the safe-haven metal. Meanwhile, WTI Oil advanced higher with a 4.95% gain for the day after recovering towards the $82 area amid the risk-on market mood.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD rallied more than 1% over the previous trading day amid a broad-based Dollar sell-off. The short-term U.S. 10-year treasury yield retreated back 3.8% and is currently trading at 3.737%. Market participants rotated out of the U.S. Dollar into equities as equity markets rebounded off of fresh lows. All major U.S. equity indices rose more than 1%. A 75 basis point interest rate hike by the ECB is now being entertained as the E.U. continues to struggle with soaring inflation.

On the technical side, EURUSD has rebounded strongly off of our previously estimated support level of 0.96. Should the Dollar continue to weaken, EURUSD could head back above the 0.97 price region. RSI for the pair sits at 39.8, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  1.0011, 1.0055

Support: 0.9550, 0.9400

GBPUSD (4-Hour Chart)

Cable rallied 1.45% over the previous trading day. The decision by the BoE to restart its bond purchasing program to control the Pound’s recent freefall has allowed the Pound to rise against the U.S. Dollar. The BoE’s plan to purchase longer-dated bonds to stabilize its currency, however, has attracted many criticisms, including comments from the IMF. The short-term decision by the BoE continues to raise our previous concerns about the health of British credit. Further widening its credit deficit could put the British economy under tremendous stress; furthermore, members of the British Finance ministry have come forward to confirm that there are no plans to reverse the cancellation of its latest tax policy.

On the technical side, GBPUSD has found support just below our previously estimated support level and is now consolidating around the 1.08 price region. Short-term resistance for the pair stands at the 1.1 price region. RSI for this pair sits at 29.34, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.08, 1.053

XAUUSD (4-Hour Chart)

Gold rebounded more than 1.8% over the previous trading day. The precious metal saw a surge in price as the U.S. Greenback witnessed a broad-based sell-off. The non-yielding metal found momentum as market participants rotated out of the Dollar and into equities. The macroeconomic environment for the yellow metal, however, remains unchanged. While Gold bulls can find a day of breathing room and profit-taking space, the short-term upward movement of Gold does not suggest a break away from its recent downward trend. Market participants will be paying close attention to the U.S. GDP data, scheduled to be released during today’s American trading session.

On the technical side, XAUUSD rebounded strongly from our previously estimated support level of $1619 per ounce and is now trading above our higher level of support for Gold at $1660 per ounce. Note that $1,660 could change polarity and become a short-term resistance for Gold. RSI for this pair sits at 35.7, as of writing. On the four-hour chart, XAUUSD currently trades above its 50-day SMA but below its 100 and 200-day SMA.

Resistance: 1695, 1724

Support: 1619, 1600

Economic Data

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In the Eurozone, multiple leaks in Russia’s gas pipeline in the Baltic Sea raise concerns about the escalating energy conflict between Europe and Russia, which pushed European natural gas prices higher and exerted bearish pressure on investors’ moods.

US stocks declined on Tuesday, dropping for the sixth session and ending a volatile session lower as the fears of a worldwide recession keep leading the market sentiment.

The safe-haven US dollar continued to find demand after the Fed delivered a third jumbo hike and warned of more pain to come, meanwhile Federal Reserve’s James Bullard also added to a chorus of officials saying more rate hikes are needed and the risks to the economy remain elevated. Some US Federal Reserve officials tried to pour cold water into the dollar’s recent strength but failed despite Fed’s Charles Evans saying he was getting concerned about going too far, too fast with rate hikes.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Tuesday as the harsh central bank tightening programs sparked the S&P 500’s longest losing streak since February 2020. The S&P 500 was down 0.2% on a daily basis and the Dow Jones Industrial Average also dropped lower with a 0.4% loss for the day. Seven out of eleven sectors in the S&P 500 stayed in negative territory as the Consumer Staples sector and the Utility sector are the worst performing among all groups, losing 1.76% and 1.70%, respectively. The Nasdaq 100 meanwhile advanced slightly with a 0.2% gain on Tuesday and the MSCI World index was down 1.3% for the day.

Main Pairs Movement

The US dollar climbed higher on Tuesday, extending its previous rally and touched a daily high above the 114.40 mark during the US session amid the risk-off market sentiment. On top of that, the firmer US Durable Goods Orders and CB Consumer Confidence data also acted as a tailwind for the safe-haven greenback, as the US Durable Goods Orders declined by only 0.2% in August and US CB Consumer Confidence also improved to 108.00 for September.

GBP/USD rebounded slightly on Tuesday with a 0.43% gain after the cable recovered towards the 1.080 level amid the overnight special statement from the Bank of England. On the UK front, the BoE added that it is monitoring developments in financial markets very closely. Meanwhile, EUR/USD remained under pressure and finished the day right below the 0.9600 mark amid a risk-off market mood. The pair was down almost 0.15% for the day.

Gold rebounded with a 0.40% gain for the day after climbing to a daily top above the $1,640 mark during the European session, as some profit-taking witnessed in the US dollar earlier in the day has provided support to the safe-haven metal. Meanwhile, WTI Oil advanced higher with a 1.94% gain for the day after recovering towards the $79 area despite hawkish rhetoric from Fed officials.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD continued to fall for the second straight day despite efforts to recover above 0.96. The energy crisis continues to trouble the European economy; furthermore, with Russia expanding its aggression by the day, the spillover effect of the Russian-Ukrainian war will quickly take a toll on the whole European economy. On Wednesday, ECB President Christine Lagarde will participate in the Frankfurt Forum, and so will Fed Chair Jerome Powell. Both heads of central banks are expected to deliver a speech.

On the technical side, EURUSD has traded slightly below our previous estimated support level of 0.96. The pair is attempting to defend this support level, but with the U.S. Greenback gaining more demand by the day, we expect a lower support level for the pair at around 0.95. RSI for the pair sits at 32.08, as of writing. On the four-hour chart, EURUSD currently trades well below its 50, 100, and 200-day SMA.

Resistance:  1.0011, 1.0055

Support: 0.96, 0.94

GBPUSD (4-Hour Chart)

Cable, after sinking to historical lows on Tuesday, has recovered 0.43% by yesterday’s close. The broadly weaker Dollar across markets has allowed the British Pound to gain traction against the U.S. Greenback. The British Pound was also stimulated by the BoE’s, seemingly emergency, statement after the Pound’s plunge. The statement by the BoE stated that the central bank will intervene in the decline shall the British Pound continue to fall uncontrollably. Markets are still pricing in an  80% chance that the BoE will raise rates to 3.5% by November from 2.25%.

On the technical side, GBPUSD has rebounded from our previously estimated support level of 1.035. Short-term resistance for GBPUSD stands at around 1.08 and 1.12. RSI for the pair sits at 40.37, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.035, 1.000

XAUUSD (4-Hour Chart)

Gold found some breathing room on the 27th as the Dollar slowed its growth. Furthermore, as mentioned in yesterday’s report, the mobilization of Russia’s armed forces, riots in Iran, geopolitical and instability in the South China Sea have all contributed as a potential catalyst for astronomical upside potential for Gold. On the contrary, tightening by global central banks has eliminated any upward space for Gold save a catastrophic global geopolitical conflict.

On the technical side, XAUUSD has broken below our previously estimated support level of $1640 per ounce and is heading towards our estimated next level of support at $1600 per ounce. RSI for the non-yielding gold sits at 37.83, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1695, 1724

Support: 1620, 1600

Economic Data

US stocks declined on Monday, extending their recent slide and fell in a volatile session amid the fact that worldwide central bankers insisted on battling inflation at any cost. On the economic data side, US Durable Goods Orders and CB Consumer Confidence are taking centre stage on Tuesday.

The UK markets were in focus on Monday as the UK’s plan to lift its economy fueled fears that heightened inflation would push rates higher and ignite a global recession. Despite the Bank of England Governor Andrew Bailey’s repeated they would not hesitate to alter interest rates if necessary and added that they are closely monitoring financial markets developments, the comments did little to reassure traders who were waiting for a broader policy response.

In the Eurozone, investors are awaiting the European Central Bank (ECB) President Christine Lagarde’s speech, which will provide cues for likely monetary policy action ahead.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined on Monday as the S&P 500 ended yesterday’s session at its lowest level since December 2020 meanwhile the Cboe Volatility Index spiked past 30. The S&P 500 was down 1.00% daily and the Dow Jones Industrial Average also dropped lower with a 1.1% loss for the day. Ten out of eleven sectors in the S&P 500 stayed in negative territory as the Real Estate sector and the Energy sector are the worst performings among all groups, losing 2.63% and 2.57%, respectively. The Nasdaq 100 meanwhile dropped the least with a 0.5% loss on Friday and the MSCI World index was down 2.0% for the day.

Main Pairs Movement

The US dollar climbed higher on Monday, preserving its upside strength and touched the highest since 2002 above the 114.5 mark amid recession fears and rising interest rates. The Federal Reserve’s 75 basis point hike in interest rates and the promise of further increases as the central bank looks to quell inflation has underpinned the safe-haven greenback and pushed major pairs into fresh multi-year lows.

GBP/USD tumbled sharply on Monday with a 1.04% loss after the cable recovered slightly from the all-time low marked on Monday amid the pessimism surrounding the UK. On the UK front, British finance minister Kwasi Kwarteng announced the scrapping of the top rate of income tax and cancelled a planned rise in corporate taxes. Meanwhile, EUR/USD preserved its downside momentum and traded near a fresh two-decade low of 0.9549 amid US dollar strength. The pair was down almost 0.60% for the day.

Gold declined with a 1.29% loss for the day after dropping to the lowest in more than two years below the $1,623 mark during the US trading session, as the risk aversion keeps traders’ flows toward the greenback and weighed on the safe-haven metal. Meanwhile, WTI Oil retreated further with a 3.74% loss for the day after retreating from the $80.0 area amid concerns about a global economic slowdown.

Technical Analysis

EURUSD (4-Hour Chart)

The Euro sank against the Dollar on the first trading day of the week. The shared currency extended its decline from last week and is heading towards multi-year lows amid a strong Dollar. Risk-off sentiment across markets have allowed the Dollar to gain tremendous bidding at the start of the Asia trading session. A string of speeches by Fed officials is set to happen for this week, starting with Fed Chair Jerome Powell’s speech on Tuesday the 27th. The U.S. 10-year treasury yield has continued to rise as bonds sell off—yields have topped 3.8%, as of writing. The Fed’s most recent conference has delivered a clear message of reining in inflation at all costs. The U.S. PCE report, which is scheduled for September 30th, will be in focus as it is a favoured leading inflation indicator for the Fed.

On the technical side, EURUSD has once again traded towards our previously estimated support level of 0.96. The next level of support for EURUSD could form around 0.94 should the U.S. Greenback continue to gain strength. RSI for the pair sits at 37.96, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  1.0011, 1.0055

Support: 0.96, 0.94

GBPUSD (4-Hour Chart)

Cable tumbled on the first day of the new trading week. The British Pound witnessed a fresh historic low as the Pound sold off during the Asia and European trading sessions. Market participants dumped the Pound as news of Britain’s latest corporate tax reduction sparked concerns over the fiscal deficit of the British government. As mentioned in last week’s report, we see rising credit risk from Britain as the country continues to face significant growth challenges, while the BoE continues to hike rates; on the other hand, the British government has decided to run a further budget deficit to finance the private sector and subsidize energy costs for British residents. Members from the BoE and the Fed are scheduled for speeches throughout the week—starting with Fed Chair Jerome Powell on the 27^th.

On the technical side, Cable has broken below our previously estimated support level of 1.08 and is now consolidating around the 1.06 price level. Parity is now firmly in play for Cable as the Dollar continues to reach historical highs. RSI for the pair sits at 43.13, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.06, 1

XAUUSD (4-Hour Chart)

Gold slid more than 1% on the first trading day of the week. The Dollar denominated Gold could fare worse against the Dollar as market participants continue to demand the U.S. Greenback. As of writing, Gold has sunk to $1,624 per ounce, the lowest level since April of 2020. Some reasons contribute to the plummet of gold—hawkish central banks across the globe, rising yields on sovereign debt, and risk-averse market sentiment, which is typically a positive signal for Gold but market participants have favoured the U.S. Greenback over gold. However, as Russia begins their partial mobilization of its armed forces, Gold prices could see a surge should the war between Russia and Ukraine take a turn for the worse.

On the technical side, XAUUSD has broken below our previously estimated support level of $1640 per ounce. The next level of support for the non-yielding metal forms around the $1600 per ounce price level. RSI for the pair sits at 32.8, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1695, 1724

Support: 1620, 1600

Economic Data

US stocks tumbled sharply on Friday, coming under heavy bearish pressure and suffered daily losses amid the risk-off market sentiment and surging US dollar.

The UK’s plan to lift its economy fueled concerns about heightened inflation and added to fears of a global recession. Liz Truss’s new UK government delivered the most sweeping tax cuts since 1972 as the Bank of England is struggling to rein in inflation. Earlier in the day, the data from the UK revealed that the business activity in the private sector continued to contract in early September with the preliminary Composite PMI dropping to 48.4 from 49.6 in August, which came in below the market expectation of 49.

Furthermore, the Fed’s decision on Wednesday to lift rates by 0.75% and open the door for another 120 bps increase has also reignited US recession fears.

In the Eurozone, the Eurozone Manufacturing PMI arrived at 48.5 in September, which fell further into contraction in September and came in below the market’s estimations.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined on Friday as a selloff in the riskier corners of the market deepened amid the escalating fears of a global recession. The S&P 500 was down 1.7% daily and the Dow Jones Industrial Average also dropped lower with a 1.6% loss for the day. All eleven sectors in S&P 500 stayed in negative territory as the Energy sector and the Consumer Discretionary sector is the worst performing among all groups, losing 6.75% and 2.29%, respectively. The Nasdaq 100 meanwhile retreated lower with a 1.7% loss on Friday and the MSCI World index was down 2.1% for the day.

Main Pairs Movement

The US dollar surged higher on Friday, extending its intra-day rally and refreshing its 20-year highs above the 113.0 mark during the US trading session amid the risk-off market mood. The Fed’s aggressive tightening cycle and UK’s plan to bolster the economy both provided strong support to the safe-haven greenback as traders worries that Fed’s aggression would tip the US economy into a recession.

GBP/USD plummeted sharply on Friday with a 3.60% loss as the cable slumped to fresh multi-decade lows below 1.1050 level amid the risk-averse environment. On the UK front, UK Prime Minister Liz Truss announced the energy relief package for households and businesses to help slow inflation. Meanwhile, EUR/USD remained under pressure and plummeted to two-decade lows near the 0.970 mark amid the stronger US dollar across the board. The pair was down almost 1.50% for the day.

Gold declined with a 1.65% loss for the day after refreshing its two-year lows below the $1,687 mark during the US trading session, as the US dollar strength and higher US Treasury bond yields both exerted bearish pressure on the safe-haven metal. Meanwhile, WTI Oil retreated further with a 5.02% loss for the day after dropping to daily lows near the $78.0 area amid as traders expect that the oil demand would diminish following the US Federal Reserve’s decision to increase rates.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD has continued to drop lower as the U.S. Greenback regains demand. The Germany PMI, which was released during the European trading session of the 23^rd, revealed a lower figure compared to last month’s print. The lower PMI could be a warning sign for the E.U. economy ahead—slowing structural growth amid rising energy costs and rising inflation. The ECB raised interest rates in their September 14^th meeting, but markets are not reacting well to the hawkish actions of the ECB as purchasing activity in the private sector has entered a decline, while inflation has not seen a material decline. In contrast, while the Fed has hiked interest rates for the fourth time this year, U.S. PMI has risen to 49.3, compared to 44.6 in August, showing a robust private sector and still an expanding economy despite contractual monetary policies.

On the technical side, EURUSD has slumped below our previously estimated support level of 0.98. The fresh support level for EURUSD now forms at around the 0.96 price region. RSI for the pair sits at 43.33, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  1.0011, 1.0055

Support: 0.98, 0.96

GBPUSD (4-Hour Chart)

GBPUSD has dropped to below 1.09 and a new multi-decade low as the U.S. Greenback surged on the 23^rd. The U.S. PMI data, indicating 49.2, has shown signs of continual growth in the U.S. private sector despite contractual monetary policies. On the other hand, the BoE announced a 50 basis point interest rate hike on the 22^nd, while no economic data released from the U.K., so far, has shown an economy that could survive further interest rate hikes. Furthermore, while new Prime Minister Liz Truss has promised a subsidy package that would put a cap on energy bills, the fiscal budget of the U.K. has already been in deficit since early 2020. In addition, U.K. finance minister Kwasi Kwarteng has announced the cancellation of the planned increase of corporate taxes to 25%, to stimulate the private sector—again, this is running a wider fiscal deficit. Rising credit risk could bring parity into play as Q4 approaches. September 30th will be key for Pound Bulls as the U.K. will release its quarterly GDP figure.

On the technical side, GBPUSD has broken well below our previously estimated support level of 1.12. The next level of support for the pair sits near parity at 1.08. RSI for Cable sits at 29.53, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.12, 1.08

XAUUSD (4-Hour Chart)

The Dollar denominated gold has plunged over the last trading day. The surging Dollar exerted tremendous selling pressure throughout trading sessions on the 23^rd. Despite rising tensions in Eastern Europe and the South China Sea, Gold could not find demand as market participants try to find yields in other assets that will provide any type of yield. The better-than-expected U.S. PMI figure announced during the American trading session on the 23rd, sparked a further sell-off of Gold. The benchmark U.S. 10-year treasury yield has cooled off to 3.685% on the 23rd, after running beyond 3.7% on the 22^nd. On the economic docket, the U.S. is set to release GDP figures on the 29^th, and the U.K. is set to release GDP figures on the 30^th.

On the technical side, XAUUSD has dropped below our previously estimated support level of $1,660 per ounce and is heading toward the second support level of $1600 per ounce. RSI for Gold sits at 44.6, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1695, 1724

Support: 1640, 1600

Economic Data

This week will see a much lighter schedule of data releases compared to last week.

Some significant releases to watch out for include the CB Consumer Confidence and Core PCE Price Index in the US and the Gross Domestic Product in Canada.

US CB Consumer Confidence | 27 September 2022

The US Consumer Confidence Index rose to 103.2 in August 2022, up from 95.3 in July. According to recent forecasts, Consumer Confidence in the US will increase more to 104, indicating that consumers are confident in the stability of their income and thus may be more inclined to spend.

Canadian Gross Domestic Product | 29 September 2022

According to Statistics Canada, the Canadian economy expanded by 0.1% in June. The agency’s latest estimate for July has the economy contracting 0.1% m/m from the previous month.

US Core PCE Price Index m/m | 30 September 2022

The Federal Reserve Board’s monthly report on consumer prices states that the CPI for Core PCE in the US, which excludes food and energy, rose 0.1% in July from a 0.6% increase in June.

Core PCE prices are projected to increase 0.3% in August.