Markets Tread Cautiously: Euro Leads, Oil Retreats

Euro emerged as the frontrunner in today’s forex markets, establishing itself as the strongest performer. However, the overall momentum in the currency arena seems relatively restrained. Following closely behind Euro, Canadian Dollar is occupying the spot of the second strongest, with Sterling and Dollar not far behind. Contrarily, Swiss Franc, Yen, and Australian Dollar demonstrated softer dynamics.

European stock markets are showcasing a stable sentiment, with FTSE and DAX experiencing only mild losses. Across the Atlantic, US futures are indicating a lower open. However, absent any significant geopolitical shocks, investors are anticipated to reserve their major plays for the post-earnings period of tech giants Microsoft, Alphabet, Meta, and Amazon later this week. At the same time, US 10-year yield is gaining traction, and a resurgence to have another take on the 5% level is on the cards.

From a technical standpoint, WTI crude oil’s rebound from 81.77 is still in favor to continue as long as 85.67 support holds. Nevertheless, the structure of the rise argues that it’s a corrective move, as the second leg of the pattern from 95.50. Hence, while break of 9.107 will resume the rebound, upside should be limited below 95.50. Break of 85.67 will indicate the start of the third leg to 81.77 and below. Nevertheless, given the susceptibility of oil prices to geopolitical fluctuations, staying adaptable to evolving scenarios is prudent.

In Europe, at the time of writing, FTSE is down -0.42%. DAX is down -0.58%. CAC is flat. Germany 10-year yield is up 0.0302 at 2.923. Earlier in Asia, Nikkei fell -0.83%. China Shanghai SSE fell -1.47%. Singapore Strait Times fell -0.76%. Japan 10-year JGB yield rose 0.0301 to 0.874.

Gold and Silver consolidating last week’s gains

Following a robust rally last week, both Gold and Silver seem to be taking a breather, moving into a consolidation phase in today’s trading session.

Gold, in particular, seems to be encountering resistance around the much-watched 2000 psychological mark. But still, as long as 1907.99 support holds, bullish outlook is unchanged. That is, corrective fall from 2062.95 has completed with three waves down to 1810.26. Break of 1997.00 will resume the rise from there to retest 2062.95 resistance.

Meanwhile, Silver’s ascent last week was somewhat tempered compared to Gold’s. Nevertheless, the favored case is that corrective fall from 26.12 has completed with three waves down to 20.67 already. Further rise is expected as long as 22.26 support holds, to 25.00 structural resistance next. Firm break there will bring retest of 26.12 high.

Bundesbank’s monthly report paints a bleak picture of Germany’s economy

Bundesbank’s latest monthly report revealed a likely contraction in Germany’s real GDP during Q3, attributing this slump to dwindling foreign demand for industrial goods. Elevated financing costs have not only hampered investments but also stymied domestic demand, particularly in the construction and industrial sectors.

Despite these economic headwinds, German job market has shown resilience, with pronounced wage increases amidst declining inflation offering a silver lining. However, this positive spin has yet to translate into increased consumer spending. Data suggests that private households are opting for caution, channeling additional funds into savings rather than expenditure, a trend underscored by diminished real sales in the retail and hospitality industries.

Inflation dynamics in September offer a mixed bag. The report highlighted a moderate uptick in energy and food prices, whilst services experienced an above-average increase. Bundesbank anticipates a deceleration in inflation in the forthcoming months.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0571; (P) 1.0588; (R1) 1.0610; More…

EUR/USD recovers further today but stays below 1.0639. Intraday bias remains neutral and outlook stays bearish. On the downside, firm break of 1.0447 will resume whole fall from 1.1274 and target 1.0199 fibonacci level. On the upside, however, break of 1.0639 turn bias to the upside for 1.0764 cluster resistance (38.2% retracement of 1.1274 to 1.0447 at 1.0763).

In the bigger picture, fall from 1.1274 medium term top could still be a correction to rise from 0.9534 (2022 low). But chance of a complete trend reversal is rising. In either case, current fall should target 61.8% retracement of 0.9534 to 1.1274 at 1.0199 next. For now, risk will stay on the downside as long as 55 D EMA (now at 1.0684) holds, in case of rebound.

Economic Indicators Update