DAX 40 - German stock market remains under pressure
The day before, the Association of German Banks (BDB) published an updated forecast for the economic development of Germany, which turned out to be much worse than previous estimates released in the spring. The Association assumes that Germany’s Gross Domestic Product (GDP) will increase by 1.4% in 2022 (previously expected to grow by 2.2%), and consumer prices could add 8.0% this year and 6.2% in 2023. In addition, the forecast for Household Spending is also pessimistic, which could rise by 3.3% this year and then decline marginally by 1.2% next year.
On the daily chart of the asset, the price is trading within a Triangle pattern, approaching the support line. Technical indicators have already reversed to the downside and are strengthening the signal: fast EMAs on the Alligator indicator are moving away from the signal line, and the AO oscillator histogram, having moved to the sell zone, continues forming descending bars.
Support levels: 12370, 11900 | Resistancelevels: 12900, 13450
GBPUSD - Active decline amid the rhetoric of the British authorities
The key impact on the dynamics of the asset was made by the report of the new UK Secretary of the Treasury, Kwasi Kwarteng, who announced measures to stabilize the economic situation: also to support the payment of electricity bills, the situation with taxation caused special attention. The official noted that the government is working on a plan for a significant reduction in fees, for the implementation of which it will be necessary to raise an additional 72.0B pounds, and one of the ways the government announced to receive these funds is to reduce the amount of unemployment benefits, due to which the majority of the UK population now lives. After this statement, investors are actively redirecting their capital to other currencies, which may lead to the achievement of parity between the pound and the US dollar soon.
The trading instrument has left the boundaries of a long downward channel and, having broken the support line, is actively declining. Technical indicators maintain an increasing sell signal: the Alligator indicator’s EMA oscillation range expands, and the histogram of the AO oscillator forms downward bars.
Resistance levels: 1.08, 1.1214 | Support levels: 1.0276, 1
USDJPY - Bank of Japan started foreign exchange interventions
The Bank of Japan conducted the first foreign exchange intervention since 1998 to support the yen after the decision to keep interest rates at a very low level of –0.10%. Its value is unknown but judging by the movement on the stock exchange, it was a test operation to determine the “depth” of the market, but more serious steps may follow from the financial authorities, which will provoke new pressure on the USD/JPY pair. It is obvious that the key point for making a decision will be 145.00, upon reaching which the officials are likely to approve new interventions. It is quite logical that in the current situation, macroeconomic statistics faded into the background, but this morning, Service PMI in Japan was published, which in September rose to 51.9 points after three months of decline in a row.
The trading instrument is moving within the global uptrend, holding near the high of the year, around 145.9. Technical indicators keep a stable buy signal: the range of fluctuations of the EMA on the Alligator indicator is directed upwards, and the histogram of the AO oscillator forms bars well above the transition level.
Resistance levels: 144.55, 145.9 | Support levels: 142.30, 140.33
Weak Friday statistics acted as a driver of the instrument’s decline. The French Manufacturing PMI in September fell from 50.6 points to 47.8 points, and the Services PMI was 53.0 points. In turn, the Manufacturing PMI of the eurozone fell from 49.6 points to 48.5 points, which led to a correction of the Composite PMI from 48.9 points to 48.2 points.
The upward dynamics in the domestic bond market continues. Today, auctions will be held to place short-term bills, the rate on which may exceed the previous one. In turn, the popular 10-year bonds are trading at a rate of 2.597%, exceeding the 2.442% shown last week. Global 20-year securities continue to grow, and the rate on them exceeded the peak values of mid-summer at the level of 2.724%, amounting to 2.754%.
Quotes of the asset continue to show an active decline. Technical indicators strengthen the sell signal: fast EMAs on the Alligator indicator are moving away from the signal line, and the AO oscillator histogram, being in the sell zone, continues to form descending bars.
Support levels: 5700, 5500 | Resistance levels: 5835, 6125
USDCHF - the “bulls” intend to break out the 0.985 level
During the morning trading, the price of the USDCHF pair came close to the resistance level of 0.9850. Buyers are probably preparing to break through this mark and continue to grow with a target at the highs of May-June 2022. The growth of quotations is due to two factors: the strengthening of the US currency due to the increase in the interest rate of the US Fed (last week the regulator adjusted the value by 75 basis points to 3.25%) and the weakening of the euro, which also affects the currencies of neighboring countries, including the Swiss franc.
The USDCHF pair is trading in a long-term uptrend. The growth target is to update the highs of May-June 2022 at 1.004, the breakout of which will allow the instrument to continue the upward trend with a target at 1.0120. In turn, holding the resistance level of 0.9850 will lead to a price correction in the area of 0.965 – 0.96.
The mid-term trend is upward. Last week, market participants broke through target zone 2 (0.9762–0.9749), and the next growth target is zone 3 (0.9903–0.9890). The key trend support is shifting to 0.9733–0.9720. If the “bulls” test this zone as part of the correction, new long may be considered.
Resistance levels: 0.985, 1.004 | Support levels: 0.965, 0.96
Gold prices show a slight increase, retreating from their April 2020 record lows, updated the day before, and trying to consolidate above 1630 amid increasing uncertainty about the global economic outlook.
The pressure on the XAUUSD pair remains, as the market expects further tightening of monetary policy by global financial regulators. In particular, the US Federal Reserve may go for at least one more major interest rate hike before the end of the year. In turn, the Bank of England may hold an emergency meeting in order to correct the rate, although it was previously noted that the regulator plans to take a wait-and-see position until November.
Demand for contracts based on the precious metal continues to decline: this week, the rate of liquidation of transactions for sale significantly exceeds the statistics for purchases. According to the report of the US Commodity Futures Trading Commission (CFTC), last week the number of net speculative positions in gold decreased to 65.7 thousand from 97.3 thousand a week earlier. As for the balance of sellers and buyers, the “bears” still hold the lead in the positions of swap dealers, and their number is 150.801 thousand against 96.613 thousand for the “bulls”. This week, buyers again increased the number of contracts by 6.691 thousand, which is almost 10 times more than last week’s increase, while sellers reduced their positions by 21.070 thousand contracts, which is 4 times higher than the rate of liquidation last week.
Bollinger Bands in D1 chart demonstrate a stable decrease. The price range expands from below, making way for new local lows for the “bears”. MACD is declining keeping a weak sell signal (located below the signal line). Stochastic retains downward direction but is located in close proximity to its lows, which indicates the risks of oversold gold in the ultra-short term.
USDCAD - The trend in the pair has changed upwards
Statistics Canada published a report on retail sales, which reflected negative dynamics in nine out of eleven sectors, and in general, in July, the figure fell by 2.5% to 61.3B dollars (for the first time since the beginning of the year). Gasoline prices fell the most (by 14.2%), while demand for new cars was corrected by -0.6% and used cars by –1.7%. This week, no more important macroeconomic data from Canada will be released, so the USDCAD pair will continue to be under the full control of the US currency.
On the daily chart of the asset, there is an upward trend: the range of fluctuations of the EMA on the Alligator indicator expands upwards, and the histogram of the AO oscillator forms ascending bars in the buying zone.
Resistance levels: 1.374, 1.39 | Support levels: 1.36, 1.34
The current growth is seen as technical, as fundamental factors remain unfavorable for the cryptocurrency market. The tightening of monetary policy by the US Federal Reserve continues. Moreover, officials signaled the continuation of maintaining interest rates at high levels for several more years, which, in turn, strengthened the US currency against major competitors, including digital assets. According to investors, they have not become a reliable remedy for inflationary risks. The transition of the main Ethereum network to the Proof-of-Stake (PoS) proof algorithm did not support the position of ETH. However, market participants still hope that the upgrade will have a positive effect in the long term, as network performance has increased and energy consumption has decreased. However, experts believe that everyone who could and wanted to join the Ethereum community has done so, so for now, the growth in the popularity of the asset among users is not expected.
After the consolidation above 1375 (Murrey [3/8]), further growth will be possible around 1500 – 1520 (Murrey [4/8], Fibonacci correction 23.6%, the middle line of Bollinger bands). Quotes are unlikely to rise above this range, as technical indicators reflect a continuation of the downward trend: Bollinger bands are reversing downwards, and the MACD histogram stabilizes in the negative zone. The key “bearish” level is 1250 (Murrey [2/8]), which was already tested last week. If it consolidates below it, the downward dynamics may develop to 1125 (Murrey [1/8]) and 1000 (Murrey [0/8]).
The dynamics of the asset are affected by the continued release of oil from US reserve storage facilities. As noted in The Wall Street Journal, energy stocks fell last week to a minimum since 1984, reaching 427.0M barrels, and fell below commercial reserves held by US firms, which raises fears of experts ahead of the entry into force of the ban. for the import of Russian “black gold” by the EU countries from December 5. According to preliminary estimates, the market may lose up to 1.0M barrels per day, which will lead to a sharp increase in prices and have nothing to compensate for.
Despite the fall in quotations, the demand for contracts from investors continues to rise for the third week, reaching a value of 239.9K against 227.1K a week earlier. Such values were last recorded in 2016, during the first serious decline in oil prices to levels around 30 – 40 dollars per barrel, and at the current level of demand, there is no increase in asset quotes expected.
On the daily chart of the asset, the price is moving within a downwards corridor, declining towards the support line. Technical indicators maintain a sell signal: fast EMAs of the Alligator indicator are below the signal line and move away from it, and the AO oscillator histogram forms downward bars in the sell zone.
Resistance levels: 85.5, 92 | Support levels: 82.4, 76.8
Pressure on quotes is exerted by growing fears of a global recession, which are confirmed in macroeconomic publications and comments by official representatives of monetary regulators. In addition, investors are concerned about possible disruptions in oil supplies from Russia, as the country is under sanctions pressure, and the geopolitical risks associated with the escalation of the military conflict in Ukraine are only intensifying. Finally, the fact of the continued release of the energy carrier from the US reserve storage facilities contributes to the decline in “black gold”, which leads to a short-term increase in supply on the market. Inventories fell to a 1984 low last week to 427.0 million barrels, according to The Wall Street Journal. In addition, on Monday, the Organization for Economic Cooperation and Development lowered its forecasts for global economic growth: this year it may still be 3.0%, but next year it will drop to 2.2% instead of the 2.8% previously expected.
The American Petroleum Institute (API) report released the day before pointed to an increase in reserves by 4.15 million barrels. For the last reporting week, the report showed an increase in the indicator by 1.035 million barrels. Today, investors are waiting for the publication of similar data from the Energy Information Administration of the US Department of Energy (EIA).
On the daily chart, Bollinger Bands are steadily declining. The price range expands from below, making way for new local lows for the “bears”. MACD is preserving a weak sell signal (located below the signal line). Stochastic, having reached the zero level, reversed into the horizontal plane, indicating risks of the oversold instrument in the ultra-short term.
The cost of gas to consumers could rise by 60% in the fourth quarter, with a new high for electricity at 66.6 cents per kilowatt-hour, up 25.0 cents from the previous quarter, according to forecasts by Italian analyst Nomisma Energia. The supply of “blue fuel” from Russia was again under threat after reports were received of the destruction of three strings of gas pipelines of the Nord Stream system near the Danish island of Bornholm. According to representatives of Nord Stream AG, which is the operator of the project, critical damage has been recorded, the timing of the repair of which is still unknown. Meanwhile, experts predict a slowdown in the Gross Domestic Product (GDP) of Italy at least by two times, and the inflation rate is expected to be around 10.0%. Last month, energy prices in the country rose by 44.9% compared to 42.9% a month earlier, food prices rose by 10.5%, and durable goods by 3.9%. The Italian authorities have already allocated more than 50.0 billion euros to stabilize the economic situation, but it is obvious that this is not enough.
The trading instrument is traded within the global downward channel and has almost reached the support line. Technical indicators continue holding a sell signal: fast EMAs on the Alligator indicator are moving away from the signal line, and the AO oscillator histogram is forming new bars, being in the sell zone.
Support levels: 0.948, 0.93 | Resistance levels: 0.967, 0.986
Against the background of the possible imminent completion of the lawsuit by the US Securities and Exchange Commission (SEC) against Ripple Labs, the token price rose to five-month highs around 0.5548, after which it resumed its decline, which continues to this day. Now the quotes are close to the 0.4000-0.3906 support zone (the middle line of the Bollinger Bands, Murray [0/8]), the breakdown of which will open the prospect of a further decline to 0.3418 (Murray [-1/8]), 0.3200, 0.2930 (Murray [-2/8]). With a reverse breakout of 0.4395 (Murray [1/8], Fibo retracement 23.6%), the instrument is likely to return to 0.4883 (Murray [2/8]) and 0.5219 (Fibo retracement 38.2%).
Technical indicators do not give a single signal: the Bollinger Bands are reversing upwards, confirming the preservation of the short-term upward trend, but the Stochastic is directed downwards, and the MACD histogram is decreasing in the positive zone, not excluding the development of a decline.
USDJPY - The trading instrument is preparing to continue growing
The quotes are supported by the “hawkish” policy of the US Fed, aimed at combating inflation, which has reached 40-year peaks. Despite the fact that in August there was a slight decrease in the indicator from 8.5% to 8.3% in annual terms, officials intend to follow the course of tightening monetary incentives. In yesterday’s speech, the head of the Federal Reserve Bank (FRB) of St. Louis, James Bullard, stated the need for a consistent increase in the interest rate, stressing that the US Fed is already losing the confidence of investors and citizens due to the inability to overcome high inflation. He noted that the peak rate is possible at the level of 4.5%, after which it will remain high for some time to manifest an economic effect. In turn, the president of the Federal Reserve Bank (FRB) of San Francisco, Mary Daly, stated the need to reduce excessive demand, which only acts as a driver of consumer price growth.
The long-term trend is upward. After the correction to the level of 141.9, the USDJPY pair continued to grow and is currently trying to break out the resistance level of 144.8. If successful, the upward trend will continue with a target at 148.5.
The mid-term trend remains upward. Last week, market participants tested the key support of the trend 141.36–140.92. The zone was held, after which a new upward momentum began, the purpose of which is to update the local maximum in the area of 145.80. Then the quotes will be able to continue moving to the area of 147.77–147.29.
Resistance levels: 144.80, 148.5 | Support levels: 141.9, 139, 136
The European currency is falling, retreating after an active corrective growth the day before, when quotes retreated from record lows. The reason for the strengthening of the downtrend was mainly technical factors, as well as the prospect of foreign exchange interventions by regulators.
In turn, the news background remained quite pessimistic, which did not allow the “bulls” to develop an uptrend. In particular, Gfk Group’s Consumer Confidence Index, published yesterday in Germany, corrected from -36.8 points to -42.5 points in October. In addition, the index of Economic Expectations in Switzerland in September from the Center for European Economic Research (ZEW) fell from -56.3 points to -69.2 points.
The focus of investors today will be a block of data on the level of Consumer Confidence and Economic Sentiment in the euro area for September. Also, during the day statistics on the dynamics of inflation in Germany is expected to be released: the figure may accelerate sharply from 7.9% to 9.4% in September.
According to Bloomberg, the EU states intend to postpone the final decision on the issue of setting a price limit for Russian “black gold”. Earlier it was predicted that the amendments could be part of another package of sanctions against the Russian economy, which is likely to target specific sectors such as aviation, as well as affect the export of technologies for industry. In particular, it was not possible to obtain unanimous approval of all EU member states: among those who expressed disagreement, Bloomberg names Cyprus and Hungary. Against this backdrop, the region’s authorities are discussing other sanctions policy options against Russia, which include control over the supply of diamonds and a ban on the export of certain products made from steel and wood.
At the end of last week, the Swiss National Bank lifted the interest rate out of the negative zone. It raised it by 75 basis points, bringing it to 0.5% in response to inflation rising to 3.5%, recorded by statistics in August. Despite the measures taken, the regulator expects that the indicator will remain above 3% until the end of the year and will begin a gradual decline only in 2023. Due to high uncertainty in the global economy, officials have also adjusted their forecasts for GDP growth until the end of the year and now expect the figure to rise by 2% rather than 2.5%, as noted earlier.
The asset’s price is correcting within the lateral corridor, declining towards the lower border on the daily chart. Technical indicators hold a buy signal, which has somewhat weakened due to a downward correction: fast EMAs on the Alligator indicator are above the signal line, and the AO oscillator histogram has formed a down bar in the buying zone.
Support levels: 0.9745, 0.962 | Resistance levels: 0.9840, 0.9965
Crude Oil - Markets fear restrictions on oil imports from Russia
The quotes moved to corrective growth after it became known that the European authorities are intending to return to the issue of setting a maximum price level for the oil supply from Russia. Initially, such an initiative was not supported by all the states of the EU (Hungary and Cyprus were opposed), but yesterday, the head of the European Commission, Ursula von der Leyen, said that restrictions could appear in the new, already eighth package of sanctions against the Russian economy. The European Union also intends to limit the import of products to up to 7B euros and prohibit EU citizens from entering the management bodies of Russian companies, which is now quite common. Thus, investors fear that by December, the region will experience not only a shortage of gas, the supply of which has practically ceased after reports of the destruction of three pipelines of the Nord Stream system near the Danish island of Bornholm but also oil due to a “mirror” response to the introduction of sanctions by official Moscow.
On the daily chart, the price is moving within a downwards corridor, falling towards the support line. Technical indicators maintain a sell signal: fast EMAs of the Alligator indicator are below the signal line, and the AO oscillator histogram forms downward bars in the sell zone.
Resistance levels: 89.68, 97.1 | Support levels: 82.54, 76.2
DAX 40 - German stock market remains under pressure
Despite the fact that the leading stock indicators of the Eurozone showed strong growth in yesterday’s trading, the German market index was able to interrupt its global decline only briefly, and now the DAX 40 is correcting down, trading at 12140.
The upward dynamics was a reaction to the rhetoric of the President of the European Central Bank (ECB) Christine Lagarde, who announced an increase in interest rates at at least three subsequent meetings of the regulator. At the same time, the GfK Group published October data on the indicator of Consumer Confidence in Germany, which is the leading indicator. The value turned out to be the worst in the history of observations, dropping to -42.5 points from -36.8 points in September, which was the main reason for the negative dynamics of the DAX 40 index.
On the daily chart of the asset, the price is trading within the global descending channel, falling towards the support line. Technical indicators have been holding a sell signal for a long time: fast EMAs on the Alligator indicator are moving away from the signal line, and the AO oscillator histogram, having moved into the sell zone, continues to form downward bars.
Support levels: 11850, 11200 | Resistance levels: 12400, 13060
The release of the Cardano Vasil network update made it more scalable and improved the convenience of working with smart contracts but could not provide serious support to the positions of ADA. Experts identify two main reasons that led to pressure on the token.
Firstly, modernization was postponed for a long time. Investors managed to factor in the positive effect of it into the price, and, accordingly, after the activation of the quote, they began a corrective decline. A similar technical picture was observed earlier after the release of Cardano Shelley and Alonzo forks. The tightening of the monetary policy of the US Federal Reserve remains a long-term factor that puts pressure on the entire cryptocurrency sector: at the last meeting, the regulator again raised the interest rate by 75 basis points, bringing it to the range of 3.00–3.25%, and predicted its preservation for high levels over the next few years. Accordingly, the US currency may soon continue to strengthen against alternative assets, including digital ones.
The trading instrument fell below 0.4394 (Murrey [2/8]), which gives the prospect of further decline to 0.3906 (Murrey [0/8]), 0.3662 (Murrey [–1/8]). The key “bullish” level is 0.4638 (Murrey [3/8]), supported by the middle line of Bollinger bands, upon the breakdown of which it will be possible to resume growth to 0.4882 (Murrey [4/8]) and 0.5127 (Murrey [5/8]). Technical indicators reflect that the downtrend is continuing: Bollinger bands and Stochastic are reversing downwards, while the MACD histogram is increasing in the negative zone.
Resistance levels: 0.4638, 0.4882, 0.5127 | Support levels: 0.3906, 0.3662
This week, the quotes of the USDCAD pair updated the June 2020 high at 1.372 against the background of the strengthening of the USD, which was supported by the decisions of the US Fed officials to continue the tightening of monetary policy. The President of the Federal Reserve Bank of Atlanta, Raphael Bostic, believes that due to the lack of progress in reducing inflation in the USA, the regulator will have to pursue a more restrictive monetary policy, setting an interest rate in the range of 4.25% -4.5% by the end of 2022.
In addition, the correction of quotations for WTI Crude Oil to the levels of 75 - 80 dollars per barrel leads to a weakening of the Canadian currency, giving an advantage to the “bulls” in the USDCAD pair. Continuation of this trend will accelerate the upward dynamics of quotations, and one of the possible targets for purchases will be the level of 1.3870.
The long-term trend in the USDCAD instrument remains upward: after updating the June 2020 high in the area of 1.372, the target for long trades became the mark of 1.3870, if it is broken, the quotes may rise to the area of 1.41. The RSI indicator enters the overbought zone of the market, which signals to traders about a possible correction in the medium term. Buyers of the pair should take this fact into account and focus on closing long positions as the price approaches the next resistance level.
The mid-term trend is upward. Market participants broke out the target zone 1.3668-1.3644 this week. The next target is the zone 1.3919 – 1.3894. The key trend support is shifting to the levels 1.3606 – 1.3584. This zone was tested yesterday, which caused another wave of instrument purchases. The nearest target is the maximum of the current week in the area of 1.383.
Resistance levels: 1.387, 1.41 | Support levels: 1.36, 1.34, 1.336
Slight support for quotes at the end of the week is provided by macroeconomic statistics from Australia and China. The Chinese Manufacturing PMI from NBS in September increased from 49.4 points to 50.1 points, which was better than expected 49.6 points, but the Services PMI corrected from 52.6 points to 50.6 points, demonstrating decline more active than forecasts at the level of 52.0 points. Australian data indicated an increase in Private Sector Credit in August from 0.7% to 0.8% MoM and from 9.1% to 9.3% YoY.
In turn, the US currency is supported by macroeconomic statistics from the United States. The data released the day before confirmed the decline in the Annualized Gross Domestic Product (GDP) in the second quarter at the level of -0.6%. At the same time, Initial Jobless Claims for the week ended September 23 decreased from 209 thousand to 193.0 thousand.
Analysts at Danske Bank point to the upside potential of the Australian dollar quotes due to the limited supply of liquefied natural gas, as Australia is one of the world’s key producers of raw materials. At its September meeting, the Reserve Bank of Australia (RBA) adjusted interest rates by 50 basis points, and analysts are confident that there will be a similar increase next month, despite growing recession risks for the national economy. Given these factors, the Australian currency will continue to receive only minor support from the tightening of monetary policy by the regulator.
