Market Update – October 7 – Stocks Recover, USD Holds, Oil dips

• USD (USDIndex 94.25) holds at highs, Stocks recover and ADP beat as debt ceiling is likely to be extended to December. Biden & Xi to hold summit before year end, Oil dipped after surprise build in inventories.
• Yields eased a tad (10yr closed 1.5240%) now at 1.54% in Asian trades – Yields very much “on notice” following RBNZ. (30-yr at 2.14%). China remains closed.  Evergrande news – investor to go private , clock ticking.
• Equities moved higher into close.  USA500 +17.0 (+0.41%) at 4363 (but remains weak) USA500.F higher for 3rd day 4375.  Asian equities mixed.  VIX closed at 21.20 – trades lower  20.87 now.  
• USOil down from record highs $78.95 to $76.50 as inventories surprisingly rose by 2.3 million barrles.
• Gold slips on higher yields down to $1745 now back to $1760; 20-day MA $1765.   
• FX markets USD bid – EURUSD  1.1565 from 1.1525, Cable holds 1.3600, & USDJPY higher again at 111.35 from 111.85 yesterday.

European Open – The December 10-year Bund future is down -14 ticks, US futures are also lower. There was also some relief on the energy crunch in Europe and DAX and FTSE 100 futures are posting gains of more than 1%, outperforming versus US futures, which are also moving higher though, led by a 0.6% rise in the NASDAQ as tech-stocks are back in demand.

Today – US Weekly Claims, Challenger Job Cuts,  ECB Mins & BOC’s Macklem, Fed’s Wiliams.

Biggest FX Mover @ (06:30 GMT) AUDUSD (+0.33%) Rallied from  0.7225 lows yesterday to test 0.7300 now. Faster MAs aligned higher, MACD signal line & histogram trending higher & over 0 line, RSI 63 & moving higher. H1 ATR 0.0010, Daily ATR 0.0068.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Dollar Down, but Near 14-Month High Against Euro over ‘deafening’ Nat Gas Talk

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Dollar holds near 14-month high to euro on inflation fears

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King dollar not yet ready to abdicate, say FX strategists: Reuters poll

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Bitcoin rises 7.1% to $55,163

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T-Bill Distortions Are Deepening: Debt Ceiling Anxiety Tracker

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ADP up But it is the same story after all

A slightly better than expected ADP report has taken some of the bearish edged off of Wall Street futures.

But it is the same story with stagflation risks, multi-year highs on WTI oil, concerns over China, monetary policy tightening, uncertainties over the FOMC and Powell’s re-nomination, and US default fears. As expected, the RBNZ hiked rates to add to the bearish tone all around. China remained on holiday.

The JPN225 finished -1.05% lower. European bourses have plunged with the DAX down -2.2% and the UK100 -1.77% lower. U. futures are in the red with the USAdown -1.2%, the USA500 -1.1% lower and the USA30 off -0.94%. Treasury and European yields are 2 to 3 bps cheaper with the 10-year Treasury at 1.550% and the Bund at -0.168%, and the Gilt at 1.115%. Italy’s BTP is 5.5 bps higher at 0.912%. The JGB cheapened 1.2 bps to 0.072%. The EU promised swift action to prevent spiraling natural gas pries from stifling the recovery, but the bearish effects on growth and inflation expectations have rippled across markets. European data were weaker than expected today, with a larger than expected decline in German manufacturing orders, with Eurozone retail sales also rising less than hoped. Also, hotter Korean inflation exacerbated global inflation fears.

Howoever the highlight of the day was the ADP report as a key indicator of Nonfarm payrolls on Friday. US ADP reported private payrolls increased 568k in September, a little better than expected, but August was revised down to a 340k (was 374k) increase after July’s 326k gain. Employment in the service sector continues to pace the bulk of the gains rising 466k versus the prior 297k increase. Employment in leisure/hospitality led the month’s pick up, adding 226k, the best since the 363k pop in June. Jobs in education/health were up 66k, with professional business services adding 61k. Trade/transport employment increased 54k. Jobs in the goods sector rose an unusually strong 102k after the 42k August increase, nearly 3x the 3-month average of 38k. Manufacturing and construction jobs were up 49k and 46, respectively, also beating the prior several months.

The US DOllar was little changed following the ADP jobs report which revealed a better than expected rise in private payrolls in September. EURUSD sits near trend lows at 1.1550, while USDJPY is up a few points over 111.35. USDCAD rallied to 1.2648 highs into the US open, up from 1.2576 seen just after Tuesday’s close. The usual combination of a pullback in oil prices, along with risk-off conditions, which prompted safe-haven USD buying was behind the move higher. Since then, the pairing has pulled back to 1.2610, as the greenback edges off its highs overall. Equity futures continue to indicate a lower Wall Street open, while yields remain firmer but off their earlier highs.

The ADP report signals slight upside risk for Friday’s jobs data, though the ADP data remain an unreliable predictor of monthly payroll swings. Overall, the supply chain disruptions and price spikes have prompted mark-downs in NFP forecasts over the last 2 weeks, leaving a September nonfarm payroll estimate of 400k and a Q3 GDP growth estimate of 3.6%.

The payroll gain is above the recent lean 235k August rise, but below the 503k average thus far in 2021. The September workweek should seen at 34.7 that still leaves a solid 0.6% September hours-worked rise. Hourly earnings gain is seen at 0.3% and a jobless rate drop to 5.1% from 5.2%. A big portion of lower paid workers remain outside the labor force, leaving a smaller work force with longer workweeks, and a higher level of pay.

A solid has forecasted at 4.4% y/y increase in September despite the headwind from elevated comparisons. Growth in hourly earnings was gradually climbing from the 2% trough area between 2010 and 2014 to the 3%+ area up to the start of the pandemic. The underlying trend for y/y wage growth is likely well above the prior cycle’s peak once we move past distortions from base effects.

Claims improvement is moderating, vehicle sales plunged further on supply shortages, and both producer and consumer sentiment are falling from Q2 peaks.

Click here to access our Economic Calendar

Andria Pichidi 

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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A Wave of Bets Against the Pound Is Starting to Build

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IKEA to shift more production to Turkey to shorten supply chain

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USDJPY is approaching a pivot, potential for bounce!

Type:Bullish BouncePreference:Price is approaching our Pivot at 111.469 in line with 50% Fibonacci retracement and bullish trendline and has the potential to climb higher towards our 1st resistance at 112.083 which is a graphical swing high.Alternative Scenario:Price might dip towards our 1st support at 111.204 in line with 61.8% Fibonacci retracement.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/usdjpy-is-approaching-a-pivot-potential-for-bounce"
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DAX is on bearish momentum

Type:Bearish BreakoutPreference:Price has recently broke our Pivot at 14803.15 in line with 127.2% Fibonacci Projection. Price has the potential to dip even further to 1st support at 14600 in line with 161.8% Fibonacci Projection.Alternative Scenario:Alternatively, prices may climb to our area of 1st resistance at our big 15000 in line with bearish trendline and graphical swing low.

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EURUSD is on a bearish momentum!

Type:Bearish DropPreference:Price has been consolidating in a bearish channel and has the potential to dip further towards our area of 1st support at 1.15231 in line with 61.8% Fibonacci retracement and 161.8% Fibonacci projection.Alternative Scenario:Price could reverse to our 1st resistance at 1.15906 which is a graphical overlap.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/eurusd-is-on-a-bearish-momentum"
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Using RSI To Trade Trending Markets

All Hail The RSIThe Relative Strength Index continues to be one of the most popular technical indicators. The RSI, which is a momentum indicator (measuring the strength of prices moves) is used by beginner and professional traders alike and is renowned for its simple and effective signals. The indicator (shown below) essentially consists of a 14 period line which oscillates in a 0 – 100 range. There are two default thresholds plotted on the indicator ate 30 and 70. In its simplest form, when the 14 period line hits the bottom threshold, momentum is classed as oversold and the market is vulnerable to a reversal higher. When the indicator hits the upper threshold, momentum is classed as overbought and is vulnerable to a reversal lower.Basic RSI MethodTypically, the way that traders will use this indicator is to look to trade reversals as the indicator hits either the upper or lower threshold. This is a great strategy and is particularly useful when combined with some basic support and resistance analysis e.g looking to sell overbought signals as price hits resistance or looking to buy oversold readings as price hits support. This type of method works particularly well in range bound markets where price is rotating between two support and resistance regions.However, the RSI can also be incredibly useful in trending markets. Interestingly, many new traders often struggle to use RSI in trending markets, but this is typically because they look to use the same technique applied in ranging markets. However, when a trend is flowing, we need to slightly adjust the way we use the indicator and, in doing so, we can then unlock great trading opportunities.In the image above we can see the market selling off a double top formation. When price breaks through the neckline of the double top, the bear trend is in full swing. Now, typically traders would look to buy oversold RSI readings. However, because the market is trending, doing this will simply cause you to suffer many losing trades. Alternatively, looking to trade with the trend and looking to sell overbought readings will prove difficult seeing as the market rarely corrects strongly enough (during the middle of a trend) to allow for this. So, this is where we adapt our technique.Advanced RSI MethodSo, this is where we adapt our technique. Knowing that 0-50 on the RSI indicates bearish momentum and that 50-100 indicates bullish momentum, instead of looking for the indicator to move all the way up to the overbought level, in a bearish trend like this we can wait for the indicator to rise above the 50 level (you’ll have to plot this in yourself) and then sell as it crosses back below. These mini corrections can offer fantastic entries into fast moving markets and are only typically used by advanced RSI traders, meaning that you will be identifying plenty of unique entry points.Give It A GoSo, now you know a better way to use the indicator, try it out! and feel free to let us know how you get on in the comments section. The great thing about this method is that it can be used on all timeframes and for any instrument meaning it should suit all types of traders from scalpers through to set and forget traders.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/using-rsi-to-trade-trending-markets"
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Market Spotlight: NZDCAD Channel Break

NZDCAD Looking HeavyPrice action in NZDCAD currently is offering plenty of downside opportunities. Following the corrective grind higher over recent months, NZDCAD is now breaking through the bottom of the bull channel, taking out support at the .8751 level. With the retail community holding a more than 90% long position and with both MACD and RSI giving bearish readings, there is plenty of room for this move to develop further. Downside targets are .8631 and .8475.Key Data to WatchThe RBNZ rate hike overnight did little to inspire a rally in NZD and has instead seen the currency coming under heavy selling pressure. Canadian employment data at the top of the week will be the main focus now. Any upside beat for the releases will see the CAD rally extend further, creating more room for downside in the pair over the near term. The ongoing surge in oil prices looks likely to keep CAD supported in the near term and is also bolstering BOC tightening expectations.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-nzdcad-channel-break"
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