Daily Market Analysis By FXOpen

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US Government Shutdown: Assessing Economic Impact and Recession Risks

The recurring spectre of a government shutdown has once again loomed over the United States, prompting concerns about its potential economic consequences. The shutdown may occur this weekend unless lawmakers agree on spending levels and whether to give more aid to Ukraine. Economists and analysts are closely examining the situation, weighing the likelihood of a recession, and evaluating the resilience of the American economy in the face of this uncertainty.

The Longer the Shutdown, the Greater the Damage

A recurring theme has emerged from past government shutdowns: their duration directly correlates with the extent of economic damage.

A brief shutdown is unlikely to significantly impede economic growth or push the nation into a recession, as both Wall Street and the Biden administration economists contend. Historical evidence from previous government funding stoppages supports this assertion, revealing limited economic disruption during short-lived closures.

However, the narrative shifts when contemplating a protracted shutdown scenario. A sustained government shutdown has the potential to erode economic growth, potentially impacting President Biden's re-election prospects. This challenge would compound other economic headwinds anticipated in the final months of the year, including elevated interest rates, the resumption of federal student loan payments, and a possible extended United Automobile Workers strike.

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Gold Price Accelerates Lower, Crude Oil Price Dips

Gold price is moving lower below the $1,885 support. Crude oil price is now correcting gains and trading below the $92.00 support.

Important Takeaways for Gold and Oil Prices Analysis Today

• Gold price failed to clear the 1,915 resistance and moved lower against the US Dollar.
• A major bearish trend line is forming with resistance near $1,865 on the hourly chart of gold at FXOpen.
• Crude oil prices are now correcting lower below the $92.00 zone.
• There was a break below a key bullish trend line with support near $92.50 on the hourly chart of XTI/USD at FXOpen.

Gold Price Technical Analysis

On the hourly chart of Gold at FXOpen, the price struggled to settle above the $1,915 resistance. The price started a fresh decline below the $1,900 pivot level.

The price traded below the $1,885 support and the 50-hour simple moving average. It tested the $1,858 zone. A low is formed near $1,857.71 and the price is now consolidating losses. It is now struggling below the 23.6% Fib retracement level of the downward move from the $1,915 swing high to the $1,857 low.

There is also a major bearish trend line forming with resistance near $1,865. The next major resistance is near $1,870, above which the price could test the 50-hour simple moving average at $1,880.

The next major resistance is near the 61.8% Fib retracement level of the downward move from the $1,915 swing high to the $1,857 low at $1,892. An upside break above the $1,892 resistance could send Gold price toward $1,915. Any more gains may perhaps set the pace for an increase toward the $1,930 level.

Initial support on the downside is near the $1,858 level. The first major support is near the $1,850 level. If there is a downside break below the $1,850 support, the price might decline further. In the stated case, the price might drop toward the $1,832 support.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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US 30 Analysis: Dow Jones Finds Support

September is likely to be the second month in a row that the Dow Jones (US 30) stock market index declined. The last time this happened was... also in September, a year ago.

Important economic data was published yesterday:
→ According to a revised report released by the Bureau of Economic Analysis, US real GDP increased 2.1% year over year in the second quarter. This reduces the risk of recession.
→ The number of applications for unemployment benefits amounted to 204k for a week, which continues the downward trend that has emerged since June of this year.

Today, fresh data on the PCE inflation index will be published, it can provide evidence that inflation is slowly subsiding as long as the economy remains resilient.

More bullish arguments for displaying cautious optimism are provided by the Dow Jones index chart:

→ the price of US 30 has formed an inverted head-and-shoulders pattern (SHS);
→ this bullish pattern formed near the lower border of the descending channel — which indicates support from this line;
→ after Wednesday, when the bearish acceleration was noticeable, the price recovered — this is a sign that if there were panic sentiments, they have exhausted themselves.
→ On Thursday, the bears’ attempts to resume the decline failed, and Friday morning looks optimistic – during the Asian session the price exceeded Thursday’s high.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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The Price of Gold Drops Below $1,900

The decline in the price of the asset considered a safe haven was facilitated by rising bond yields, which are becoming more attractive for investment in a high-interest environment. According to top Federal Reserve officials, new increases are possible to achieve inflation targets.

At yesterday's low, the price fell below 1,860 per ounce for the first time since March 2023. Will the fall continue? The XAU/USD chart on the 4-hour time frame provides valuable information for thought.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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Watch FXOpen's 25 - 29 September Weekly Market Wrap Video

Weekly Market Wrap With Gary Thomson: Inflation, EUR/USD, S&P 500, OIL

Get the latest scoop on the week's hottest headlines, all in one convenient video. Join Gary Thomson, the COO of FXOpen UK, as he breaks down the most significant news reports and shares his expert insights.

• Inflation Still Dogs the Economy: What Are the Central Banks Doing About It?
• Market Analysis: EUR/USD Takes Hit While USD/CHF Surges
• S&P 500 Analysis: Price Reaches The Edge of Abyss
• Market Analysis: Oil Surges to a New High of the Year

Stay in the know and empower yourself with our short, yet power-packed video. Watch it now and stay updated with FXOpen.

Don't miss out on this invaluable opportunity to sharpen your trading skills and make informed decisions.

FXOpen YouTube


Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

#fxopen #fxopenyoutube #fxopenuk #fxopenint #weeklyvideo

 

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GBP/USD Struggles While EUR/GBP Eyes Increase

GBP/USD is struggling below the 1.2235 resistance zone. EUR/GBP is rising and might climb above the 0.8675 resistance.

Important Takeaways for GBP/USD and EUR/GBP Analysis Today

• The British Pound is showing bearish signs below 1.2235 and 1.2270.
• There is a key bullish trend line forming with support near 1.2160 on the hourly chart of GBP/USD at FXOpen.
• EUR/GBP is rising and trading above the 0.8660 zone.
• There is a major bearish trend line forming with resistance near 0.8675 on the hourly chart at FXOpen.

GBP/USD Technical Analysis

On the hourly chart of GBP/USD at FXOpen, the pair attempted a fresh increase above 1.2235. However, the British Pound failed above 1.2270 and started a fresh decline against the US Dollar.

There was a clear move below the 1.2235 support and the 50-hour simple moving average. The pair even traded below the 50% Fib retracement level of the upward move from the 1.2110 swing low to the 1.2271 high.

The pair is now showing bearish signs below 1.2200. On the downside, there is a key support forming near 1.2160 or the 76.4% Fib retracement level of the upward move from the 1.2110 swing low to the 1.2271 high.

There is also a key bullish trend line forming with support near 1.2160. If there is a downside break below the 1.2160 support, the pair could accelerate lower.

The next major support is near the 1.2110 zone, below which the pair could test 1.2050. Any more losses could lead the pair toward the 1.2000 support. On the upside, the GBP/USD chart indicates that the pair is facing resistance near the 50-hour simple moving average at 1.2200.

The next major resistance is near 1.2235. A close above the 1.2235 resistance zone could open the doors for a move toward 1.2270. Any more gains might send GBP/USD toward 1.2350.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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XAG/USD Analysis: Silver Price Quickly Drops by Approximately 7.5%

On Friday, silver was trading at USD 23.5 per ounce, but on Monday morning it dropped below USD 21.7 – a difference of 7.5%.

Fundamental influencing factors are not clearly identified, but it can be assumed that the sharp drop was facilitated by:
→ the fact that a shutdown of US government agencies was avoided, since the authorities reached a budget agreement – albeit a temporary one;
→ high yield on bonds;
→ at the end of the Q3, the long-term portfolios of large market participants were rebalanced.

Factors could put pressure on gold (it also shows a negative trend, falling below USD 1,850 per ounce for the first time since March of this year), and more volatile silver rushed after gold.

Technical analysis adds more information about the nature of the fall. In mid-July, we wrote that the price of gold had approached the upper limit of the long-term downward channel (shown in yellow), from which resistance could be expected.

However, the strength of demand was exhausted earlier, around the level of USD 25 per ounce, it turned out to be an unbearable barrier for the bulls, which is noticeable in the price action in July and August.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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Euro Analysis: ECB Cautions Against Rate Cuts Amid Inflation Battle

Luis de Guindos, the Vice-President of the European Central Bank (ECB), has firmly dismissed the notion of rate cuts as "premature" amidst the ongoing struggle to combat surging inflation. Speaking to the Financial Times, he cautioned that overcoming the final hurdles to return inflation to the target rate of 2 percent will be a formidable task.

The ECB's governing council has been grappling with the sharpest inflation increase in a generation. To address this, the bank has undertaken a record 10 consecutive deposit rate hikes, bringing it to an all-time high of 4 percent. Despite recent inflation cooling off to a two-year low, the ECB emphasised that the recent spike in oil prices to a 10-month high presents new challenges.

In a statement to the press yesterday, Luis de Guindos said, "We are on our way towards 2 percent, but we must monitor that very closely, as the last mile will not be easy. The elements that might torpedo the disinflation process are powerful."

In addition to oil, other factors such as rapid wage growth, a weakened euro, and continued strong demand for services could sustain high inflation rates. Eurozone inflation data released on Friday revealed a drop to 4.3 percent in the year to September, surpassing economists' expectations.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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Dollar Falls After Inflation Data Release

EUR/USD

The euro rose on Friday following the release of softer-than-expected US inflation data. The data showed that the price index for personal consumption expenditures (PCE), excluding volatile components of food and energy, increased 3.9% year-on-year in August, the first time it fell below 4% in more than two years. The Fed tracks PCE price indexes to achieve its 2% inflation target. The euro was up 0.10% on the day at USD 1.0578, but it was its worst quarter against the dollar in a year, down 3.08%. The immediate resistance can be seen at 1.0582, and a breakout to the upside could trigger a rise towards 1.0619. On the downside, immediate support is seen at 1.0491, a break below could take the pair towards 1.0441.

The price has broken through the upper boundary of the downward channel and may continue to rise.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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Economic Calendar: US Labour Market and ISM Manufacturing PMI Data, RBA and OPEC+ Meetings

The start of October brings plenty of macro data for traders to analyse as high inflation and low growth continue to weigh heavily on central bankers' and politicians' minds.

ISM Manufacturing PMI (17:00 GMT+3) from the States gets the ball rolling on Monday. It has been below 50 (signalling a contraction) for almost a year now, but the last couple of months have been better than expected. 47.7 is the analysts' estimate for this month, so anything above this could be bullish for the US dollar.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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META Analysis: Price Target Raised to $390

Last week, the Meta Connect event took place, where the following were presented:
→ new Ray-Ban Meta Smart Glasses with a camera and microphones, including for broadcasting on social networks. The price of the gadget is USD 299;
→ Meta Quest 3 virtual reality helmet priced at USD 499;
→ AI characters for social networks, as well as Meta AI chatbot.

Overall, the products were received favourably. And now analysts are making predictions about how this will affect the stock price. Thus, Truist Securities analyst Youssef Squali raised his target price to USD 390 per META share, expecting that:
→ revenue will increase by 21% year on year;
→ the company will receive many benefits through the implementation of AI (for example, Emu — an image generation model; Studio AI — a platform for developers that allows one to create new and customized AI).

Add to this that the increase in revenue should be facilitated by the company’s intention to offer a subscription fee of USD 14 per month for using Instagram and Facebook, which will allow one to disable advertising.

The daily chart of META stock, meanwhile, shows a mixed picture.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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EUR/USD Analysis: The Rate Updates Its Multi-month Low

Never in its history has the euro fallen for 11 weeks in a row against the dollar, but it happened. The minimum has been set for 2023.

The reason seems to be that in an environment where central banks are raising rates to combat inflation, the US economy appears to be favored. Yesterday's batch of news confirmed this:
→ US ISM Manufacturing PMI index turned out to be higher than expected (actual = 49.0; forecast = 47.8; previous value = 47.6).
→ In his speech at a roundtable in Pennsylvania, the Fed chairman said: “Lots of good things happen,” commenting on the strong labor market. Today, by the way, at 17:00 GMT+3 JOLTS data on the number of vacancies will be released, which can confirm the stability of the economy.

The attractiveness of USD is also affected by rising US government bond yields, as investors need dollars to buy them.

How long can the fall of the euro continue, which is already “settled” below the level of 1.05?

If the fundamental balance of power between the economies of Europe and the United States remains unchanged, the rate may reach the lower boundary of the bearish channel (shown in red).

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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Top 5 Stocks to Watch in October:

Bank on the Backfoot, No Thirst for Coca-Cola, Tech Giant Takes Dip and Electric Vehicle Volatility

October is here, and as the markets enter a new month, we take a closer look at five stocks that could be of significant interest to investors.

1) Bank of America

Bank of America stock has taken a dive over the past weeks and entered October on a low point. Down from the high of $29 on September 14 to the mid $26 range at the close of business on the first trading day of October, it is now at its lowest point in six months. Yesterday, Bank of America stated that capitulation is a likely event when discussing the possibility of big drawdowns in October, and the sentiment of investors is reflected in these reduced share values. The company's CEO has said this week that he believes there will not be a recession, therefore giving rise to some investor confidence across the US markets.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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The American Currency Resumes Growth

The beginning of October turned out to be favourable for continued growth in the US dollar. From the data published yesterday, it follows that in September, the US manufacturing business activity index (PMI) rose to 49.0 against the forecast of 47.7. The ISM manufacturing employment index for the same period also turned out to be positive: 51.2 versus 48.3. Add to this the hawkish statements of the FOMC members who have spoken in recent days, and we can observe another upward impulse on the greenback.

NZD/USD

For commodity currencies, the current week is extremely rich in important fundamentals. This morning, the Reserve Bank of Australia met, tomorrow, the RBNZ will announce its verdict on the rate, and on Friday, the US employment report will be released.

According to analysts' forecasts, the New Zealand regulator will leave the rate unchanged, which may put additional pressure on the NZD/USD pair. On the weekly timeframe, we are seeing a rebound from the important level of 0.6000. If the current situation does not change, we can expect a renewal of the March low of this year at 0.5860. We can consider cancelling the downward scenario only after a confident consolidation above 0.6050.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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EUR/USD Tumbles While USD/JPY Seems Unstoppable

EUR/USD remained in a bearish zone and declined below 1.0530. USD/JPY is again rising and might climb toward the 150.00 level.

Important Takeaways for EUR/USD and USD/JPY Analysis Today

• The Euro started a fresh decline below the 1.0530 support zone.
• There is a short-term bearish trend line forming with resistance near 1.0475 on the hourly chart of EUR/USD at FXOpen.
• USD/JPY climbed higher above the 148.00 and 148.75 levels.
• There was a rejection noticed near a bearish trend line at 150.15 on the hourly chart at FXOpen.

EUR/USD Technical Analysis

On the hourly chart of EUR/USD at FXOpen, the pair remained in a bearish zone below the 1.0650 level, as mentioned in the previous analysis. The Euro declined below the 1.0530 support zone against the US Dollar.

The pair even settled below the 1.0500 zone and the 50-hour simple moving average. A low is formed near 1.0448 and the pair is now consolidating losses. On the upside, the pair is now facing resistance near a short-term bearish trend line at 1.0475.

The next key resistance is near the 50-hour simple moving average and the 23.6% Fib retracement level of the recent decline from the 1.0617 swing high to the 1.0448 low at 1.0485.

A clear move above the 1.0485 level could send the pair toward the 1.0530 resistance. It is close to the 50% Fib retracement level of the recent decline from the 1.0617 swing high to the 1.0448 low. An upside break above 1.0530 could set the pace for another increase. In the stated case, the pair might rise toward 1.0615.

If not, the pair might resume its decline. The first major support on the EUR/USD chart is near 1.0450. The next key support is at 1.0420. If there is a downside break below 1.0420, the pair could drop toward 1.0380. The next support is near 1.0335, below which the pair could start a major decline.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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E-mini S&P 500 Falls to Lowest Since Early Summer

Job openings rose to 9.6 million in August, the highest level since April, the US Bureau of Labor Statistics reported yesterday. That's nearly 700,000 more than in July and well above the Dow Jones forecast of 8.8 million.

A strong labor market may indicate a growing economy, but why did E-mini S&P 500 futures fall to their lowest level since early summer? It's about the Fed's high rates.

A strong labor market makes the case for keeping rates high for longer to slow inflation to the 2% target. And high rates mean a decrease in the profitability of companies' businesses; accordingly, we see the development of bearish sentiment in the stock market. We wrote about this scenario in an analytical review on September 19, before the last FOMC meeting took place.

In addition, high Federal Reserve rates make bonds more attractive and portfolio managers, it can be assumed, are transferring capital from the stock market to bonds, as well as to cash (the dollar index hit a new high of the year yesterday).

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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Fed Policymakers Ponder Prolonged High Rates Amidst Inflation Dilemma

The US Federal Reserve's persistent strategy of increasing interest rates to combat inflation and subsequently maintaining them at elevated levels has sparked a contentious debate in Western financial markets. While US Federal Reserve officials emphasise the necessity of a restrictive monetary policy to rein in inflation and bring it down to the Fed's 2% target, there remains an underlying dispute regarding the potential for another rate hike later this year.

It's crucial to note that inflation in the United States has been relatively well-contained for over a year, a far cry from the double-digit inflation still plaguing certain regions in Europe. Nevertheless, central bankers' approach to monetary policy remains notably conservative.

One of the paramount concerns facing the US economy is its staggering national debt, which surpasses that of most Western economies. Surprisingly, despite this financial burden, the US dollar continues to exhibit strength, notably gaining significant ground against the British pound in recent weeks.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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Yen and Commodity Currencies Hit Annual Lows

Yesterday, one could observe a continuation of the upward momentum in the dollar. Good data on the number of open vacancies in the US labour market from JOLTS allowed the USD/JPY pair to update its annual maximum at 150.00. The USD/CAD currency pair has strengthened above 1.3700, and the AUD/USD pair is approaching last year’s extremes at 0.6200-0.6100.

USD/JPY

The American currency continues to hold its leading position in the first five-day trading period of October. But, since many pairs have reached important levels, corrective pullbacks from the main movements can be expected in the near future. Thus, the USD/JPY pair fell sharply yesterday after testing the psychological level of 150.00 and lost more than 250 points in just an hour. US dollar buyers very quickly returned the price above 149.00, but apparently, the range of 150.20-150.00 could become a serious obstacle to further growth of USD/JPY. A corrective downward pullback for the pair may be limited by recent extremes at 147.30-148.50.

Today at 15:15 GMT+3, we are waiting for preliminary data on employment in the US for September from ADR. A little later, the business activity index (PMI) in the US services sector for the same period will be released.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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WTI Oil Analysis: Price Falls 10% in Less Than a Week

In our article “Oil Analysis: Finally, A Bearish Reversal?” on September 21, we drew attention to emerging signs that the initiative was shifting to the bears. This was noticeable in the changes in the dynamics of impulses and corrections, as well as in the analysis of the interaction between trading volumes and prices.

Since then, the bulls were able to update the high of the year on September 28, but the price did not stay there for long, falling sharply in the following days. Three bearish candles formed on the chart, which confirmed the problems of the bulls, and the double top pattern (A-B) also became relevant.

Another principle of technical analysis that emphasized the dominance of supply over demand is that each upward move was approximately 2 times weaker than the downward move. This can be seen in the consistent structure characteristic of a bearish trend:

→ the C→D move is approximately 50% of the B→C bearish momentum;

→ the rebound from the median line of the ascending channel E→F is approximately 50% of the bearish impulse D→E;

→ the bounce from the (now former) support line 87.50 G→H is approximately 50% of the bearish momentum F→G.

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

 

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USD/CHF Analysis: Rate Rises to Its Highest in Six Months

This happened against the backdrop of rising US bond yields. Reuters writes that it is in the region of a 16-year high. It is reasonable to assume that big capital was balancing its defensive portfolio by selling the franc, considered a safe haven, and buying dollars to invest in American bonds, which also have high-quality status.

On July 13, we wrote that the franc could rebound from the lower line of the channel (shown in red). This was supposed to be facilitated by hawkish rhetoric from Fed officials and, as a result, the strengthening of the dollar.

However, now the situation has reversed. The USD/CHF rate expanded the range of a larger downward channel and reached its upper limit. It even tried to break out of it on October 3 (but without noticeable success).

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Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.