EURUSD
- EUR/USD Price: The EUR/USD pair is trading on the backfoot below the 1.1000 level during the early European session on Wednesday, pressured by the continued strength of the US Dollar (USD). The greenback remains buoyant after recent data releases and hawkish comments from Federal Reserve officials, keeping the EUR/USD pair subdued.
- ECB’s Statements: François Villeroy de Galhau, a member of the ECB Governing Council, hinted at a possible rate cut during his remarks on Wednesday. He highlighted the risk of weak economic growth and stated that “a decrease in ECB rates is very likely.” His comments suggest that the ECB might adopt a more dovish stance at its upcoming meeting, which would weigh further on the Euro (EUR).
- Weak European Data: European data releases have shown a tepid trend this week, reinforcing the view that the region’s economy is struggling to regain momentum. With the ECB set to make its next policy decision next week, market participants are bracing for a dovish tone, especially in the absence of any major pan-European economic data until then.
- US Labour Market: Federal Reserve (Fed) officials have indicated that a further weakening in the US labour market might be necessary to justify any aggressive rate cuts. This narrative has supported the USD and kept the EUR under pressure, as markets assess whether upcoming US data will validate the need for more easing or prompt the Fed to stay on hold.
- US Inflation Data: Traders will closely watch Thursday’s release of the US Consumer Price Index (CPI) for September, a key indicator of inflation trends. The CPI report could influence the Fed’s rate outlook and provide fresh directional impetus for the EUR/USD pair. A stronger-than-expected reading would likely boost the USD, pushing the pair lower, while a softer print might offer some reprieve for the Euro.
| SMA (20) | Slightly Rising |
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| RSI (14) | Falling |
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| MACD (12, 26, 9) | Falling |
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Closing statement: EUR/USD remains vulnerable below the 1.1000 mark amid a cautious market environment. Dovish expectations from the ECB, coupled with persistent USD strength, are likely to keep the pair under pressure. The upcoming US CPI release could be a pivotal moment, potentially setting the stage for the next major move in EUR/USD, depending on its impact on Fed policy expectations.
GBPUSD
- GBP/USD Price: The GBP/USD pair remains under pressure and struggles to build on its previous recovery, trading defensively below the 1.3100 level during early European trading on Wednesday. Despite the brief rebound attempt, the pair continues to lack bullish momentum, reflecting the broader weakness in the British Pound (GBP).
- BoE’s Dovish Outlook: The British Pound is experiencing relative underperformance as market participants grow increasingly convinced that the Bank of England (BoE) may accelerate its rate-cutting cycle. Expectations of earlier-than-anticipated rate cuts are putting a lid on the GBP's recovery prospects, as investors position for a more dovish BoE stance amid signs of an economic slowdown in the UK.
- USD Movements: On the other hand, the US Dollar (USD) remains resilient near a seven-week high touched last week, supported by diminishing expectations of aggressive easing by the Federal Reserve (Fed). The recent string of robust US economic data has dampened hopes for large-scale rate cuts, bolstering the USD’s appeal and keeping GBP/USD on the defensive.
- FOMC Meeting Minutes: Traders are exercising caution and refraining from making large directional bets ahead of the release of the Federal Open Market Committee (FOMC) meeting minutes later in the US session. The minutes will be scrutinized for clues about the Fed’s future policy stance, particularly after the recent shift in rate expectations. Any hawkish undertones could further support the USD and pressure the GBP/USD pair.
- US Inflation Data: Market participants will also turn their attention to the upcoming US Consumer Price Index (CPI) and Producer Price Index (PPI) data due on Thursday and Friday, respectively. These inflation figures will be crucial in shaping expectations around the Fed’s policy outlook and could set the stage for the next leg of directional movement in the GBP/USD pair. Stronger-than-expected inflation readings would likely reinforce the Fed’s cautious approach and push GBP/USD lower, while softer prints could offer the GBP some breathing room.
| SMA (20) | Rising |
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| RSI (14) | Falling |
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| MACD (12, 26, 9) | Falling |
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Closing statement: The GBP/USD pair remains vulnerable below 1.3100 because of the BoE’s dovish outlook and a stronger USD, with the immediate focus on the FOMC meeting minutes for short-term guidance. The upcoming US CPI and PPI data will be critical in determining the pair’s next directional move, making these events pivotal for traders looking to position around the GBP/USD pair. Until then, the pair is likely to remain confined to a narrow range amid cautious sentiment.
GOLD
- Gold Price: Gold prices remain under pressure, trading with a negative bias for the sixth straight day as the precious metal struggles to find a clear bullish impetus. The persistent decline is driven by shifting expectations around the US Federal Reserve’s interest rate policy, with markets now pricing in a reduced likelihood of aggressive rate cuts, which is weighing on non-yielding assets like gold.
- Fed Minutes: Later today, investors will turn their attention to the release of the minutes from the Fed’s September policy meeting. Market participants are looking for insights into the Fed’s views on the labor market, inflation dynamics, and the trajectory of future interest rate decisions. Any signs of a less dovish stance could exert further downward pressure on gold, given the metal’s sensitivity to interest rate expectations.
- Chinese Economic Concerns: Gold buyers are showing a lack of conviction amid ongoing concerns about China’s economic outlook. The absence of significant stimulus measures from the Chinese government has dampened sentiment and raised questions about the global demand outlook, further contributing to the bearish sentiment surrounding the yellow metal this week.
- Geopolitical Risks: Despite the overall negative bias, gold continues to attract some safe-haven demand on dips, as escalating geopolitical tensions between Israel and Iran heighten concerns about the conflict potentially expanding into a broader regional war. This geopolitical uncertainty could lend some support to the metal in the short term, as investors seek refuge in safe-haven assets amid the increasing risk of a wider confrontation in the Middle East.
- Fed Speeches: In the lead-up to the Fed Minutes, speeches from key Fed officials, including Fed Vice Chair Philip Jefferson and San Francisco Fed President Mary Daly, could offer additional trading incentives. Market participants will be looking for any indications that might shift the market’s current expectations for the Fed’s policy path, which could have an immediate impact on the direction of gold prices.
Closing statement: The gold price remains under pressure due to a more cautious Fed outlook, while concerns over China’s economic prospects have further weighed on sentiment. However, dip-buying amid geopolitical risks could offer some near-term support. The release of the Fed Minutes, along with speeches by Fed officials, will be pivotal for determining the next leg of movement for XAU/USD. Traders should monitor these events closely, as a less dovish Fed stance could keep the precious metal under pressure, while any unexpected dovish signals could provide relief for gold bulls.
CRUDE OIL
- Crude Oil Prices: West Texas Intermediate (WTI), the benchmark for US crude oil, is trading around $74.00 on Wednesday as investors scale back their war-risk bets. The easing of concerns over further escalation in the Middle East has alleviated fears of potential disruptions to global oil supplies, weighing on crude prices.
- Geopolitical Uncertainty: Despite the current softening, geopolitical developments continue to influence market sentiment. The possibility of Israel targeting Iran’s oil infrastructure in retaliation for Tehran’s recent ballistic missile attack could still lead to sudden spikes in crude prices. Any unexpected escalation in the region would reignite fears of supply constraints, which could quickly change the current bearish sentiment.
- US Crude Oil Inventories: The American Petroleum Institute (API) reported that US crude oil stockpiles surged by 10.9 million barrels for the week ending October 4, significantly exceeding market expectations. The large build-up in inventories indicates a weaker-than-anticipated demand environment in the United States, which is putting downward pressure on oil prices. Traders will now look ahead to the Energy Information Administration’s (EIA) official weekly report to confirm this trend.
- EIA Report: Following the sharp rise in crude inventories reported by the API, attention will now turn to the EIA’s official crude oil stocks data. Should the EIA confirm a similar build, it could signal a sustained oversupply situation in the US market, putting additional downward pressure on oil prices. Conversely, a surprise draw in inventories could offer some support to the market.
- FOMC Minutes: In addition to supply-side dynamics, crude oil traders are awaiting the release of the Federal Open Market Committee (FOMC) meeting minutes later in the day. Any indication of the Fed’s policy stance could impact the US Dollar and, consequently, oil prices, as a stronger Dollar tends to make USD-denominated commodities more expensive for holders of other currencies.
| SMA (20) | Falling |
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| RSI (14) | Rising |
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| MACD (12, 26, 9) | Rising |
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Closing statement: WTI crude oil is currently under pressure amid waning geopolitical risk premiums and rising US stockpiles. The immediate focus will be on the FOMC minutes and the EIA’s inventory report for further cues. If the EIA data confirms a large inventory build, it could signal a bearish outlook for oil in the short term. However, renewed geopolitical tensions in the Middle East could quickly shift sentiment and provide a bullish impulse. Traders should remain vigilant and monitor developments closely for potential volatility.
DAX
- Auto Sector: German auto stocks led the DAX lower on Tuesday, reversing Monday’s gains. Mercedes-Benz Group dropped by 2.13%, BMW by 2.03%, and Volkswagen by 1.43%. The decline was driven by renewed concerns over weakening demand from China, a key market for German automakers. Retail stocks were not spared either, with Adidas falling by 1.38%, further weighing on the index.
- China’s Stimulus: A lack of fresh stimulus measures from Beijing dampened global risk sentiment, despite mainland China’s equity markets showing some resilience. The Hang Seng Index, however, tumbled 9.41%, signaling investor dissatisfaction. Given Germany's heavy exposure to the Chinese market, these developments have a notable impact on the DAX, especially in the industrial and automotive sectors.
- German Industrial Production: The latest data showed German industrial production rising by 2.9% in August, reversing a 2.9% decline in July. Despite the positive monthly change, the broader outlook remains cautious, as economic challenges persist. The increase offered limited support to the DAX, given ongoing uncertainties around future production levels and the broader economic environment.
- German Trade Data: German trade figures were mixed, with imports declining by 3.4% and exports increasing by 1.3% in August, leading to a trade balance of 22.5 billion euros, which beat expectations. While the trade surplus indicates resilience in Germany’s export sector, falling imports point to subdued domestic demand and economic activity.
- US Economic Sentiment: In the United States, the RCM/TIPP Economic Optimism Index edged up from 46.1 in September to 46.9 in October, indicating a modest improvement in consumer sentiment. However, this had a limited impact on the outlook for US monetary policy, as expectations of a Federal Reserve rate cut in November remain muted.
| SMA (20) | Rising |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | Rising |
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Closing statement: The DAX was under pressure on Tuesday, primarily driven by losses in auto stocks amid demand concerns from China and a lack of supportive measures from Beijing. While German industrial production data showed a rebound in August, the overall economic outlook remains clouded by trade and growth uncertainties. With US consumer sentiment slightly improving but still fragile, the immediate direction for the DAX will hinge on external factors, particularly developments in China and broader market sentiment regarding the global economic outlook.