In Friday's (October 20th) Asian session, WTI crude oil oscillated narrowly, and it is currently trading at $89.0/bbl. Yesterday, WTI crude oil rebounded from lows (once touched 85.3), and it was in line with our expectations about the low prices. Investors who followed our instructions yesterday should have made profits of $3, and those who went short at 88.3 the day before yesterday could exit at 85.3 by also earning $3. Thus, $6 was earned in total for the past two days. We also explained that the oscillation is a result of the current situation, and investors should wait for a chance to buy low and sell high, instead of chasing the trend. The rise in oil prices yesterday was affected by the growing Middle East situation and the de-stocking. However, it was also because the Department of Energy could not sit still and planned to buy 6 million barrels of oil for the SPR. Therefore, a retracement may emerge in the hourly chart today when investors could buy in and build long positions. 

News: The U.S. Department of Energy said Thursday that it wanted to buy 6 million barrels of crude oil to replenish the SPR, by delivering 3 million barrels in December and 3 million barrels in January next year while continuing its program to replenish the emergency stockpile. 

Macro: Fed Chairman Powell demonstrated that inflation is still too high so the road to fighting it could be rocky and some time is needed, and the Fed is committed to bringing inflation down to 2% on a sustainable basis. To reach this goal, it may take a period of below-trend economic growth, as well as further weakness in labor market conditions. Additionally, Powell noted that rising yields in the bond market may mean that more rate hikes are not necessary.

Today's Focus: No important data, focusing on situations in the Middle East.

Yesterday, WTI depreciated to 85.3 after a decline and then rebounded tremendously to 89.4 by $4. Besides, the candlestick chart closed positively with a long lower shadow, and the daily chart has crossed through the key resistance level now at the middle band. Furthermore, the MACD has formed a golden cross, and it will probably test the upper band. Meanwhile, the bullish momentum from the 4H chart is releasing, but WTI is consolidating at the 1H chart. Thus, a consolidation will appear at small timeframes, and WTI crude oil should restart the appreciation in the U.S. session.  

Trading recommendations: Buy low and sell high. If WTI crude oil depreciates to 86.3, investors could go long with small positions and set the stop-loss at 85.8. To take profits, the first target will be at 89.3, where they can reduce the position size and move the stop-loss to breakeven, and the second target should be set at 90.3. Comparingly, if WTI crude oil rebounds to 90.3, investors could go short with small positions and set the stop-loss at 90.8. To take profits, the first target will be at 88.3, where they can reduce the position size and move the stop-loss to breakeven, and the second target should be set at 86.3.

Trading direction: Long

Entry price: 86.300

Target price: 89.300

Stop loss: 85.800

Support: 86.300/85.300

Resistance: 88.500/89.500

In a surprising turn of events, the UK's inflation figures for September outperformed market expectations, stirring speculations of another rate hike by the Bank of England (BoE). This unexpected development has led to increased market optimism and certain concerns. The headline UK inflation held steady at 6.7% year-on-year, matching August figures but surpassing the market's projected 6.6%. Meanwhile, month-on-month inflation showed an uptick at 0.5%, slightly above the expected 0.3%.

The Core Consumer Price Index (CPI) inflation stood at 6.1% year-on-year for September, which was marginally down from the 6.2% recorded earlier but remained above the expected drop to 6.0%. This steadfast core inflation has further fueled the debate on future monetary policies and interest rate hikes.

In the wake of this news, the Pound Sterling (GBP) demonstrated strength, with financial markets now pricing in a 50% chance of another rate hike by the BoE before the year's end. Exchange rates experienced notable shifts, with the Pound to Euro exchange rate climbing to 1.1540, while the Pound to Dollar exchange rate remained relatively steady at 1.2180.

Although the odds of another rate hike stand evenly poised, at around 50-50 according to money markets, the BoE is expected to maintain elevated interest rates to counter the lingering inflation. The recent inflation figures, however, might not be the sole determinant for a November rate hike. A cooling in wage pressures, as evidenced by the previous day's wage data, could contribute to a reduction in future inflationary pressures.

The financial market appears to have pre-empted the inflation release, seeking data that corroborates the narrative of the BoE wrapping up its rate hike cycle. The Pound's softened value might be indicative of this sentiment. Notably, while rising fuel costs have significantly contributed to the inflation surge, falling oil prices may soon alleviate this trend.

The Office for National Statistics (ONS) reported a mixture of impacts from various sectors, including restaurants, hotels, food and beverages, recreation, culture, furniture, and household goods. This diversity underscores the complex nature of the factors driving the inflation rate.

Economists are split on the future of inflation. Some expect a gradual increase in the coming months, with the headline rate of CPI inflation averaging around 4.5% in Q4 and 4.0% in Q1. These projections could significantly influence the BoE's decision on maintaining the Bank Rate at 5.25%.

Turning to the technical aspect, GBPUSD has been grappling with the 1.2200 level throughout the week, unable to establish a firm foothold above it. The presence of the 20-day Moving Average around this level suggests a crucial battleground. The lack of a strong bullish drive might partially be attributed to the ongoing strength of the US Dollar.

The pair has been confined to a 100-pip range between 1.2120 and 1.2220 this week. A breach above 1.2220 could potentially pave the way for an advance towards the descending trendline and resistance at 1.2310. Conversely, if GBPUSD breaks below 1.2120, it might trigger a retest of the psychologically significant 1.2000 level. The Middle East developments are poised to play a pivotal role in this context, as further risk-off sentiment could bolster the USD, complicating GBP's recovery efforts.

ENTRY PRICE : 1.21300

STOP LOSS : 1.22500

TAKE PROFIT : 1.20000

The New Zealand Dollar (NZD) is encountering headwinds as it navigates a complex landscape of economic factors. Deteriorating investor sentiment linked to the Chinese economy and surging global bond yields have cast a shadow over the NZD's outlook.

One major factor affecting the NZD is the concerning state of China's housing sector. In September, Chinese home prices experienced their most rapid decline in nearly a year, signalling subdued consumer sentiment in China. This downturn could have repercussions for New Zealand, as it is highly reliant on exports to China, particularly consumer-dependent products like milk and timber.

Adding to the concerns, China's largest private property developer, Country Garden, appeared perilously close to defaulting on its foreign debt. These developments have raised doubts about China's post-pandemic recovery. Defaults and falling property prices are affecting consumer sentiment in China, which, in turn, influences the demand for New Zealand exports.

Although there have been positive economic indicators emerging from China, the lingering issues in the country's property sector cast doubt on the likelihood of a robust sentiment rebound. As a result, the NZD's potential for a strong recovery remains constrained.

Rising global bond yields have added to the pressure on risk-linked assets like the NZD. Investors have been preparing for the U.S. Federal Reserve to maintain higher interest rates for an extended period. The U.S. ten-year yield has reached fresh cycle highs, intensifying the challenging environment for risk assets.

All eyes are on an upcoming speech by Jerome Powell, the Chair of the Federal Reserve. Powell's message regarding the potential duration of higher interest rates holds significant implications for currency markets. If Powell underscores the message that U.S. interest rates will remain elevated for an extended period, it could lend support to the U.S. Dollar. However, should he acknowledge the challenges posed by rising yields, it might impact expectations for a November rate hike and offer some relief to currencies such as the NZD.

The NZD's technical analysis reveals a bearish trend. Weekly support has been breached after multiple tests, indicating a robust bearish momentum. The outlook suggests a potential downward movement towards the daily support zone. A bearish flag pattern has emerged, indicating a bearish continuation. Traders may anticipate a corrective move towards the confluence zone, which includes the 50-61.8% Fibonacci retracement area and the broken weekly support.

In summary, the NZD is grappling with multiple challenges, from concerns about China's housing sector and rising global bond yields to the upcoming speech by Jerome Powell. The currency's path ahead will likely be shaped by how these factors evolve in the coming weeks.

ENTRY PRICE : 0.5870

STOP LOSS : 0.5950

TAKE PROFIT : 0.5600

The British Pound (GBP) has had a lackluster performance when compared to other major currency pairs against the US dollar, with only a slight gain of +0.43%. This subdued performance followed the release of UK inflation data.

Meanwhile, the USD/JPY pair has been navigating cautious waters, largely confined to a sideways trading range. Some attribute this cautiousness to concerns of potential intervention by Japan's Ministry of Finance, particularly around the 150.30 risk level.

From a technical analysis perspective, there are signs pointing towards a bearish reversal setup for the GBP/JPY pair.

One noteworthy factor contributing to this is the potential fatigue in the major uptrend that GBP/JPY has been riding since March 19, 2020. The currency pair is fast approaching a significant major resistance and inflection point at 187.30. To add weight to the bearish argument, there has been a recent bearish divergence in the weekly Relative Strength Index (RSI), indicating a weakening in the major upside momentum. This situation increases the likelihood of a multi-week corrective decline, possibly heading towards the support zone of 171.30/168.30, where the 200-day moving average coincides.

Zooming in on the short term, specifically the 1-hour chart, GBP/JPY appears to be forming a minor bearish reversal pattern known as a "Head & Shoulders." The crucial support level for this pattern is at 181.25. Several bearish signals have emerged, including breaching the 20 and 50-day moving averages. A pivotal short-term resistance stands at 182.95. If the price drops below 181.25, it may indicate a short-term impulsive decline, targeting immediate support levels at 180.40 and 179.70.

However, there's a bullish scenario to consider. Should the GBP/JPY pair successfully clear the 182.95 resistance level, it could negate the bearish outlook and open doors to retest the next intermediate resistance at 183.80. This level corresponds to minor swing highs seen in October 12 and September 15, 2023.

In summary, the GBP/JPY pair is displaying technical indications that suggest a potential bearish reversal. Both major and minor trends point towards a correction. Keep a close eye on the critical levels of 182.95 and 181.25, as they will be pivotal in determining the short-term direction of the currency pair. If you need more specific insights or have any questions, please don't hesitate to ask.

ENTRY PRICE : 179.00

STOP LOSS : 183.00

TAKE PROFIT : 171.00

During Friday's (October 20th) Asian session, spot gold oscillated and it is now trading at 1975. Yesterday, the performance of gold was in line with our expectations that the area between 1947 and 1953 would become a support zone if gold climbed above there. Gold did break through this range and surged to 1983. There were two main factors supporting gold's surge. On the one hand, the Middle East conflict has further signs of escalation. On the other hand, Fed Chairman Powell's speech implied that the pause in interest rate hikes would last longer, which boosted gold prices. We have also emphasized before, that if the war continues, the gold price will rise to 2000 later, and investors should keep a bullish view and go long. Now, the gold price stands in the key position, and investors must stay careful when chasing the rise, as gold has grown by 170 dollars from 1810 to 1983 in half a month. Such a huge increase should have priced in the future escalation of the war. Moreover, the gold has also reached the initial expectations, and the space above should not be large. Aggressive investors could still go long after a retracement, while currently, going short at highs should offer better profits.

Data: The U.S. initial jobless claims were 198,000 last week, while the expected number was 212,000 and the previous number was revised from 200,900 to 211,000. As of the week of October 7th, the weekly number of continuing jobless claims was 1.734 million people, while the expected number was 1.71 million people, and the previous number was revised from 1.702 million to 1.705. Along with the further deterioration of homebuyers' affordability, U.S. home sales in September were annualized at 3.96 million, falling to a new low since 2010. The median selling price of a home in September rose 2.8% YoY, the highest September price on record.

News: Fed Chairman Jerome Powell said as inflation remains too high, the road to fighting inflation may be bumpy and will take some time, and that the Fed is committed to bringing inflation down to 2% on a sustainable basis. To achieve this goal, it may take a period of below-trend economic growth, as well as further weakness in labor market conditions. In addition, Powell noted that rising yields in the bond market may mean that more rate hikes are not necessary.

Today's Focus: No important data, focusing on situations in the Middle East.

Gold went stronger yesterday, and it oscillated near 1850 after the Asian session started. Moreover, gold stayed in the range from 1947 to 1953 basically and finally surged strongly to 1983 in the U.S. and Europe Sessions. At present, gold faces a multiple-resistance area from 1983 to 1988, and it is impossible for it to cross through this area, especially the psychological level of 2000, until the emergence of bullish news. Gold may plunge further if the Middle East conflict eases. Therefore, investors should focus on the situation in the range from 1983 to 1988, and aggressive investors should go short with small positions at the proper time. It is vital to stop going long at the present level but wait for a significant retracement. Investors should watch but not trade unless a tremendous retracement appears.  

Trading Recommendations: Buy low and sell high. If gold retraces to 1953 today, investors could go long with small positions, and set the stop-loss at 1948. To take profits, the first target will be at 1965, where they can reduce the position size and move the stop-loss to breakeven, and the second target can be fixed at 1983. Nevertheless, if gold surges to 1983, investors could go short with small positions, and set the stop-loss at 1988. To take profits, the first target will be at 1965, where they can reduce the position size and move the stop-loss to breakeven, and the second target can be fixed at 1953.

Trading direction: Short

Entry price: 1983

Target price: 1963

Stop loss: 1988

Support: 1965.000/1953.000

Resistance: 1983.000/1988.000

After hitting a near one-month high, gold prices briefly consolidated and faced nominal selling as investors turned their attention to Fed Chairman Powell's speech later at the Economic Club of New York, which may provide clues about interest rate prospects.

However, the overall environment remains favorable for safe-haven gold. Since the outbreak of the Israeli–Palestinian conflict, gold has risen by about $100 and is showing signs of further increase as the situation worsens. A recent deadly explosion in a Gaza hospital resulting in hundreds of deaths has intensified an already heated situation, threatening further escalation of the conflict, which continues to drive traders to seek safety.

Nevertheless, as the market anticipates the Fed to maintain relatively high interest rates for a longer period, rising US bond yields have limited the gains in non-yielding gold. Additionally, a resurgence in demand for the US dollar prompted some profit-taking at higher levels, leading to a minor correction.

Gold has been on a steep upward trend since the rebound from the October low, and after a continuous week of gains, it has now crossed back above the 200-day SMA. While short-term oscillators suggest an overbought condition, the recent geopolitical tensions could provide further momentum to the recent uptrend.

If buying interest continues, the recent two-month high of $1,986 may cap the upside in gold prices. A breakthrough of this hurdle could see bulls testing the psychological level of $2,000.

On the other hand, bearish actions could lead prices back to the previous double bottom at the $1,920-$1,926 range, with the next support at $1,904, which coincides with the 50-day SMA. If it fails to hold at this level, gold prices may drop to the August low of $1,885. A breach of this level could pave the way for a retest of the gap at $1834.

Overall, gold still faces persistent upward pressure, which has pushed the price close to overbought levels. Nonetheless, the bullish momentum has not waned. In terms of trading strategy, buying the dips is preferred.

Trading Direction: Long

Entry Price: 1926

Target Price: 2020

Stop Loss: 1906

Valid Until: 2023-11-02 23:55:00

Support: 1929, 1922, 1913

Resistance: 1952, 1972, 1977