Technical weakness builds as markets turn lower

Frank Walbaum

Important news this week

Tue, 29th, 06:30 CET AU Interest Rate Decision.
Wed, 30th, 03:30 CET AU Consumer Price Index.
Wed, 30th, 14:30 CET US Core PCE Price Index.
Fri, 02nd, 14:30 CET US Nonfarm Payrolls.

Technical weakness builds as markets turn lower

The USD is moving sideways but starting to strengthen again, while equities continue to turn lower. Tech stocks are under increasing pressure, weighing on the broader market. Silver is particularly weak and gold is also coming under pressure, while oil remains soft as fading demand and lower geopolitical risk weigh on the market.
Attention this week is shifting toward the US labour market, with around 99,000 new jobs expected on Friday. While that would represent relatively modest job creation, a stronger-than-expected number could have a greater market impact given the current dollar strength and expectations around US monetary policy.

Market talk

ETH is the asset to watch as the market loses some short-term momentum. The chart still looks constructive from a technical perspective, but the weakness in the Nasdaq is an important headwind. At the same time, more than 87% of altcoins are reportedly already in a buying or euphoric phase. Such broad optimism can sometimes precede a correction, even if the longer-term fundamental outlook for crypto remains positive.
The RBA will also be in focus on Tuesday. Markets are pricing a move from 4.35% to 4.60%, while the central bank has recently highlighted persistent inflation risks and said further tightening could be necessary if those risks materialise.

Tendencies in the markets

Equities correcting, USD stronger, crypto weaker, oil sideways, metals weaker, JPY weak.

Author

Frank Walbaum

AUD/USD defends 0.7000 ahead of RBA on Tuesday

AUD/USD is defending 0.7000 at the start of a new week, trading near its lowest level since August 4 amid a bullish US Dollar. US yields hold near multi-year highs amid inflation risks from higher oil prices and rising bets on an October Fed rate hike. This, along with the US-Iran standoff, continues to underpin the safe-haven buck and weigh on the pair ahead of Tuesday's RBA policy announcements.

USD/JPY climbs back toward 158.00 after BoJ minutes amid firm USD

USD/JPY finds dip-buyers and reverses part of Friday's slide driven by speculation that authorities will step in again to prop up the Japanese Yen. However, the BoJ's dovish Minutes cap the JPY. Meanwhile, the US Dollar regains traction as the US-Iran standoff supports crude oil prices, fueling inflation fears and reaffirming bets for an October Fed rate hike. This further supports the pair, driving it back toward 158.00.

Gold sheds 3%, eyeing $4,100 on renewed US-Iran risks

Gold is falling hard at the start of a new week, targeting $4,100 for the first time in eight weeks. Firming October Fed rate-hike bets, along with oil-driven inflation risks, keep US bond yields elevated near multi-year highs, helping the US Dollar hold firm, particularly after Trump rejected Iran's truce offer. These factors weigh heavily on the bullion.

Zcash risks a decline below $1,500 as bullish momentum eases

Zcash price hovers below $1,550 on Monday, extending losses after a 4% decline the previous day. Institutional interest in the privacy coin holds firm, recording over $35 million in inflows last week, while retail speculation takes a hit, with ZEC futures Open Interest down around 10% in 24 hours.

Data back in the driver’s seat this week

Markets will look for fresh evidence of a hot US economy from this week as September figures start to flow in. Upside surprises in jobs data could take rate hike pricing for the October FOMC above 20bp. It’s not our baseline though, and we expect some stabilisation with modest downside risks for USD in the coming days. We expect a hawkish hike by the RBA tomorrow.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.