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US goods exports fell USD -3.6B or -0.2% mom to USD 174.2B in September. Goods imports rose USD 10.4B or 3.8% mom to USD 282.4B. Trade deficit widened from USD -94.2B to USD -108.2B, larger than expectation of USD -96.1B.

Wholesale inventories fell -0.1% mom to USD 905.0B. Retail inventories rose 0.8% mom to USD 824.3B.

Full US trade balance release here.

Market Picture

The crypto market cap rose by 4.7% to $2.4 trillion in the last 24 hours, supported by a surge in top coins. These are the market’s highest levels since late July. Back then, the market stalled around these levels and soon turned lower. This time, the trend is more bullish, as the market has been in an uptrend since early September.

With a gain of around 5%, Bitcoin is generally moving with the market, behind Ethereum’s 5.5% rise, Doge’s 16% jump and Bitcoin Cash’s 10% rise. However, with a price close to $71K, BTCUSD is less than 4% below its all-time high. The first cryptocurrency has spent less than 72 hours in total above its current level.

Technically, Bitcoin has given several bullish signals, from the ‘golden cross’ on 27 October to breaking above previous highs and entering a Fibonacci extension pattern.

News Background

According to CoinShares, global crypto fund investments increased by $901 million last week, following inflows of $2.199 billion the week before. Investments in Bitcoin increased by $920 million, while Solana increased by $11 million, and Ethereum decreased by $35 million. Investments in multi-asset crypto funds increased by $2 million.

The ETF Store noted that spot Bitcoin ETFs bought nearly 977,000 BTC ($67 billion), representing nearly 5% of available issuance. If such accumulation rates continue, a repeat of BTC’s record highs is inevitable.

The Ethereum (ETH) to Bitcoin (BTC) exchange rate has hit a 3.5-year low. Since the beginning of the year, the leading altcoin has fallen 30.5% against the first cryptocurrency.
The crypto market cap has risen to $2.4 trillion, its highest since July. Bitcoin is close to its all-time high, and bullish signals are being observed. Global crypto fund investments have also increased, particularly in bitcoin.

Ethereum co-founder Vitalik Buterin cited volume bloat and the blockchain’s increasing complexity over time as some of the network’s main problems.

Bitcoin is cementing its status as a safe-haven asset against inflation, said billionaire Chamath Palihapitiya, founder of venture capital firm Social Capital. He believes the first cryptocurrency has the potential to replace gold as a rational economic safety net.

The bankrupt FTX has withdrawn its lawsuit against Bybit as part of a settlement that will generate about $228 million for future creditor compensation.

This week, five companies with market capitalisations exceeding $1 trillion are set to release their quarterly earnings:

→ Alphabet (GOOGL) on October 29
→ Microsoft (MSFT) on October 30
→ Meta Platforms (META) on October 30
→ Apple (AAPL) on October 31
→ Amazon (AMZN) on October 31

These results and profit forecasts from leading tech giants could fuel momentum for the Nasdaq 100 (US Tech 100 mini on FXOpen).

For now, technical analysis of the Nasdaq 100 (US Tech 100 mini on FXOpen) chart suggests the index is in a state of consolidation. Supporting this view:

→ The blue upward channel, based on key 2024 reversals (marked with bold lines), shows price movement near the channel median, indicating a potential balance between supply and demand.

→ A narrowing triangle formation (highlighted by purple lines, with the upper line aligning with the psychological level of 20,500) reflects a reduction in volatility, signalling consolidation in anticipation of the earnings releases.

→ A decline in the ATR indicator, reaching its lowest in approximately 3.5 months, also suggests subdued market activity.

If these tech earnings surprise to the upside, it’s possible the Nasdaq 100 (US Tech 100 mini on FXOpen) could break out of the purple triangle, setting its sights on a fresh all-time high, surpassing the previous peak from July 11.

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• Gold prices surge past $2750 per ounce on record inflows into gold funds. Gold ETFs saw a massive $3 billion investment last week, the second-largest increase ever.
• Year-to-date gains for gold are at 33%, setting the stage for its best year since 1979.
• Despite a strong US dollar, gold’s rally remains unfazed, with safe-haven appeal outweighing dollar strength amid rising global uncertainties. This trend looks set to continue.

Gold prices have smashed through the 2750 handle once more following a drop over the weekend. Following the weekend, Gold opened around 2732 before moving higher to within striking distance of the all-time highs.

The safe haven appeal appears to have returned following comments yesterday by Iranian authorities that they have the right to respond to the Israeli response over the weekend. The comments seem to have reignited the appetite of market participants for the precious metal.

Gold ETF flows are another reason that could explain the resilience of the precious metal since the weekend. According to data, gold funds received about $3 billion in new investments last week, making it the second-largest increase ever. This is more than three times the usual amount seen in recent weeks. This is continuing a trend which started during the summer months following a brief lull in demand.

The ETF and Gold fund flows have helped the precious metal maintain its gains for the year, which stands at around 33% YTD. This leaves the precious metal on course for its best year since 1979 at a time when Central Banks continue to increase their Gold holdings as well.

There is a barrage of US data on the docket this week which could affect Gold prices. However, recent data releases have proven that despite a strong US Dollar the Gold rally seems unfazed at present. Safe haven demand appears to be outweighing any sustained US Dollar strength as global uncertainties continue to pile up.

Technical Analysis Gold (XAU/USD)

From a technical analysis standpoint, Gold does need a daily candle close above the 2750 handle which has proved elusive thus far. A daily candle close above 2750 should embolden Gold bulls and facilitate a push toward the $2800 handle and print fresh all-time highs.

GOLD (XAU/USD) Daily Chart, October 29, 2024

Source: TradingView (click to enlarge)

Looking at the H4 chart below, the precious metal has closed above the 2750 handle twice bu failed to kick-on. Hence my thought process that a daily candle close above the psychological handle could assist bulls in pushing prices higher.

Immediate resistance rests at the most recent highs around 2758 before the 2775 and 2800 regions come into focus.

Conversely, a break back below the 2750 handle has to navigate support at 2738 and 2724 respectively before the chance of a retest of 2700 becomes a possibility.

GOLD (XAU/USD) Four-Hour (H4) Chart, October 29, 2024

Source: TradingView (click to enlarge)

Support

• 2738
• 2724
• 2714

Resistance

• 2758
• 2775
• 2800

• Impending potential fiscal stimulus measures are supporting the recent two days of rallies seen in the Nikkei 225.
• Technical analysis with TOPIX sector rotation suggests a likely start of a major impulsive up move sequence on the Nikkei 225.
• The biggest risk for Nikkei 225 bulls is likely the main CDP opposition party mounting a challenge to LDP’s right to lead in the lower house.

Since our last publication, Nikkei 225, one of the major benchmark stock index in Japan has rallied as expected that saw a gain of 15% to hit an intraday high of 40,257 on 15 October.

Thereafter, it staged a minor corrective decline of 6% to print an intraday low of 37,713 on 25 October, ahead of Sunday’s snap general election.

More potential fiscal stimulus measures negate short-term negative political factor

The outcome of Sunday’s snap general election for the lower house of Japan parliament saw the anticipated defeat of long-ruling Liberal Democratic Party (LDP) led coalition with Komeito that failed to secure a majority seating of 233 in the lower house for the first time since 2009.

The LDP-Komeito coalition only managed to grab a combined 215 seats which now opens the possibility of LDP to approach other smaller opposition parties such as the Democratic Party for the People (won 28 seats) or the Japan Innovation Party (secured 38 seats) to obtain the 233-majority seating to govern.

During Monday, 28 October press conference, current LDP leader and Japan’s Prime Minister Ishiba does not hint of any intention of stepping down from his leadership position. In addition, he stressed the importance of implementing a meaningful economic stimulus package together with an additional budget as soon as possible that would incorporate the ideas and measures from other political parties.

Hence, the latest political stance from Ishiba suggests that the LDP is likely to embrace more pro-growth fiscal policies that support small and medium-sized firms to hike workers’ salaries, and the upcoming size of the latest package may exceed last year’s extra budget of 13 trillion yen.

The Nikkei 225 reacted positively where it totally erased the initial gapped down of -0.4% on Monday’s opening session and staged a two-day rally of 1.8% and 0.8% respectively as on Tuesday, 29 October.

This biggest risk now is the main opposite party, Constitutional Democratic Party of Japan (CDP) that saw a significant improvement on its election performance as it won 148 seats to mount a political challenge to LDP leadership in the lower house. Some of CDP’s proposed policies are financial income taxation and tax increases which may trigger a negative sentiment towards the Japanese stock market.

Nikkei 225 bullish reversal after a test of key moving averages led by cyclical sectors

Fig 1: 1-month rolling performances of the 17 TOPIX sectors as of 29 Oct 2024 (Source: TradingView, click to enlarge chart)

Fig 2: Nikkei 225 long-term secular & major trends as of 29 Oct 2024 (Source: TradingView, click to enlarge chart)

In the lens of technical analysis, the recent two days of price actions movements seen in the Nikkei 225 and several cyclical TOPIX sectors have been “encouraging” for the bulls to maintain the current major and long-term secular uptrend phases of the Nikkei 225.

The multi-day corrective decline of 6% from its 15 October high has tested the 50-day and 200-day moving averages before it reversed up and retraced almost 50% of its prior losses from 15 October high to 25 October low.

In addition, the 2-day recovery of the Nikkei 225 has been led by three cyclical sectors of the wider TOPIX index; the Banks (+6.71%), Financials ex banks (4.36%), and Automobiles & Transportation Equipment (+3.23%) that have outperformed on a one-month rolling basis as of 29 October (see Fig 1).

Therefore, the odds are now skewed towards the bulls in the Nikkei 225 to kickstart a potential major impulsive up move sequence.

Watch the 35,850 key medium-term pivotal support and a clearance above 40,060 is likely to see the next major resistance zone coming in at 42,600/43,400 (also the upper boundary of the long-term secular ascending channel in place since 19 March 2020 low) (see Fig 2).

On the flip side, a break below 35,850 negate the bullish tone for another multi-week corrective decline sequence to resurface for a retest close to the 30,460 long-term pivotal support.

Brent crude oil prices have significantly decreased, reaching 71.46 USD per barrel on Tuesday. Prices fell nearly 6% earlier in the week, marking the most prominent daily drop in two years. The price reduction reflects the market’s reaction to developments in the Middle East, where the escalation of tensions has somewhat subsided.

Over the weekend, Israel’s measured response to Iran, which notably avoided impacting oil facilities and nuclear sites, substantially lowered the risk premium associated with potential disruptions in oil supplies from the region. Furthermore, Israeli officials expressed willingness to consider a temporary ceasefire in the Gaza Strip in exchange for the release of hostages, which has helped reduce some geopolitical risks that were previously inflating oil prices.

With the immediate threats in the Middle East receding, market focus has shifted back to the underlying weak economic data from China and the ongoing production levels from OPEC members. Additionally, upcoming US employment data will be closely monitored as it may provide further clues about the Federal Reserve’s forthcoming rate decisions. The prevailing expectation is two more rate cuts of 25 basis points each before the year ends, a scenario generally supportive of the energy sector. However, much of this has already been priced into the market.

Technical analysis of Brent

Brent crude is currently developing a corrective pattern targeting the 70.55 USD level. If this level is reached, the market may anticipate a rebound towards 75.75 USD. A breach above this could open up the possibility for a rally towards 80.90 USD, with further prospects to reach as high as 85.85 USD. The MACD indicator supports this bullish outlook, as its signal line is positioned below zero, indicating potential for an upward movement.

On the hourly chart, Brent is finalising a correction to 70.50 USD, currently forming the fifth wave of this corrective phase. Once the target of 70.50 USD is achieved, expectations shift towards a new growth wave, aiming for 73.23 USD as the initial target. This bullish scenario is corroborated by the Stochastic oscillator, with its signal line poised below 20, suggesting a pending upward correction.

• GBPUSD loses momentum near uptrend line
• Stochastic ticks higher, but RSI flattens

GBPUSD headed south in the preceding week, breaking the long-term ascending trendline to the downside. However, the pair is currently holding within a tight range after failing to extend the bearish tendency, but there is strong resistance at the 1.3000 round number.

According to technical oscillators, the stochastic is moving higher with strong momentum, while the RSI is moving horizontally, beneath the neutral threshold of 50, mirroring the latest sideways move in the market.

If there is successful recoupment of the previous losses and a jump beyond the 1.3000 critical level, then the market may retest the 20-day simple moving average (SMA) at 1.3020, ahead of the 1.3100 handle.

On the other hand, a drop beneath the 1.2900 support could test another tough obstacle near the 200-day SMA at 1.2810. Diving further, the 1.2610-1.2670 region may pause the negative action in the market.

In summary, the GBPUSD has been consolidating in the very short-term view and has been in a descending mode since the pullback from the two-and-a-half-year high of 1.3433. If the selling interest persists and breaches the 200-day SMA, the outlook will turn bearish.

Markets

Last week’s waiting game extended into the first trading day of the new and jampacked one. Oil prices crashed more than 6% to $71.4/b (Brent) after Israel spared Iranian oil facilities in retaliatory strikes over the weekend. Markets elsewhere were much more contained. Core bonds diverged with US Treasuries underperforming German Bunds. A double US auction added to the move. Both the $69 2-yr and the $70 5-yr one tailed, potentially spelling some difficulties for tonight’s 7-yr one and ahead of the 3-yr, 10-yr and 30-yr auctions next week. These take place against the background of huge event risk: over the next 9 days, markets are served a big economic update, a new president & Congress and a Fed policy meeting. That Treasury marginally trimmed its borrowing estimate (see below) for the Oct-Dec quarter won’t alleviate concerns for the big wall of supply. US yields finished higher on Monday, gains varying between 3 (30-yr) to 5.3 bps (5-yr). German rates undid a higher open to ease up to 1.6 bps at the front. The Japanese yen underperformed global currency peers in the wake of Sunday’s elections which stripped PM Ishiba’s Liberal Democratic Party of an absolute majority. USD/JPY rose to 153.29. Japanese finance minister Kato already took note of the “significant weakening” of the yen. More verbal warnings are likely to follow in coming days. EUR/USD whipsawed and closed around 1.08, DXY did something similar north of 104.

The economic calendar features the first of many releases today. US job openings (September JOLTS) are expected to come in at 8 mln, slightly down from the 8.04 mln in August but still above the pre-pandemic highs of 7.6 mln. Consumer confidence (Conference Board) may pick up slightly in October to 99.5 but that wouldn’t change the confidence stalemate of the past months. The headline indicator has been oscillating around 100 since February of this year. Given the data avalanche that’s still ahead, we don’t expect today’s to leave a significant mark on markets. Instead we keep a close look at some technical resistance areas popping up in the likes of the US 10-yr. The latter tested 4.3% (62% recovery on the Q2-Q3 decline) yesterday and we continue to see the long end as the most vulnerable part of the curve, at least going into the elections. The front/2-yr confirmed last week’s break above 4.09%. Unless economic data this week deliver some blowout upside surprises, markets may feel most comfortable aligning more or less with the Fed dot plot (50 bps of additional cuts vs 43 bps priced in now). First dollar resistance is situated at EUR/USD 1.076 (October low). Sterling is biding its time in a narrow EUR/GBP 0.83-0.835 trading range ahead of tomorrow’s Budget. UK gilts yesterday underperformed in a possible sign of market nervousness.

News & Views

The US Treasury said in a statement yesterday that it borrowed $762bn in privately-held net marketable debt during Q3 2024 compared with an estimated borrowing of $740bn. Borrowing was $22bn higher largely because of a $36bn higher ending cash balance ($886bn vs $850bn) partially offset by higher net cash flows. The Treasury expects to borrow $546bn in the final quarter of the year assuming an (unchanged) end-of-year cash balance of $700bn. That’s $19bn less than projected in July ($565bn). On Wednesday, the department will release its quarterly refunding announcement in which it unveils specific plans for long-term debt issuance. During Q1 2025, Treasury expects to borrow $823bn, assuming an end-of-March cash buffer of $850bn.

UK shop prices rose by 0.1% M/M in October according to a metric of the British Retail Consortium. The small gain was driven by non-food prices with food prices flat on the month. In Y/Y-terms, overall prices fell by 0.8% from -0.6% Y/Y in September and the weakest since August 2021. Food price inflation slowed from 2.3% Y/Y to 1.9% Y/Y with non-food price deflation unchanged at -2.1% Y/Y (falling on annual basis since April). BRC chief executive Dickinson said that the downward trajectory is vulnerable to ongoing geopolitical tensions, the impact of climate change on food supplies, and costs from planned and trailed government regulation. Wednesday’s budget by Chancellor Reeves is also causing some unease among employers.

Equity markets across Europe and the US began the week on a positive footage, except for oil stocks. Energy companies were hit by a 5% dive in oil prices due to Israel’s targeted attack on Iranian military facilities. The barrel of US crude is trading below the $68pb this morning. A major part of the geopolitically-backed long positions around the $70pb level are likely cleared at yesterday’s selloff. But trend and momentum indicators remain comfortably negative, the RSI indicator suggests that oil is not yet in the oversold territory and that there is room for further selloff in the short run – with shorts targeting the $65pb September support. Once the actual selloff loses stream, we will certainly see some minor upside correction and consolidation, yet the medium to long term dynamics remain tilted to the downside, as well, as the Chinese growth struggle is not over, bad news keep coming in from Germany – where the country’s iconic carmaker VW announced at least three factory closures and a 10% salary decrease for tens of thousands of its employees, prospects for global oil demand have been deteriorating, OPEC countries show willingness to relax their production restrictions and the non-OPEC countries produce an ample amount of oil – led by the US – to a world that’s trying to transition from fossil fuel to alternative sources of energy. That doesn’t mean that oil prices will be immediately minced. But the downside pressures will likely be felt until global growth and demand prospects improve.

And indeed, oil giants like Exxon, Chevron, BP, Shell and TotalEnergies are expected to announce a combined 12% decline from the Q2 when they release their earnings throughout this week.

But besides oil, the S&P500 stocks eked out a meagre 0.27% gain yesterday, while bonds fell amid weak demand for 2 and 5-year bonds at yesterday’s auction. The US 2-year yield – which best captures the Federal Reserve’s (Fed) policy plans – pushed higher above the 4% level, while the US 10-year yield – which is a reflection of long-term growth, inflation and debt dynamics – advanced to 4.30%. The US dollar consolidated at the highest levels since summer, as the election jitters kept investors flocking into the safety of the US dollar and gold. The precious metal hovers near its ATH levels despite rising US yields and should remain bid until next week’s US election.

In the FX, the EURUSD regained the 1.08 handle but without much conviction from the euro bulls as the VW troubles remind investors about the difficulties that the European economies are going through at the moment. The morose European outlook supports the dovish European Central Bank (ECB) expectations, hence price rallies are interesting opportunities to strengthen bearish euro positions. Across the Channel, Cable is offered near the 100-DMA, while the yen is slightly better bid this morning and the USDJPY is back below the 153, but the political jitters, there, probably call for an extended Bank of Japan (BoJ) support to the economy. The BoJ will announce its latest verdict on Thursday.

But before that, investors’ attention will shift to the US jobs data starting from today with the JOLTS data due today, ADP tomorrow, weekly jobless claims on Thursday and the official NFP, wages and unemployment rate due Friday. The Fed doves have certainly scaled back their too dovish expectations over the past few weeks, but there is no doubt that the Fed will announce another 25bp cut when it meets next week. The probability given to that scenario is close to 97%. Unless we see another month of blowout jobs report – which will be hard due to the strike at Boeing and hurricanes – the Fed should go ahead with another rate cut. A softer-than-expected set of jobs data will have the potential to convince those who were betting that the Fed should take a pause in the December meeting, and maybe fuel the 50bp cut expectations for next week’s FOMC and weigh on the dollar. But the dollar weakness will likely remain limited into next week’s election.

On the earnings front, Alphabet is the first Magnificent 7 company to go to the earnings confessional this week. Together, the US Big Tech companies are expected to announce around 18% growth in profit and – hopefully for Nvidia – massive increase to their AI spending. Nvidia will not be reporting its results for another month, but AMD results are also due today. Roundhill’s Magnificent 7 ETF is back to flirting with ATH levels after the summer fatigue, but the Big Tech companies must deliver meaningfully better-than-expected results and brighter-than-expected forecasts to justify a further extension of the AI rally at a time investors are getting increasingly worried about the huge amounts spent on AI. Any misstep could cost the US indices their latest rally, as the rest of the S&P500 stocks are expected to announce flat profit growth in Q3. According to the latest data, 75% of the S&P500 companies that reported so far reported better-than-expected results - the smallest beat since the 4th quarter of 2022 for profit expectations that have already, meaningfully weakened since summer.

In focus today

In the US, we receive JOLTs labour turnover, which is a key measure of labour demand for the Fed. The October consumer confidence survey is also due for release.

In Sweden, at 08:00 CET, the GDP indicator for Q3 is released. The first two quarters presented a mixed growth picture; the Q1 growth of 0.8% q/q was followed by a contraction of 0.3% in Q2. We expect growth of 0.5% q/q driven by net exports and private consumption. Riksbank's quarterly business survey is also due and it will be interesting to see whether Swedish businesses have seen any improvements yet. Both releases will carry weight for the Riksbank in their upcoming rate decision on 7 November.

In Australia we receive CPI; consensus expects a decline of 0.9 percentage points from 3.8% to 2.9%

Economic and market news

What happened yesterday

In euro area, commenting on the speculation of an ECB jumbo cut, ECB policymaker Pierre Wunsch (hawk) stated that due to an improved economic landscape that there is no urgency to accelerate the easing of monetary policy. Instead, the market should wait for upcoming releases of inflation and results of the US election which will affect ECB's rate decision. Markets currently price in around 20% probability of a 50bp cut.

Equities: Global equities were higher yesterday, adopting a wait-and-see approach ahead of the very busy period that kicks off today with numerous earnings reports and the first batch of job data from the US. The big loser yesterday was the energy sector, following a 6% decrease in oil prices. To illustrate the non-macro-driven performance yesterday, we saw tech underperforming alongside energy, while small caps experienced a relatively solid day despite rising yields. We have mentioned this previously, but it may be worth highlighting again. With several multifactorial, eventful days ahead, we are likely to witness days marked by special cross-asset moves and rotations. Hence, it is prudent to remain somewhat humble over the next couple of weeks when attempting to discern the causalities in fundamentals and markets. In the US yesterday: Dow +0.7%, S&P 500 +0.3%, Nasdaq +0.3%, Russell 2000 +1.6%. Asian markets are presenting a mixed picture this morning, with Japan experiencing another day of strong equities and a weaker yen. European and US futures are marginally higher.

FI: The decoupling of USD and EUR rates continued through yesterday's session as implied probabilities of a 'Republican Sweep' gained further traction through the weekend. 2Y UST yields rose 3bp throughout the session, while the comparable Schatz yield was down a couple of basis points. The recent repricing has left the SOFR terminal rate at an elevated level of 3.5%, which is about 0.5 percentage point above the median FOMC longer-term projection. In our view, this gives a significant downside for USD rates in the case of a Harris win next week. In terms of implied volatility, the MOVE index is at its highest levels since mid-2023.

FX: EUR/USD stayed around 1.08 in a quiet start to the week, with data on the US labour market in focus, starting with the JOLTS job openings today. Political uncertainty in Japan has further contributed to the USD/JPY rise over the past month. Our tactical recommendation to go short on AUD/USD spot reached its target level of 0.66 yesterday, resulting in a booked profit of 4.4%, including carry. EUR/SEK and EUR/NOK both edged higher, hovering around 11.50 and 11.90, respectively. Oil prices dropped yesterday to their lowest in about a month as investors priced out the geopolitical premium following Israel's targeted retaliatory strike on Iran.