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In this technical article we’re going to take a quick look at the Elliott Wave charts of Copper Futures HG_F, published in members area of the website. As our members know, Copper is showing impulsive sequences in the cycle from the 3.9230 low. Consequently we are favoring the long positions at this stage. The commodity has recently given us a 3-waves pull back, when buyers appeared right at the equal legs zone. We are going to explain Elliott Wave forecast further in this article.

Copper H1 Asia Update 10.09.2024

The current view suggests that the Copper commodity is doing a 4 red pullback. Structure of the correction is still incomplete, suggesting more short term weakness. We expect to see another leg down toward equal legs : 4.3758-4.3069 ( buyers zone). Once extreme zone is reached , we expect potential buyers to appear in that area, which could lead to a further rally towards new high or a three-wave bounce at least.

Copper H1 Asia Update 10.12.2024

The commodity made another wave down as we expected. The price has reached the extreme zone at 4.3758-4.3069 area. The commodity found buyers and made a rally from the Equal Legs-Buyers zone, completing pull back at the 4.3729 low. Copper can remain supported as far as the price stays above 4.3729 low.

• US 30 index strengthens uptrend to all-time high of 42,904
• Short-term bias is positive, but the way up may not be straight

The US 30 index (cash) hit an all-time high of 42,904 in less than a month on Friday and closed above the constraining line at 42,550, raising confidence that its record rally has more room to go.

Having bounced off its 20-day simple moving average (SMA), the bulls may face immediate resistance within the 43,155-43,500 constraining region given the overbought signals coming from the RSI and the stochastic oscillator.  If not, then the uptrend could accelerate towards the 44,165 zone, where the 261.8% Fibonacci extension of the previous downfall is placed.

Alternatively, if upside forces fade out, the 20-day SMA could provide extra fuel near 42,132 with the help of the 41,830 territory. Slightly lower, the 50-day SMA might also act as support as it did back in September near 41,435. Should the bears win the battle there, the decline could continue towards the 100-day SMA at 40,650.

In brief, the latest bounce in the US 30 index reflected that the bulls are still in town, though there are still some barriers nearby, with the next challenge expected to emerge near 43,155-43,500.

China's export and import data for September painted a weaker-than-expected picture of the nation's trade performance. Exports grew by just 2.4% yoy to USD 303.7B, well below expectations of 6.0% yoy and down from the 8.7% yoy rise in the previous month. Imports edged up a modest 0.3% yoy to USD 222B, missing expectations of 0.9% yoy increase and lower than August's 0.5% yoy rise. Trade surplus narrowed to USD 81.7B, smaller than the expected USD 89.8B and down from USD 91.0B in August.

Breaking down the data by region, exports to the US, China’s largest trading partner, rose by 2.2% yoy, while imports saw a stronger 6.7% yoy growth. Trade with ASEAN remained more robust, with exports up 5.5% yoy and imports climbing 4.2%yoy. However, exports to the EU edged up by only 1.3%, while imports from the bloc fell by -4% yoy. Trade with Russia was mixed, with exports surging by 16.6% yoy, but imports declining by -8.4% yoy.

Customs spokesman Lu Daliang attributed the weaker export growth to “short-term incidental factors,” including frequent typhoons in key port cities, a high base from last year, and ongoing global shipping congestion. Lu noted that the peak export season for some Chinese products typically seen in Q3 had been moved forward by more than a month this year due to the shipping delays.

• Gold enters a new bull run; shifts spotlight to all-time high
• Technical signals point to more upside; close above 2,650 needed

Gold started a new bullish corrective phase near the 2,600 level last week, adding extra credence to its upward trend that has been active for more than two months.

On Monday, the price climbed to 2,666, surpassing the short-term falling trendline from September’s peak that the bulls must break to reach the top of 2,670 or achieve a new record high near the upper band of the channel at 2,735. The latter coincides with the 161.8% Fibonacci extension of the previous downfall. If the rally continues above it, the next barrier could occur within the 2,800-2,850 region and near the resistance line of the broad upward-sloping channel.

Based on the RSI and stochastic oscillator, it appears that the current rebound is still at an early stage. Encouraging trend signals persist as well. If the Elliot pattern in the chart is correct, the precious metal might have one more upleg to complete before it shifts to the sidelines.

However, if the price doesn’t close above 2,650, it may drop and find support near the 20-day SMA and the channel’s support trendline at 2,623. The 2,600 area may also be scrutinized, and if the bears break through that level, the sell-off could accelerate towards the 50-day SMA and the 38.2% Fibonacci retracement of the June-September uptrend at 2,535.  Failure to pivot there could cause another rapid fall towards the 50% Fibonacci mark of 2,489 and the flat constraining line at 2,458.

Summing up, gold is expected to continue its bull run in the short-term. In the meantime, a close above 2,650 might be necessary to bolster buying appetite towards the top of the bullish channel.

As shown by the S&P 500 chart (US SPX 500 mini on FXOpen), the leading US stock index set its 45th record of the year, closing above 5800 on Friday. This marks the fifth consecutive week of growth, with the index up more than 22% since the start of the year.

According to Reuters, the bullish market sentiment is driven by the start of Q3 earnings season, with companies possibly issuing bolder forecasts due to the beginning of the Fed’s rate-cutting cycle.

What are the prospects for the index until the end of 2024?

A technical analysis of the daily S&P 500 chart (US SPX 500 mini on FXOpen) shows:

In 2024, price action has been contained within three relatively narrow ascending channels (shown in blue), where:

→ The first two channels remained valid for at least 80 candles, and the third has now reached 30 candles;

→ The channels have similar slopes and widths;

→ Drawing lines through the high of Channel 1, the high and low of Channel 2, and the low of Channel 3 forms a larger channel (shown in orange).

If the bullish sentiment persists, the S&P 500 (US SPX 500 mini on FXOpen) may continue to rise within the third blue channel towards the upper orange line.

However, several factors could significantly impact the market before the year's end: → Labour market data, as well as Fed decisions and comments;

→ US presidential elections and budget approval;

→ Company earnings and forecasts that fall well below market expectations.

Goldman Sachs analysts predict that the S&P 500 could reach 6,000 by the end of 2024.

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China didn’t pull out the fiscal bazooka on Saturday, but said that there will be a significant bond issuance to help reverse the deepening property crisis and local governments. Israel didn’t attack Iran but some reports hinted that the Israeli army could be narrowing their targets on military and energy infrastructure. As such, crude oil kicked off the week downbeat. The barrel of US crude is trading below the $75pb mark in the early ours of Monday trading, and Brent oil consolidates near $78pb. The short-term risks remain alive; there could be a sudden spike in oil prices in case the Israeli attack on Iranian energy facilities materializes. But the careful steps from the Chinese government regarding their stimulus plans will likely keep the medium to long run investors on hold.

Xi doesn’t like market euphoria and investors don’t like the fact that the ample monetary stimulus may not be channelled toward the right places in the absence of an efficient and comprehensive fiscal package. But both agree that China needs stimulus to overcome the deepening property crisis and fight deflation. The figures released during the weekend showed that consumer price inflation in China was flat in September, while the decline in producer prices accelerated to 2.8% y-o-y. The stock markets gave a mild reaction to the avalanche of news and data. The CSI 300 is up by 1.50% at the time of writing. The index sank last Friday into the bearish consolidation zone on the latest rally triggered by the news of major monetary stimulus. We will probably see the volatility and the latest gains fade. The Hang Seng index, on the other hand, is down by around 0.40% today but holds ground near a minor 23.6% Fibonacci retracement. The index is still in a bullish trend but gains here will probably slow down as well. China related commodities, like copper and iron ore futures are mixed this morning, swinging between hope that China hasn’t got an option but to do whatever it takes to reverse the fortunes, the AUDUSUD is consolidating near the 50-DMA and the major 38.2% Fibonacci retracement, near the 0.6720 level, that should distinguish between the actual bullish trend and a medium-term bearish reversal.

USD extends gains

Friday’s US producer price data came in mixed. The monthly figures were lower than the expectations but the yearly figures were stronger than expected, and the core PPI advanced to 2.8%. The figures didn’t change the November expectations regarding what the Federal Reserve (Fed) would do... the expectation is that the Fed will likely cut its rates by 25bp with a nearly 87% chance assessed to it. But it becomes clearer by the day that the Fed won’t attempt another acrobatic move on its rates in the coming months. The US dollar consolidates and should further extend gains as the other major central banks are set to deliver dovish decisions.

In this context, the European Central Bank (ECB) is expected to announced another 25bp cut on Thursday – as the September CPI should confirm that headline inflation in the Eurozone fell below the bank’s 2% policy target a few hours before the decision. The EURUSD pulled out the major 38.2% Fibonacci support last week and extends losses within the medium term bearish consolidation zone. The next bearish target stands near 1.0875, the 200-DMA, that will either give support to the pair on the back of a cautious cut (due to concerns around sticky core inflation), or clear that support on the back of a dovish cut. Lagarde will tell.

Across the Channel, the British CPI due Wednesday is expected to confirm that the British inflation has also come below the Bank of England’s (BoE) 2% target, but core inflation is still near 3.5%. The BoE Governor Bailey had recently told investors that the bank is about to get ‘more aggressive’ on its rate policy – a comment that had triggered an aggressive selloff in pound sterling. This week’s inflation numbers could give more substance to Bailey’s comments and send Cable below the 1.30 mark, but services inflation will say the last word.

Earnings season kicks off on a positive note

The S&P500 finished last week on a fresh record high as the first big bank earnings came in better than expected. JPM jumped more than 4% and Wells Fargo rallied more than 5% after their Q3 results beat estimates. More bank earnings are due this week along with Netflix, TSM and ASML results.

Elsewhere, Tesla fell nearly 9% on Friday after the company failed to deliver enough details and an encouraging timeline for its robotaxi at last Thursday’s reveal. It’s clear that their robotaxi is not ready to hit the streets yet and that Tesla is not yet bringing any revolution to the world of robotaxis. And provided that the dream of robotaxis was what was keeping investors in appetite since April – as the EV sales are clearly declining across the globe – there is little reason to keep the positive trend going in Tesla. The shares will probably give back to robotaxi gains until further notice. The crumbling robotaxi hopes for Tesla sent Uber and Lyft around 10% higher on Friday.

Today, some traders may still be away due to Columbus Day in the US, though the stock market is open while the bond market is closed. But this could still lead to thinner liquidity. The most important event this week will likely be the ECB interest rate decision on Thursday, but before that, we have UK, CAD and New Zealand inflation reports. In the US, the key focus will be retail sales and a few FOMC speakers.

Regarding the markets, we saw some recovery in stocks last week, and this trend could extend further into the start of this week. It could also mean that sooner or later, the US dollar may enter a corrective phase, as discussed last week. We mentioned that the first impulse from September lows is likely facing resistance around the 103 level on the Dollar Index so pullback wouldn't be surprising. In such a case, the 101.80 to 102.30 zone will be key support to watch for a potential new resumption higher.

https://www.youtube.com/watch?v=tLZvpTEpj2U

Markets

The US yield curve finished last week with a little steepening. Net daily changes varied between -0.2 bps (2-yr) to +5.2 bps (30-yr), underpinned by second-tier data including decelerating and slightly below-consensus September PPIs. October consumer confidence (U. of Michigan) missed the bar as well. The headline index fell to 68.9 from 70.1 with both the current assessment and outlook deteriorating. The 1-yr ahead inflation gauge picked up from 2.7% to 2.9%, the 5-yr one eased as expected to 3%. German yields closed little changed due to a late-session swoon that erased much of the 4-5 bps gains earlier on the day. Major currencies were little changed against the dollar amid US markets sleepwalking into a long weekend. A healthy risk appetite (stocks 0.3-1% higher) was the main force pushing the likes of the NOK and SEK as well as cyclicals such as the Aussie & kiwi dollar a little higher. China’s yuan strengthened a bit in the run-up to a highly anticipated announced by the country’s finance minister on Saturday. After the economic planning agency underwhelmed earlier in the week, hopes ran high for Lan Fo’an to come big this time – to the tune of CNY 2tn. But while promising further steps to support the property sector and hinting at greater borrowing, investors were left in the dark by not putting a price tag on it. Chinese stock markets this morning trade volatile, swinging from gains to losses back to gains of currently 2.3% (CSI300). After the barrage of (pledged) fiscal and monetary measures in a short period of time, markets seem to give the government the benefit of the doubt. The need for a growth supporting policy pivot is increasingly apparent following another poor inflation reading for September. Consumer prices rose a mere 0.4%, undershooting the August-matching 0.6% consensus. Services inflation came in at only 0.2% y/y while core inflation barely stayed positive (0.1%, lowest since February 2021). Producer prices ventured deeper in negative territory (-2.8% from -1.8% and vs -2.6% expected). Factory inflation has been negative for two years straight (!) now. The yuan gapped lower at the open but pared losses in the meantime to USD/CNY 7.07. US markets are closed today for Columbus Day but a speech by Fed’s Waller on the economic outlook is worth watching. An otherwise empty European calendar paves the way for technically insignificant trading ahead of other events this week, including the ECB policy meeting. A 25 bps cut which was ruled out after the September meeting is now all but certain after disastrous PMIs and inflation numbers confirming ongoing disinflation.

News & Views

Rating agency Moody’s late Friday affirmed Belgium’s credit rating at Aa3 but changed the outlook from stable to negative. The rating agency said the decision to change the outlook reflects the risks that the next government will be unable to implement measures that would stabilize the government debt burden. According to Moody’s, the previous government made some small fiscal consolidation efforts, but they were not structural in nature. In the absence of a large fiscal consolidation programme, Moody’s says that debt will continue to rise due to the material structural increase in expenditures in recent years and persistent spending pressure. It expects the political economy of deficit and debt reduction may become more challenging in the future because of structural headwinds to fiscal consolidation. A large fiscal consolidation effort will require effort at all levels of government. In this respect Moody’s says that Belgium lacks intergovernmental coordination mechanisms to achieve this effort.

Rating agency Fitch on Friday cut the outlook on France’s rating from stable to negative. It affirmed the country’s rating at AA-. Moody’s sees a difficult fiscal policy ahead, as fiscal risks have increased since the previous review. This year’s projected fiscal slippage is placing the country in a worse starting position. Fitch expects wider deficits leading to a steep rise in debt toward 118.5% of GDP in 2028. High political fragmentation and a minority government complicate the country’s ability to deliver on sustainable fiscal consolidation. The government presented a sizeable package to bring the deficit to 5.0% of GDP by 2025 but some of the measures are temporary. All measures are worth €60 bn (or 2% of GDP) but the agency included only a part due to political uncertainty and implementation risks. The 2024 deficit is expected to widen to 6.1% GDP which exceeds Fitch’s forecast of 5.1%. Fitch raised the fiscal deficit for 2025 and 2026 to 5.4% and doesn’t expect the government to meet its revised deficit forecast to bring the deficit to 3.0% by 2029. Fitch expects the debt to GDP ratio to rise to 116.3% by end 2026.

Graphs

GE 10y yield

The ECB cut policy rates by 25 bps in June and in September. Stubborn inflation (core, services) still is a source of concern, but very weak PMI’s and soft comments of Lagarde (and other MPC members) suggest the ECB is likely to step up the pace of easing with an October cut. Spill-overs from strong US data prevented a test of the 2.0% barrier. 2.00-2.35% might serve as a ST consolidation range.

US 10-y yield

The Fed kicked off its easing cycle with a 50 bps move. Turning he focus from inflation to a potential slowdown in growth/employment made markets consider more 50 bps steps. Strong US September payrolls suggest the economy doesn’t need aggressive Fed support for now, but the debate might resurface as the economic cycle develops. 3.60% acted as strong support before a rebound (and resumption of the steepening trend) kicked in.

EUR/USD

EUR/USD twice tested the 1.12 big figure as the dollar lost interest rate support at stealth pace. Bets on fast and large rate cuts trumped traditional safe haven flows into USD. An ailing euro(pean economy) partially offset some of the general USD weakness. After solid early October US data, the dollar regained traction, with EUR/USD breaking the 1.1002 neckline. Targets of this pattern are near 1.08.

EUR/GBP

The BoE delivered a hawkish cut in August. Policy restrictiveness was indicated to be further unwound gradually. The economic picture between the UK and Europe also (temporarily?) diverged to the benefit of sterling, pulling EUR/GBP below 0.84 support. Dovish comments by BoE Bailey ended by default GBP-strength. Uncertainty on the UK budget to be released end this month is becoming an additional headwind for the UK currency.

Daily Pivots: (S1) 194.07; (P) 194.66; (R1) 195.47; More...

Intraday bias in GBP/JPY stays neutral at this point. On the upside break of 195.95 will resume whole rise from 180.00 to 61.8% retracement of 208.09 to 180.00 at 197.35 next. On the downside, break of 189.54 will turn bias back to the downside for 183.70 support instead.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 162.40; (P) 162.91; (R1) 163.63; More....

Intraday bias in EUR/JPY remains neutral for the moment. On the upside, firm break of 163.47/86 resistance will resume the rebound from 154.40 to 61.8% retracement of 175.41 to 154.40 at 167.38. On the downside, break of 158.09 will bring deeper fall back to 154.40/155.14 support zone instead.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.