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For the 24 hours to 23:00 GMT, Gold declined 0.16% against the USD and closed at USD1234.70 per ounce, amid broad strength in the greenback.

In the Asian session, at GMT0300, the pair is trading at 1234.90, with gold trading marginally higher against the USD from yesterday’s close.

The pair is expected to find support at 1229.60, and a fall through could take it to the next support level of 1224.30. The pair is expected to find its first resistance at 1241.10, and a rise through could take it to the next resistance level of 1247.30.

The yellow metal is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Silver declined 0.27% against the USD and closed at USD14.67 per ounce, tracking losses in gold prices.

In the Asian session, at GMT0300, the pair is trading at 14.65, with silver trading 0.10% lower against the USD from yesterday’s close.

The pair is expected to find support at 14.57, and a fall through could take it to the next support level of 14.49. The pair is expected to find its first resistance at 14.76, and a rise through could take it to the next resistance level of 14.87.

The white metal is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Crude Oil rose 0.98% against the USD and closed at USD67.02 per barrel, as Saudi Arabia’s Energy Minister, Khalid Al-Falih, signalled that major producers might have to intervene in crude markets to support prices.

In the Asian session, at GMT0300, the pair is trading at 66.78, with oil trading 0.36% lower against the USD from yesterday’s close, after Saudi Arabia’s OPEC Governor, Adeeb Al-Aama, stated that the market could face oversupply in the fourth quarter.

The pair is expected to find support at 65.96, and a fall through could take it to the next support level of 65.15. The pair is expected to find its first resistance at 67.62, and a rise through could take it to the next resistance level of 68.47.

Crude oil is showing convergence with its 20 Hr and 50 Hr moving averages .

Buy the dip mentality getting crushed in October

Any hope that Thursday's recovery was anything more than a dead cat bounce was short-lived, as a couple of disappointing earnings reports sent investors running for the hills again on Friday.

The mentality of the markets right now means that any reasons to sell are being leaped on. The earnings reports from Amazon and Alphabet are a prime example of this. Earnings for the third quarter by most companies standards were phenomenal but the bar has been raised so high that it's becoming more and more difficult to keep up.

For this to be reason for stocks to tumble again at the end of the week says a lot more about the markets right now than it does the companies in question. The relentless buy the dip mentality, which has shored up the markets during previous downturn, is being seriously tested now as investors who have engaged in this over the last few weeks have been crushed 24 hours later. How many more beatings will they take?

Another Trump nomination comes back to haunt him

The new appointment at the Fed is already not working out as hoped for Trump. The frustrated President, who has had no reservations about breaking with tradition and bashing the central bank for raising interest rates, may well be questioning another of his Fed appointments following his debut speech on Thursday.

Richard Clarida fell in line with his new colleagues at the Fed in supporting the need for further interest rate hikes which will infuriate and already irate Trump who views this as a real and direct threat to his policy agenda. Trump has already blamed the central bank for the stock market correction and laid the groundwork for the fault of any future economic downturns to lay at the door of the Fed.

Oil lower in risk-off market while Gold creeps tentatively higher

Oil is once again being dragged lower by the risk-off sentiment that is engulfing markets going into the weekend. Sentiment has drastically changed towards black gold over the last few weeks as people have reassessed their expectations for global growth and the Saudi's have promised to keep ramping up production as output from Iran falls under US sanctions. Inventory data hasn't helped with some huge builds being reported over the last week or two.

Gold on the other hand has been re-establishing itself as a reliable safe haven. The global equity market sell-off has been developing in stages and the US was the straw that broke the camel's back, with investors turning back to a reliable old friend as risk appetite fizzled out. We haven't seen much uptick overnight but as we get closer to the open on Wall Street and get a better idea of how the week's closing out, that may well change.

Chinese Yuan's selloff picks up some momentum today. USD/CNH (offshore) break 6.9586 yesterday, as well as a near term channel resistance. The upside acceleration suggests that Yuan selling might intensify for the near term.

Now, it looks like a break of 6.9875 high in USD/CNH (2017) low is inevitable. That is, Yuan will hit the lowest level in a decade. The question now is whether there will be intervention of some sort to keep USD/CNH below 7.000 handle.

Reactions in the stock markets are muted though. At the time of writing, the Shanghai SSE is down just -0.46% at 2591. Hong Kong HSI is also down -1.09% only as recent down trend extends steadily.

Fed Vice Chair Richard Clarida, Trump latest addition to the Federal Reserve Board, delivered his first public speech yesterday. And he backs further rate hike by Fed. He said, "if the data come in as I expect, I believe that some further gradual adjustment in the federal funds rate will be appropriate."

Clarida also noted that "even after our September decision (a 25bps hike), I believe U.S. monetary policy remains accommodative." He pointed out that 'the funds rate is just now--for the first time in a decade--above the Fed's inflation objective". However, "inflation-adjusted real funds rate remains below the range of estimates for the longer-run neutral real rate, often referred to as r*."

Additionally, he also noted that "if strong growth and robust employment gains were to continue into 2019 and be accompanied by a material rise in actual and expected inflation, that circumstance would indicate to me that additional policy normalization might well be required beyond what I currently expect."

His full speech here.

In a speech delivered yesterday, Cleveland Fed President Loretta Mester talked down recent market slump again. And as a known hawk, she continues to support further gradually remove of monetary policy accommodation ahead.

She said that "while a deeper and more persistent drop in equity markets could dash confidence and lead to a significant pullback in risk-taking and spending, we are far from this scenario." And, "similar to the swings in the market we saw earlier this year, the movements of late do not seem to be signaling that investors are becoming overly pessimistic."

On labor market, she noted that "we are beyond maximum employment". Much of the explanation of "moderate wage growth", lies with " low levels of inflation and productivity growth over this expansion". And, "I wouldn't expect to see a strong acceleration in wages unless we see a strong pickup in productivity growth." Meanwhile, she also emphasized that "maintaining stable inflation expectations will be the key to maintaining inflation at target.

Her full speech "The Economic Outlook, Monetary Policy, and Normal Policymaking Now and in the Future".

Chinese Premier Li Keqiang invited Japanese Prime Minister Shinzo Abe to build a "more mature, steady and progressive" relationship together. Abe is in a three day visit to China, the first the Prime Minister did in seven years.

Li said, "the China-Japan relationship has gone through wind and rain in the past four decades, yet peace, friendship and cooperation have always been the mainstream." And he added "we need adhere to the general direction of peace, friendship and cooperation and conform to the trend of the times, so as to jointly build a more mature, steady and progressive China-Japan ties."

Li also urged "both sides would work hard to promote regional peace, safeguard multilateralism and free trade, and become the axis of stability, growth and momentum for not just Asia but the world,”

Abe said when he arrived in Beijing yesterday that "Today, Japan and China are playing an essential role in economic growth not only in Asia but in the world," And, "as problems that cannot be resolved by one country alone have risen, the time has come for Japan and China to jointly contribute to world peace and prosperity."

Today, China and Japan signed a broad range of agreements covering cooperations in areas from finance and trade to innovation and securities listings. In particular, the currency swap arrangement dropped back in 2013 will be revived.

STOCKS

Recovery is seen in Dow (24984.55, +1.63%) and Dax (11307.12, +1.03%) yesterday but note that we cannot negate a test of lower levels again in the near term. Nikkei continues to trade in the red.

Dow (24984.55, +1.63%) has immediate resistance near 25000-25250 and unless a sustained break on the upside is seen, near term bearishness remains intact. Another dip below 25000, if seen could gradually take the index towards 24000 in the medium term.

Dax (11307.12, +1.03%) seems to have held above the weekly support at 11000. While the support on Dax holds, we may not expect a break below 11000 in the near term but an eventual rise towards 12000 is possible in the next 2-weeks.

Nikkei (21245.35, -0.11%) continues to trade in the red today also and looks bearish for the near term. While below 21800, Nikkei could come off further towards 21000-20800 in the near term.

Shanghai (2605.14, +0.052%) has resistance on the upside at 2650 and 2750 respectively. If 2650 holds, we could see a dip towards 2450-2400 in the near term; else a rise towards 2750 could be seen before another corrective decline.

Nifty (10124.90, -0.98%) dipped slightly yesterday. We continue to look at immediate support near 10000. Upside could be capped at 10400 in the near term.

COMMODITIES

The OPEC governor said yesterday that the market could be heading into oversupply as growth concerns come back into the picture with decline in the global equities this week. Further, the Saudi Arabia Energy Minister Khalid Al-Falih said there could be a need for intervention to reduce oil stockpiles after increases in recent months.

News states that BSE said yesterday that it will introduce futures contracts on Oman Crude Oil in its newly launched commodity derivatives segment today approved by SEBI. The BSE Oman Crude Oil Futures Contract will be settled on Dubai Mercantile Exchange (DMX).

Brent (76.51) and WTI (66.79) have risen slightly. WTI has support near 66 which may hold in the near term producing a bounce towards 68. A break above 68-69 levels is needed to target higher levels in the medium term.
Brent has risen from immediate support near 74 and could head towards 77-78 in the near term. Some stability in crude prices could be seen in the next few sessions.

Gold (1234.30) is trading below 1240 just now. While immediate resistance at 1240 is likely to hold and keep prices stable for some more sessions, Gold is likely to break on the upside eventually targeting 1250/70 on the upside soon. Medium term looks bullish.

Copper (2.7380) could continue to remain ranged for now within the 2.70-2.83 region. While Aussie is ranged within 0.705-0.7150 and shanghai trades in the 2750-2450 region, Copper is also in its sideways consolidation phase. We expect Aussie, Copper and Shanghai to move together and see a break out soon to sustain in a particular direction in the longer run. For now, while consolidation continues, we will have to wait and watch unless a break on either side is seen.

FOREX

Euro has broken below 1.14 and Dollar-Yuan is almost testing its Dec ’16 high of 6.9633. Watch out for further weakness in both Euro and Yuan – it could be negative for Rupee strength.

Euro (1.1370) – The ECB maintained status quo yesterday and Draghi maintained a dovish tone in the press conference later. In response, Euro has broken below the support near 1.141 on 3 day candles and could now target its previous low of 1.1301 in the next week. It has almost broken below horizontal support on weekly line chart as well – a clear break of this support would be very bearish for the next few weeks.

Dollar Index (96.63) has broken above resistance near 96.3 on 3 day candles and could now move higher towards its previous high near 96.98 in the next week. Looking at the weekly line chart, Dollar Index looks quite bullish in the weeks ahead.

Dollar Yen (112.26) has continued to trade above support at 112. While it stays above this support, there will be chances of an up move to 113 in the near term. Also watch the 21 weeks MA at 111.48 – a week close below this level in the next 1-2 weeks could be bearish.

Euro-Yen (127.64) : On 3 day and weekly line charts, there could be some support for Euro Yen near current levels. However, a test of lower support near 127 on 3 day and weekly candles and a bounce back from there could happen in the next week.

Pound (1.2820) is trading just above support near 1.2800-1.2775 on weekly candles. If this support also breaks, there is lower support at 1.27 on daily line chart. Pound could possibly range between 1.27 and 1.30 in the next 2-3 weeks before deciding further direction.

Aussie (0.7062) has resistance on daily candles near 0.71. While below this level, it could continue to move down towards 0.705. 0.705-0.704 is a super crucial long term support level, which if broken, could turn out to be very bearish for the Aussie.

Dollar-Yuan (6.9628) has moved up very close to its Dec ’16 high of 6.9633. If it rises above that level –it could be a very bullish indicator – and could bring about further weakness in EM currencies.

Dollar Rupee (73.28) – Weakness in Euro and Yuan could lead to Rupee weakness in the near term. A rise to 73.40-50 (or even above that) in today’s session is likely.

INTEREST RATES

The ECB maintained status quo in yesterday’s meet as expected. Draghi maintained a mostly dovish tone in the press conference later on – he did however highlight concerns about Brexit, trade wars and Italy and also remarked that recent economic data had been “somewhat weaker” than anticipated. Bond yields have remained largely unmoved in response to the ECB meet.

The US 10 Year (3.10%) is testing important support near 3.10%. It will be important to see whether 3.10% holds or breaks – in case of a break, the yield could even move down towards 3% in the next couple of weeks.

German 10 year yield (0.40%) has been falling after testing 0.577% in early Oct and could test support near 0.35%-0.30% in the near term. A break of 0.30% (if it happens) would be very bearish.

Japan 10 year bond yield (0.12%) has broken below trendline support near 0.14% on near term chart and could drop more towards 0.10% in the next week.

Key Highlights

The US Dollar started a downside correction after trading as high as 114.53 against the Japanese Yen.

There is a crucial bullish trend line formed with support at 111.90 on the daily chart of USD/JPY.

The US Durable Goods Orders in Sep 2018 increased 0.8%, better than the -0.9% forecast.

Today, the US Gross Domestic Product for Q3 2018 (Preliminary) will be released, which is forecasted to grow 3.3%.

USDJPY Technical Analysis

After a solid upward move, the US Dollar faced sellers near 114.50 against the Japanese Yen. The USD/JPY pair formed a high at 114.53 and later started a downside move.

Looking at the daily chart, the pair declined below the 113.10 and 112.80 support level to move into a short term bearish zone. Moreover, there was a break below the 50% Fib retracement level of the last wave from the 109.77 low to 114.53 high.

However, the decline was limited by the 111.50 support area and a crucial bullish trend line with current support at 111.90 on the same chart. Besides, the 61.8% Fib retracement level of the last wave from the 109.77 low to 114.53 high also acted as a support.

As long as the pair is above the trend line support and 111.80, the pair could resume its upside move. An initial resistance is near the 113.00-113.10 zone, above which the pair could trade towards the 113.80 level.

On the other hand, a downside break below the trend line and 111.80 may possibly push the pair towards the 111.00 support.

Fundamentally, the US Durable Goods Orders report for Sep 2018 was released by the US Census Bureau. The market was looking for a decline in orders by around 0.9%.

The result was positive as the US Durable Goods Orders increased by 0.8% in Sep 2019, but it was less than the last revised reading of +4.6%.

Overall, the market sentiment supports the US Dollar, which means pairs like EUR/USD and GBP/USD may perhaps continue to struggle in the near term.

Economic Releases to Watch Today

• US Gross Domestic Product Q3 2018 (Preliminary) – Forecast 3.3% versus previous 4.2%.
• US Personal Consumption Expenditures Prices for Q3 2018 (QoQ) (Preliminary) – Forecast +2.0%, versus +2.0% previous.
• US Core Personal Consumption Expenditures for Q3 2018 (QoQ) (Preliminary) – Forecast +1.8%, versus +2.1% previous.