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Australia's retail sales turnover increased by 0.7% mom in August, surpassing the expected rise of 0.4% mom. On a year-over-year basis, retail sales were up 3.1%. This stronger-than-expected growth was largely attributed to unusually warm weather, which boosted spending on items typically associated with spring.

Robert Ewing, head of business statistics at the Australian Bureau of Statistics (ABS), explained that “this year was the warmest August on record since 1910, which saw more spending on items typically purchased in spring." Categories that saw increased demand included summer clothing, liquor, outdoor dining, hardware, gardening supplies, camping gear, and outdoor equipment.

Full Australia's retail sales release here.

Key Highlights

• WTI Crude Oil price started a fresh decline from the $73.25 resistance.
• It traded below a key bullish trend line with support at $72.20 on the 4-hour chart.
• Gold started a downside correction from the $2,685 high.
• Bitcoin dipped after the bulls struggled above $66,000.

WTI Crude Oil Price Technical Analysis

WTI Crude Oil price recovery stalled near the $73.25 resistance zone. The price started a fresh decline and traded below the $72.00 level.

Looking at the 4-hour chart of XTI/USD, the price traded below a key bullish trend line with support at $72.20. It settled below the $72.00 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour).

There was a clear move below the 61.8% Fib retracement level of the upward move from the $65.51 swing low to the $73.26 high. The bulls are now trying to protect the $67.65 support.

On the downside, the first major support sits near the $67.35 level. It is close to the 76.4% Fib retracement level of the upward move from the $65.51 swing low to the $73.26 high. A daily close below $67.35 could open the doors for a larger decline.

The next major support is $65.50. Any more losses might send oil prices toward $60.00 in the coming days. On the upside, the price might face resistance near the $70.00 level.

The next major resistance is near the $71.50 zone, above which the price may perhaps accelerate higher. In the stated case, it could even visit the $72.20 resistance. Any more gains might call for a test of $73.25.

Looking at Gold, the price formed a short-term top near $2,685 and recently started a downside correction below the $2,665 level.

Economic Releases to Watch Today

• Germany’s Manufacturing PMI for Sep 2024 - Forecast 40.3, versus 40.3 previous.
• Euro Zone Manufacturing PMI for Sep 2024 – Forecast 44.8, versus 44.8 previous.
• US ISM Manufacturing Index for Sep 2024 – Forecast 47.5, versus 47.2 previous.

NZIER Quarterly Survey of Business Opinion reveals significant improvement in business confidence in New Zealand during Q3. A net 5% of firms now expect deterioration in general economic conditions, a stark improvement from the net 40% expressing pessimism in the June quarter.

Firms are still facing challenges in demand. A net 31% of businesses reported weaker trading activity. However, looking ahead, only a net 2% of firms expect activity to decline in the next quarter.

This shift in sentiment comes as firms anticipate more supportive economic conditions following RNBZ's decision to begin cutting interest rates in August, with expectations of further reductions in the coming year.

Cost pressures remained present, with a slight increase in the proportion of firms reporting higher costs. However, pricing power has diminished significantly, with only a net 3% of firms able to pass on these costs to consumers, compared to 23% in the previous quarter.

Full NZIER QSBO release here.

Japan's Manufacturing PMI for September was finalized at 49.7, marginally lower than August's reading of 49.8, signaling continued contraction in the sector.

According to Usamah Bhatti from S&P Global Market Intelligence, the data reflected "muted trends" in Japan's manufacturing industry. Both output and new orders remained in negative territory, while the rate of job creation "slowed to a crawl."

While businesses expressed optimism about output growth over the next 12 months, the level of optimism softened, marking the weakest positive outlook since the end of 2022. Some manufacturers highlighted concerns over the "timing of a demand recovery," reflecting cautiousness in the face of global and domestic uncertainties.

Full Japan PMI manufacturing final release here.

Japan's Q3 Tankan Large Manufacturing Index remained steady at 13, unchanged from Q2 and in line with market expectations, indicating stability in the country's manufacturing sector. Manufacturers’ outlook for the next three months improved slightly to 14, signaling cautious optimism about future business conditions.

Large Non-Manufacturers Index showed a modest rise to 34, up from 33 in June, surpassing expectations of 32. However, the outlook for non-manufacturers over the next three months dipped to 28, reflecting some uncertainty in the service and retail sectors.

Capital spending plans by big companies were revised down, with firms now expecting a 10.6% increase for the fiscal year ending in March 2025. This is below the median forecast of an 11.9% rise and down from an 11.1% forecast three months ago, suggesting some cooling in business investment intentions.

The Tankan survey results will be closely monitored by BoJ as it prepares for its monetary policy meeting on October 30-31, where it will set new growth and inflation forecasts.

Full Japan's Tankan release here.

The Summary of Opinions from BoJ's meeting on September 19 and 20 acknowledged that while outlook for Japan's economic activity and inflation will guide future changes in monetary accommodation, policymakers remain vigilant about developments in overseas economies, particularly the US, and their potential impact on Japan's financial markets and price stability.

With Yen's depreciation retracing and import price pressures easing, one view noted that BoJ has "enough time to assess the situation". Another opinion stressed that Japan's economy is not at risk of "falling behind the curve" if interest rates are not raised swiftly. BoJ should not raise interest rate when "financial and capital markets are unstable".

Another member suggested that while price stability has not yet been achieved and uncertainties persist, a shift to "full-fledged monetary tightening" would be undesirable at this stage.

However, a contrasting opinion within the BoJ indicated that if economic conditions remain stable and the outlook is confirmed, it would be preferable for the bank to raise rates "without taking too much time."

This divergence highlights the ongoing debate within BoJ about the timing of future rate hikes.

Full BoJ summary of opinions here.

Fed Chair Jerome Powell made it clear during a speech at the NABE conference that FOMC is "not a committee that feels like it is in a hurry to cut rates quickly."

Powell noted that if the economy evolves as expected, Fed could enact "two more cuts" by the end of the year, reducing the policy rate by an additional half a percentage point. He reaffirmed that the US economy is on track for a continued slowdown in inflation, which should allow the Fed to reach a neutral interest rate level "over time."

"Disinflation has been broad-based," Powell said, citing recent data that shows progress towards Fed's 2% inflation target.

However, Powell stressed that Fed is "not on any preset course" and will assess risks on both sides of the economy. "We will continue to make our decisions meeting by meeting," he added.

Chicago Fed President Austan Goolsbee highlighted Fed's outlook for an extended period of monetary easing in an interview with FOX Business overnight.

He noted, "this is a process over a year or more that we're trying to get the rates down to normal."

He also pointed out that the Fed's latest forecasts suggest "a lot of cuts" ahead, with policymakers aligned on this approach.

Fed has already begun easing, cutting its policy rate by 50bps at last meeting, bringing it to the 4.75%-5.00%.

Goolsbee refrained from committing to a specific rate cut size at the upcoming November meeting, stressing that the overall process of returning rates to more "normal" levels is the focus.

Additionally, Goolsbee noted cautionary signals in the labor market, though he remarked that the current unemployment rate of 4.2% appears to be at a sustainable level.

In an interview with Reuters overnight, Atlanta Fed President Raphael Bostic outlined his expectations for a gradual, "orderly" easing of monetary policy over the next 15 months. His baseline scenario sees policy rate falling to a range of 3.00% to 3.25% by the end of 2025, a level he considers neutral for the economy.

However, Bostic cautioned that a "much weaker" labor market could accelerate the pace of rate cuts. He emphasized that significant job market deterioration would "add urgency" to Fed's easing process, prompting another "dramatic move" such as the 50bps rate cut enacted in September.

Bostic also noted his close attention to job growth, stating that as long as the economy continues to produce net jobs and monthly job creation stays above 100,000, the labor market will likely remain on stable footing. This threshold, in Bostic’s view, is the minimum needed to absorb new entrants into the labor force.

• Gold prices fell due to a stronger dollar and end-of-quarter flows, despite being on track for the best quarter since Q1 2016.
• The market is awaiting US jobs data on Friday, which could impact rate cut expectations and the US dollar.
• Gold remains extremely overbought at present, will the NFP report inspire a deeper correction?

Gold prices slid this morning as a slightly stronger dollar and end of quarter flows weigh on the precious metal. Despite the drop off, Gold remains on course for its best quarter since Q1 of 2016, which recorded gains of 16% +.

Gold continues to find support as safe haven appeal and incoming rate cuts keep bulls interested. However, the drop to start the week could be down to a number of overlapping factors such as profit taking, repositioning and the recent rally in Chinese equities and emerging markets.

The stimulus announced by the PBoC is the gift that keeps on giving where China is concerned. The rally in Chinese equities could be impacting Gold as well, given the higher yield on offer. Gold remains in extremely overbought territory and thus further upside may also prove a challenge.

As things stand, markets could continue to range ahead of the jobs data on Friday. Any increase in rate cut expectations could lead to USD weakness. Current expectations have a 50 basis point cut in November at around 40%, down from 53% a day ago and could be partially responsible for the drop in the price of the precious metal.

Source: CME FedWatch Tool (click to enlarge)

Economic Data Ahead

Gold prices face many challenges at the moment, both positive and negative. Safe haven appeal for now appears to be waning yet a weaker US Dollar as we are seeing today does have the potential to keep gold prices on the front foot.

There is a host of US data this week including services data, however the biggest volatility and potential for a change will come on Friday when the US jobs report is released. Signs of improving jobs numbers and a drop in the unemployment rate could push the precious metal lower.

Later in the day we do have a speech from Fed Chair Jerome Powell which could stoke volatility if the Fed President touches on rate cut expectations moving forward.

Technical Analysis Gold (XAU/USD)

From a technical analysis standpoint, Gold is tough to read at the minute particularly where areas of resistance is concerned. As we continue to print fresh all time highs it makes it difficult due to the lack of historical price data to analyze.

To put things into perspective, the RSI on the daily, weekly and monthly timeframe are all in overbought territory. However, as we know an instrument can languish weeks and sometimes months in overbought territory on the larger timeframes so this seems to be irrelevant at present.

The psychological 2650 mark is the most immediate area of resistance i would keep an eye on  A break beyond that could open up a retest of last weeks and the all-time high print around 2685.50 before the 2700 comes into focus.

Looking at support and the 2625 area has been key over the last couple of days and could still serve as a base for gold prices. This may be a level worth monitoring moving forward.

GOLD (XAU/USD) Four-Hour (H4) Chart, September 30, 2024

Source: TradingView (click to enlarge)

Support

• 2625
• 2600
• 2585

Resistance

• 2650
• 2675
• 3000