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Unlike the RBA yesterday, the Reserve Bank of New Zealand met expectations by raising its key rate by 50 points to 3.5%. Having started raising the rate a year ago, the RBNZ accelerated the move from 25 to 50 points in April, bringing it to the cyclical highs of 2014-15.

The Reserve Bank cites too high core inflation (without food and energy) and labour shortages as reasons for further rate hikes. And here, it is worth remembering that at its peak in 2007/08, New Zealand’s key rate reached 8.25%, and cyclical lows in 2002 and 2003 were 4.75% and 5.00%, respectively. In other words, the New Zealand economy is more suited to high rates than many.

The NZDUSD is gaining 2.6% so far this week and feels quite comfortable since the beginning of the day, in contrast to the pullback in the dollars on Wednesday morning. On the daily charts, the two September lows formed a double bottom. From roughly the same levels, we saw an intensification of buying in the Kiwi in March 2020.

That said, the NZDUSD position remains quite fragile and the initial bounce in the pair could quickly stall if the bears remain the dominant force in the world markets. Cautious traders to confirm a change of trend from bearish to bullish should wait for the pair to strengthen from the current 0.5740 to levels above 0.6000, where the 50-day average and the former support are concentrated besides the beautiful round level.

The WTI oil is consolidating within a narrow range on Wednesday, after the recent recovery rally peaked at $86.94 (the highest since Sep 15), taking a breather ahead of today’s OPEC+ meeting, which is expected to provide fresh signals.

The cartel had a proposal of stronger production cut on its table for some time, with expectations for a 2 million barrels per day cut to boost oil prices.

The recent discussions between the OPEC+ member countries lacked consensus, as some producers are unable reach their production quotas, while the United States are opposing the plan.

In addition, the US prepared a letter to order stopping exports in attempts to keep oil prices lower ahead of mid-term elections, though faced strong opposition from US oil trade groups, which urge the administration not to proceed with the plan.

Technical view shows improving daily studies, as daily MA’s (10/20/30) turned into bullish setup and 14-d momentum emerged into positive territory that support near-term action.

Bulls probe through 50% retracement of $9762./$76.25 bear-leg, close above which would generate bullish signal and open way for attack at $89.46/$90.00 pivots (Fibo 61.8% / psychological).

Res: 88.67; 89.46; 90.00; 92.58.
Sup: 85.54; 84.41; 83.30; 81.68.

S&P500 index futures are trading 6% above the lows set at Monday’s start of the day. Such a solid start for the new month, quarter and financial year in the US is helped in no small part by the low base, as the index ended September at the lows since November 2020, below the 3,600 mark.

The powerful two-day rally suggests that we could see the start of more than just a portfolio shakeout at the start of a new period.

On the bulls’ side, there is another revival of hopes that the monetary watchdogs in the USA and other developed countries will slow down their policy tightening.

The “worse is better” rule was in full effect in the markets yesterday. Markets treat the sharpest drop in job openings as a possible excuse for the Fed to move from a 75-point rate hike to a 50-point step. However, such hopes are overly speculative for a couple of days. There will be official labour market data to which the Fed is paying much more attention.

Nevertheless, we note that the buyers in the S&P500 appeared just after touching the significant 200-week moving average, which was near the 3600 level. The market bounced back from this curve in 2018, 2016 and 2011. A correction towards the 200-week moving average made the stock an attractive buy in all those cases and in the long period from 1980 to 2001. This is how the market tries to stay within the patterns formed after the global financial crisis. In 2020, the panic of covid uncertainty took the market lower, followed by a robust response from governments and central banks that returned the markets to growth within weeks.

In addition to the 200-week average, the stock was helped by the oversold conditions over the past few months, where so many sellers were piling up that it was difficult to find new ones.

However, the bull market has yet to prove itself. Moving from the weekly to the daily chart, we can see that the last sell-off started in mid-August and failed to get above the 200-day MA. The first technically solid sign of a break of this trend would be for the S&P500 to consolidate above 3900 (61.8% of momentum).

The potential buyers should pay more attention to the index’s performance around 4000, where the 50-day average is hovering, and around 4200, with the 200-day average near. Only firm buying from these levels will indicate that we are witnessing a fundamental reversal of the market sentiment and not a rally in the bear market. In turn, only a change in the tone of the Fed and other central banks could perhaps support such buying.

Gold drifted lower and back into the broken 2022 bearish channel after its two-day exciting rally stalled at 1,729 – the highest since September 13.

The RSI and the stochastics have abandoned the overbought region, raising concerns that the latest bullish wave has probably peaked. The weakness in the MACD is also endorsing the current negative momentum in the price.

Nevertheless, sellers would not be ruining the short-term positive trajectory unless they drive forcefully below the 200-period simple moving average (SMA) and the bullish channel at 1,698. The 20-period SMA is also converging on that area. In case the decline officially violates the upward pattern below the 38.2% Fibonacci of 1,688, the price may seek shelter around the former resistance of 1,676. If it fails to rebound here, the 50-period SMA, which coincides with the 23.6% Fibonacci retracement of the 1,807–1,614 downtrend, could next come to the rescue at 1,660.

In the bullish scenario, where the precious metal bounces back above the 50% Fibonacci of 1,711, the bulls may attempt to reach the cautious zone of 1,735–1,746. A decisive close higher could confirm additional gains towards 1,765.

To summarize, gold traders are engaging in profit-taking after a strong rally earlier this week, but the market

Bulls are taking a breather under new highest since Sep 15 as recent rally faced headwinds on approach to 1.1500 barrier.

Fundamentals work in favor of pound, as U-turn in government’s plan to cut tax to the highest rate of income boosted the sentiment, while traders expect fresh signals from Fed, after the latest data showed signs of wobbling US economic growth that would prompt the central bank to reduce the pace of tightening, in the fight against high inflation.

The dollar will lose strong support in such scenario that would further boost pound’s near-term recovery.

Traders started to collect profits after six consecutive days of rally, on overbought conditions on daily chart and awaiting fresh signals.

Dips face initial support at 1.1285 (20DMA, reinforced by bull-cross with rising 5DMA), with extended pullback to find firm ground above 10 DMA (1.1090) and keep near-term bulls in play for fresh push towards pivotal barriers at 1.1500/50 (round-figure/Fibo 61.8% of 1.2293/1.0348 descend).

Recovery is also supported by long-tailed candles of last week and month which showed strong rejection after pound hit a record low vs dollar, however, the developments on fundamental front are expected to remain a key driver.

Res: 1.1500; 1.1550; 1.1590; 1.1738.
Sup: 1.1379; 1.1321; 1.1285; 1.1225.

According to an Ifo survey, price expectations of German businesses rose from 48.1 to 53.5. The balance is obtained by subtracting the percentage of companies that want to lower their prices from the percentage of those that want to raise their prices.

For food industry, the indicator rose further from 96.9 to 100, meaning that a 100% of food companies are expecting to raise prices.

"Unfortunately, this probably means the wave of inflation isn't about to subside," says Timo Wollmershäuser, Head of Forecasts at ifo. "Especially when it comes to gas and electricity, the price pipeline is not yet exhausted."

Full release here.

UK PMI Services was finalized at 50.0 in September, down from August's 50.9, weakest reading since February 2021. PMI Composite was finalized at 49.1, down from prior month's 49.6, lowest since January 2021.

Tim Moore, Economics Director at S&P Global Market Intelligence: "September data highlighted an absence of growth in the UK service sector for the first time in 19 months as the energy crisis continued to hit business and consumer spending.... Service sector businesses trimmed their growth expectations to the lowest seen for nearly two-and-a-half years in September, which survey respondents linked to concerns about falling disposable income and the unfavourable global economic outlook."

Full release here.

Eurozone PMI Services was finalized at 48.8 in September, down from August's 49.8, a 19-month low. PMI Composite was finalized at 48.1, down from prior month's 48.9, a 20-month low.

Looking at some member state, Ireland PMI Composite rose to 52.2 while France rose to 51.2. But Spain dropped to 48.4 (8-month low). Italy dropped to 47.6 (20-month low). Germany dropped to 45.7 (28-month low).

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: "Any hopes of the eurozone avoiding recession are further dashed by the steepening drop in business activity signalled by the PMI. Not only is the survey pointing to a worsening economic downturn, but the inflation picture has also deteriorated, meaning policymakers face an increasing risk of a hard landing as they seek to rein in accelerating inflation.

Full release here.

NZDUSD finally jumped above the weekly resistance of 0.5730 to top at 0.5800 in the wake of the RBNZ's hawkish policy announcement early on Wednesday.

Although the pair has already reversed its advance, the RSI continues to build its uptrend above its 30 oversold level, signaling that the previous bearish wave in the price has probably bottomed out. Likewise, the MACD is extending its positive momentum above its red signal line, mirroring an improving short-term bias as well.

On the way up, the recovery may initially face some challenges between the 20-day simple moving average (SMA) at 0.5855 and the tentative descending trendline currently seen around 0.5900. If the bulls forcefully pierce through this area, the next obstacle could be found between 0.6000 and the 50-day SMA at 0.6078.

Should the bears retake control, pressing the price quickly below 0.5730, all eyes will turn again to the 0.5563 low. A durable extension beneath that bar would bring the pandemic 2020 trough of 0.5468 and the nearby constraining zone of 0.5415 back under the spotlight.

In brief, buying appetite may keep improving in NZDUSD in the short term once the price successfully overcomes the 0.5725 bar.

The British Pound started a fresh increase from the 1.1000 zone against the US Dollar. The GBP/USD pair was able to climb above the 1.1100 and 1.1200 resistance levels.

There was a close above the 1.1250 level and the 50 hourly simple moving average. It even spiked above the 1.1400 level and traded as low as 1.1489. The pair is now correcting gains, with an immediate support near the 1.1420 level.

On the downside, an initial support is near the 1.1420 level and a connecting bullish trend line. The main support is forming near 1.1280 on FXOpen. A break below the 1.1280 support could even push the pair below the 1.1220 support.

On the upside, the first major resistance sits near the 1.1480 zone. If there is a clear upside break above the 1.1480 resistance, the pair could rise steadily towards the 1.1550 level in the near term.