- Main drivers: Negative sentiment weighs on risk appetite again; UK unemployment improves as expected; German ZEW Economic Sentiment data due
- Mixed sentiment: Rising yields and elevated inflation fears are concerning equity investors. Wall Street fell once more last night and futures are lower again today. [Risk negative]
- UK employment data positive: UK unemployment fell as expected to 4.5% in the three months to August (from 4.6% in July). Wage growth dropped to +7.2% (from +8.3% in July). These are positive trends, but the key data point will be next month as the furlough government support scheme ended in September. [GBP supportive]
- Central bank speakers: FOMC’s Richard Clarida (permanent voter, dove) speaks at 1515GMT; and Raphael Bostic (2021 voter, hawk) speaks at 1630GMT.
- Data watch: German ZEW Economic Sentiment at 0900GMT expected to deteriorate for a fifth consecutive month in October to 27.9 (from 31.1 in September)
- Broad outlook: Equities lower, USD consolidating, a slight tick higher on gold and consolidation on oil.
- Forex: EUR/USD drifting into consolidation for now, but little real sign of any recovery. Trading under the four-week downtrend. Initial resistance 1.1585/1.1600. We prefer selling into strength and medium-term short positions for further downside towards 1.13/1.14. GBP/USD near term and intraday rallies continue to struggle for traction. Still attracted back towards 1.3570/1.3610. We prefer to sell into strength for medium-term short positions and a retest of 1.3520 initially. AUD/USD is now rallying as commodities look to move higher. Breaking through resistance around 0.7315 implies 0.7460, with resistance around 0.7410/0.7475. Initial support at 0.7290.
- Commodities: Gold is still unable to hold any upside traction, with resistance mounting between $1780/$1790. A close back under $1745 re-opens $1722 again. We still prefer using strength as a chance to sell. Silver is still unable to overcome key resistance $22.75/$23.00 that would open a recovery. With resistance intact and medium-term momentum indicators negative, we prefer short positions to retest $22.00 and $21.40. Brent Crude oil continues to move higher a test of the 2018 high of $86.95.
- Indices: Souring market sentiment is weighing on indices. S&P 500 futures have faltered under the five-week downtrend and a decisive move below 4364 re-engages selling pressure. Resistance mounting around 4365/4388 with near term rallies used as a chance to sell for a test of the key support band 4223/4295. DAX rebound has failed at resistance around 15,265 resistance and negative pressure is mounting for a test of 14,810/15,000 again. FTSE 100 still holding up relatively very well near term. However, resistance is growing around 7120/7160. The buyers are struggling to hold upside traction. Lacking direction.