- US Markets
From a fundamental standpoint, upbeat earnings reignited AI momentum in the markets. However, the rally cooled slightly last week as Meta fell 11% on Wednesday and Microsoft slipped due to higher AI related capex. Jerome Powell’s comments added uncertainty, noting that December rate cuts are not guaranteed but acknowledging that the labour market is losing momentum, which could eventually lead the Fed toward easing. Meanwhile, U.S.-China talks brought modest optimism after China agreed to resume U.S. soybean imports and to maintain rare-earth exports. However, concerns over the U.S. government shutdown are now weighing slightly on sentiment amid a critical economic data blackout.
Technically, a gravestone doji appeared on the weekly chart, suggesting possible short term exhaustion. The SPX remains supported at the 8-day SMA around $6884. A break below this level could open the door to the 21-day SMA near $6746.09, while holding above the 8-day could lead to a retest of the all-time high resistance at $6924.
- US Dollar IndexÂ
The dollar’s rally has been underpinned by hawkish remarks from Fed Chair Jerome Powell following the Fed’s decision to cut interest rates last week. He cited the risk of making additional moves without a better understanding of the current economic picture amid the second-longest US government shutdown, boding well for the dollar as traders quickly adjusted their expectations for a December rate cut. We have seen the odds of an additional 25-bps rate cut at the December FOMC meeting fall to 67.2%, from a high of 94.4% a week ago, according to the CME FedWatch tool. The government shutdown is again expected to delay key macro-economic data like the Nonfarm payrolls or JOLTS job openings. Hence, focus this week would shift to private job market reports like the ADP Nonfarm employment change to gauge the health of the US labor market.
From a technical standpoint, the dollar’s recent strength suggests a bullish momentum with an RSI of 65. Additionally, the index gave a breakout above the previous high of 99.56 from 9th October, along with a breakout from a downward sloping trendline connecting the highs of 29th May, 31st July, and 9th October, suggesting a bullish market structure yet again. Near term resistance could be seen near the 200-day EMA level around 100.02, a break of which could mark a reversal in the long term downward trend. The EUR/USD pair has fallen below the key 100-day EMA, suggesting an intermediate term bearish trend.
- Gold and Silver
Beijing’s decision to prevent some retailers from offsetting VAT while offloading gold purchased from the Shanghai Gold Exchange and Shanghai Futures Exchanges has opened the door for further corrective dips in gold. The Fed struck a less dovish tone at the October FOMC, which is expected to keep gold in a consolidation phase until the next catalyst emerges. But despite near-term headwinds, the longer-term bullish trend remains intact. Although gold has fallen over 8% from its October peak of $4,381.48, it remains higher by over 50% YTD.
Gold is up 0.42% at $4,020, with immediate 50-SMA resistance at $4,026 on the 4-hour chart. The precious metal has 21-SMA support at $3,993 on the 4-hour chart, which aligns with the late October lows. The next 200-SMA support on the 4-hour chart is at $3,971.
Silver is up 0.64% at $48.98. It faces 21-SMA resistance at $49.64 on the day chart, a level that has capped gains since late October. Silver is consolidating above the 50 RSI level, signalling that positive momentum is building. It has support at $48.24, with the next support at $47.28.
- Â Crude OilÂ
The OPEC+ announcement fuels market confidence that the coalition is headed in a constructive direction towards balancing supply in the face of seasonally weakened demand. In addition, geopolitical risks and concerns of supply disruptions are becoming an increasing factor supporting market sentiment, after reports of a Ukrainian drone attack on a Russian oil port located in the Black Sea surfaced. Meanwhile, traders await Tuesday’s API inventory data, as the report may provide new information on near-term price direction. With a supportive market sentiment and API data due, there looks to be near-term tests of higher price levels, assuming geopolitical tensions persist.
From a technical standpoint, the WTI remains bullish on its daily chart, trading above its 9-day and 21-day SMA levels. Resistance is seen at the 50-day SMA at 62.21, while WTI can find support at the 9 SMA at 61.08. As for Brent, support lies at 63.45, a point tested multiple times in the previous week, and resistance is seen at 66.32, on a downward sloping trendline formed by connecting the highs of June 23 and Sept 26.
