Once again the forex heatmap tells a story that was risk-off and equities across the board were lower as were commodities and their associated currency pairs. The US dollar caught a bid on better-than-expected data which was the main driver of today’s price action.
Market Wrap
The forex markets were signaling a weaker equities day today, as the yen had maintained its relative strength and the commodity pairs had stayed weaker across the board.
The biggest currency move was seen in the NZDUSD which dropped -0.75% against the US dollar as the US initial jobless claims data came in better than expected.
At 290k the US IJC are at a 19-month low, even with a slight revision higher in the previous week's reading. As workers seek positions with better pay, working conditions, and flexibility, the number of new job filings remains higher than pre-pandemic trends of about 210K.
According to advance seasonally adjusted numbers for the week ended October 9, insured unemployment decreased 0.1 percentage points from the previous week's revised rate to land at 1.8%. The number of unemployed in the same week also decreased by 122,000 from the previous week's revised level to 2,481,000.
The US dollar was slightly stronger today though it did break down below yesterday’s inside day, which could be construed as a bullish reversal if we close green. However, I remain bearish of the greenback until we get a close back above the $93.80-$93.90 zone as I see the swing low from 4th October as acting as significant daily resistance.
Today we heard from the Federal Reserve Board of Governors, Chris Waller, who noted that in the long-run inflation expectations remain anchored but that the Fed would have to act fast if these price pressures were persistent. Additionally, he said that with inflation up, the Fed is in a "tricky spot" and won't be able to concentrate solely on the employment market when making policy changes.
The price of oil dropped from a seven-year high as the price of WTI crude futures and Brent fell over 2% to $81.6 and 83.99 a barrel respectively. I had previously marked the $84.80 on Brent as a possible level for a bullish resumption towards the $90/$100 price level, but instead, the US dollars strength pulled the bids from under that level and then closed the trap door. Traders wait to see now if the current $83.50 level can let them back in for a second chance at higher prices today or whether the profit taking is going to commence and the bears turn up to push back down to value.
Vladimir Putin gave the market a shock when he stated that "The Organization of Petroleum Exporting Countries (OPEC) and its oil-producing partners (OPEC+) are raising oil production "a little more than they agreed to,"
But then he put the fear into everyone by saying a time may come when "the demand for oil will grow, and there will be no place to get it." In reference to a previous thought that not all oil-producing countries are able to quickly increase oil production.
The number of existing homes sold in the United States rose by 7% month-on-month in September to a seasonally adjusted annual rate of 6.29 million, according to the National Association of Realtors (NAR) report published on Thursday. There is still a strong demand for houses and if there are going to be interest rate hikes, home buyers will want to get in before the mortgage rates go up.
The AUDUSD looks to be coming down to test the daily 200 ema, as it has already created a bearish engulfing pattern. The 200 ema is approximately 20 pips below, so I expect a test of it by London open tomorrow and from there we will have to see if we can get a decent rejection.
The Weekly AUDJPY shows how strong the yen is currently versus the weaker Aussie today but in the bulls favor the ActivTrader sentiment Indicator is showing that 91% of traders on the platform are bearish of the pair, which suggest that prices are going to go a lot higher to stop these traders out. 83.80-84.00 seems to be the pivot level that extends back to prices most recently in the spring of 2021 but is actually a heavily traded level throughout the last 10 years or more.
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