CHN.Cash - Chart of the Day

Today, Chinese stock markets are falling sharply, with CHN.cash down almost 1%. Economic data is weaker than expected. Excluding oil, exports from Singapore, the world's biggest port, dropped 3.8% month over month, which is worse than the 4.2% growth predicted and the previous 3.2% drop. This shows that some economic indicators are weakening for a longer period. China, which depends a lot on demand from Western countries, especially the US, could suffer greatly if demand from developed economies decreases, for instance, due to a recession. The fact that fewer goods are leaving China each month might indicate a wider problem. How a declining Chinese market affects global fund managers' portfolios is a big question because China's economic weakness is somewhat separate from other 'emerging markets'.

Another risk factor was the nearly 20% drop in Evergrande shares at the start of the Chinese session. Although they recovered their losses, it raised wider concerns about China's real estate sector. Country Garden, which is financially troubled, faced two major challenges: the initial deadline for interest payments on more than $50 million in dollar bonds and the end of a creditor vote on a proposal to extend repayment of debt in yuan. While property sales in China increased month over month in August, other key indicators like new housing starts, total construction area and real estate investment continued to fall. Data from the 70 biggest cities show that property prices fell in most cities.

Looking at the CHN.cash chart, we see that supply is maintaining the overall downward trend line and became active again last time at 7000 points. The rebound lost momentum at 6700 and now sellers are back in control again, who may want to test the 61.8 Fibonacci retracement of the upward wave from fall 2022 at 6000 points again. Alternatively, if this support breaks downwards it could lead to a test of 6750 points, which are near 5750 points - 61.6 Fibo retracement. To break the current trend, buyers would have to push the index above the SMA200, which is now at 6672 points.

USDCAD Technical Analysis

Inflation rates have increased due to a rise in gasoline prices. The inflation rate for the year ending in August was 4.0%, up from 3.3% in July. This was slightly higher than what economists predicted, which was 3.8%. From July to August, inflation increased by 0.4%, which was a bit more than the expected 0.3%, but less than July's 0.6%.

Core inflation, which excludes volatile items like food and energy, also increased to 3.3% from 3.2% in July, but it was less than the expected 3.5%. On a monthly basis, core inflation decreased to 0.1% from 0.5%.

Despite these changes, it's still expected that the Bank of Canada (BoC) will not change interest rates at their next meeting. However, the chances of a rate increase have gone up to about 43%. But with unemployment rates rising since May and signs of slower economic growth, a rate hike is still not likely.

The USDCAD currency pair has recently experienced a bounce from the support area at 1.338. This upward movement suggests that bullish traders might be gearing up to test the resistance level at 1.35. However, it’s important to note that the overall trend appears to be bearish.

The bearish outlook remains valid as long as the pair continues to trade within the daily downward channel. This means that despite the recent bounce, we could still see a continuation of the downward trend.

GBPUSD Analysis

The GBPUSD, also known as Cable, dropped to its lowest level since May 26 on Tuesday. This was due to the UK's inflation rate in August being lower than expected.

The yearly CPI (Consumer Price Index) fell to 6.7%, which is the lowest it's been since February 2022. This was a drop from 6.8% in July and was lower than the predicted increase of 7.0%. The core inflation rate, which doesn't include fluctuating components, also fell to 6.2% in August. This was lower than the predicted 6.8% and the 6.9% from the previous month.

Even though inflation is still high (more than three times the target of 2%), the data from August gives some hope. It also gives some relief to the Bank of England, which was expected to raise interest rates for the 15th time in a row at a policy meeting on Thursday. Now, there's a 50-50 chance that they might not raise rates this time.

However, there's still a risk of inflation increasing again. This is because oil and food prices are still going up, which keeps adding to inflation and might lead to more policy tightening.

The daily chart shows a bearish trend. However, the price is nearing a key short-term support level at 1.2307 (the lowest point on May 25), and this could slow down the downward trend because the market is oversold.

Any increase in price is likely to be limited by the broken 200-day moving average (1.2432) to keep the overall downward trend intact. If the price falls below the 1.2307 level, it could lead to a deeper correction of the larger uptrend from 1.0348 to 1.3141, and could potentially reach 1.2074 and 1.2000 (a key psychological level).

On the other hand, if the price consistently stays above the 200-day moving average, it could signal a stronger correction. A rise above the important 1.2500 level could indicate a possible trend reversal.

The market is waiting for the Federal Reserve's decision (expected later today and likely to remain unchanged) and a more important decision from the Bank of England on Thursday. The British pound could face more downward pressure if the Bank of England decides not to raise interest rates this time. However, if the central bank decides to raise rates again and maintains a hawkish stance, it could boost the currency.

Resistance levels: 1.2432; 1.2482; 1.2504; 1.2522.
Support levels: 1.2332; 1.2307; 1.2274; 1.2190.

USD 100 - Chart of the day

With the BoJ's decision, the cycle of publishing monetary decisions of major central banks this week comes to an end. The markets reacted volatile to them, but overall, the indices recorded losses on a weekly basis. The relatively hawkish Fed and its published new dot-plot indicated the possibility of one more hike this year and the postponement of the first-rate cuts. The overtones of this conference broadly affected sentiment around the US100 index and TNOTE.

The US100 index has been recording declines, which have reached, from the perspective of technical analysis, important support zones set by the 100-day exponential moving average (purple curve), which, it is worth mentioning, have not been tested for nearly 6 months. Moreover, the declines themselves are directly driven by the selloffs observed in the debt market, which has historically shown a correlation with the listings of technology companies.

US30 - Chart of the day

Investor confidence in the US stock market has been declining since the latter half of the third quarter. This is partly due to the Federal Reserve's aggressive stance and Chairman Powell's statements, which have led to a rise in bond yields. In fact, 10-year treasury yields have hit a 16-year high of 4.54%. If the economy remains stable, these yields could continue to rise.

The stock market, including the Dow Jones Industrial Average (DJIIA or US30), is losing value as the risk-free rate increases and the economic growth outlook becomes uncertain. Major institutions like S&P and the Conference Board predict a slowdown in US GDP growth in 2024.

There are also concerns about China's real estate market, particularly the default of Evergrande, and potential political crises in the US over the federal budget. A government shutdown, which has happened 18 times since 1977, could slow economic growth and delay the release of economic data. Credit rating agency Moody's warns that such events could lead to a downgrade of the US credit rating.

Looking at the US30 chart, the price is close to the 200-day Simple Moving Average (SMA200) level, which is around 33,932 points. The price has also fallen below the 100-day Simple Moving Average (SMA100) for the first time since May. If the price doesn't rebound, it could test the 23.6% Fibonacci retracement of the March 2020 upward wave at 32,400 points. Historically, the price's behavior around the SMA100 and SMA200 has often indicated buying opportunities or periods of weakness.

EURUSD

Several economic reports from the United States were released at 3:00 pm BST today. The most anticipated was the Conference Board report, which was projected to show a slight decline compared to August. However, the actual report revealed a more significant drop than expected, from 106.1 to 103.0.

In addition to the Conference Board data, investors also received the Richmond Fed index for September and new home sales data for August. The Richmond Fed index was a pleasant surprise, while the new home sales data was slightly lower than anticipated.

- **Conference Board consumer confidence index for September**: 103.0, lower than the expected 105.5 (previous figure was 106.1)
- **New home sales for August**: 675k, lower than the expected 700k (previous figure was 714k)
- **Richmond Fed index for September**: +5, significantly better than the expected -6 (previous figure was -7)

Following the release of this data, the USD experienced a slight decline. However, the market reaction was minimal, with EURUSD increasing by approximately 0.05% in the initial minutes of trading, while USDJPY fell by around 0.1%. The stock markets largely disregarded the data.

USDJPY Technical Analysis

The Japanese yen remains weak against most currencies, including the USD, EUR, and CAD. Coupled with the strengthening dollar, the USDJPY rate is entering higher territories and is currently approaching the historical high of 151.7. Leading representatives of the Japanese government and the Central Bank have repeatedly indicated that the yen is currently too weak.

Today, Japanese Finance Minister Shunichi Suzuki again warned against speculative trading of the yen, which is approaching an 11-month low with USDJPY close to the 150 level. Although the minister did not confirm any plans regarding interest rate control or intervention, he leaves all options open to address excessive currency volatility.

However, an open question remains regarding an agreement with the US government concerning BoJ intervention, which would likely be necessary before any significant actions. For this reason, many analysts argue that the bar for intervention is set higher this time than the last and beyond market current expectations.

Looking at the USDJPY chart, we see that the rate is approaching its historical peak and the psychological level of 150. However, comparing the USDJPY rate to the dollar index, one can notice that reaching the current levels is not only due to the strengthening dollar but also a greater depreciation of the yen compared to October 2022. Currently, the dollar remains 7.5% lower than its peak last year.

Today’s Forex Focus: GBPUSD Pair

The GBPUSD pair is currently experiencing a positive trading trend, testing the MA 50. This situation calls for caution in the upcoming trades. For the bearish trend to remain valid today, it’s essential for the price to return below the moving average. However, a close above the moving average could propel the price towards additional gains, potentially reaching 1.2280.

The Stochastic indicator is clearly losing its positive momentum, which bolsters the chances of a decline. It’s worth noting that our anticipated target stands at 1.2030. The expected trading range for today lies between the support level at 1.2040 and the resistance level at 1.228. The forecasted trend for today is bearish.

Silver

Silver prices have been rising strongly, boosted by lower bond yields, a weaker US dollar, gains in the Chinese market, and a generally better mood in global markets.

The future looks bright for silver due to increased demand from the solar power industry and limited supply from major mines. ANZ Research predicts that by 2025, solar power will increase silver demand to 225 million ounces, up from an estimated 161 million ounces in 2023.

Today's rise in silver prices is mainly due to global factors and speculators covering their short positions, expecting silver prices to fall further. Silver has been under pressure for several days due to the strong dollar and high yields.

As markets become more confident that interest rates may have reached their peak, some analysts predict that silver prices will rise if monetary policy is gradually relaxed worldwide.

Will solar energy increase the demand for silver?

According to the Silver Institute, the silver market had a deficit of 237.7 million ounces in 2022, and this deficit is expected to continue in the coming years. However, large inventories and holdings of individuals and investors are filling this gap.

Silver Institute analysts say that demand for silver from photovoltaic (PV) cells used in solar panels has tripled over the past eight years to 160 million ounces. This represents 14% of total silver demand in 2023, compared to 5% in 2014. There is a risk that the amount of silver used in panels could be reduced if prices become too high for producers, but there is limited scope for reduction given the usefulness of the metal.

Looking at the silver price chart, we can see that the price has risen above the 38.2% Fibonacci retracement of the upward trend from March 2020 and is now close to surpassing all three key moving averages, which are almost at the same level of $23.4 per ounce. If prices break above these averages, it could signal a potential rebound towards $25.7, where we see the 23.6% Fibonacci level. On a daily basis, despite today's strong increases, the RSI indicator is just over 53 points. The area around $22.5 has been a strong support for buyers in recent months - a possible decline around this level could signal longer-term weakness.

Looking at the SILVER chart and the dollar index (USDIDX, gold color), we see that a strong upward impulse has re-emerged as the dollar reduces the recent very strong gains. At the same time, the trend line has been maintained.

Tesla

Wall Street is expected to open lower, with futures indices erasing earlier gains. Investors are shifting towards lower-risk positions as US 10-year bond yields surge and the dollar strengthens.

Final PMI data indicates a contraction phase in major economies despite better than expected results from Europe. US Manufacturing PMI improved due to increased employment and better supply availability, but inflation concerns persist due to rising producers' costs.

US ISM Manufacturing PMI shows contraction for the 11th month in a row, despite some recovery signs. While demand remains soft, production improved, and suppliers retained capacity. Discrepancies between ISM and PMI prices underscore the rapidly changing environment.

Goldman warns of the impact of rising rates on US corporate profits. Kevin McCarthy faces pressure from Joe Biden to fund Ukraine and from Matt Gaetz to cut government spending. Bill Ackman plans to pursue a deal with Elon Musk's X through Pershing Square's SPARC.

The US500 index is trading at 4320 points, down 0.20%, with selling pressure preventing recovery. It's set to retest the critical 4300 support zone.

Tesla's shares fell 4.0% as Q3 deliveries and production fell short of estimates. The company delivered 435,059 vehicles and produced 430,488, attributing the decline to planned factory upgrades. However, Tesla's 2023 volume target of 1.8 million vehicles remains unchanged.

Oil Analysis

Oil prices have been dropping for four days straight after reaching their highest point in 13 months. The price of a barrel of WTI oil almost hit $94, as buyers tried hard to keep prices high.

This seems to be the third increase in prices since they fell in June. Starting from last Thursday, any attempts to raise the price during the day have been stopped by large sell orders. On Tuesday, WTI's price briefly fell below $87, which is 7.5% less than the highest point last week.

Worries about a slowing world economy led to large sell orders that stopped any attempts to raise the price during the day. This constant pressure seems to be more than just a temporary cooling off of the market and fits the usual pattern of three downward movements.

Last month, there was a divergence on the daily RSI timeframe when a higher price peak happened at the same time as a lower oscillator peak. This often means that bullish momentum is running out. It's also worth noting that the index has already moved away from the overbought zone, which shows the start of the decline.

The next potential drop in price could be to the $84.4 per barrel area. The 50-day moving average is around this area, as are the price peaks from early August and mid-April.

However, oil prices could drop even further. The slowing global economy and decreasing final demand are now working against it. Moreover, oil has been rising against a rising dollar and falling markets for a long time. And now it might catch up with the falling markets with even greater force.

An important signal from exporters: there were reports last month of increased oil exports from Russia and Saudi Arabia, which reduced the market deficit and raised questions about whether the cartel's production limit is really as strict as it seems.

More solid support for oil might only come with a drop to $78. That's the 50-week moving average, but we wouldn't be surprised to see a drop to $75 by the end of the year. These are high levels by historical standards, but they no longer seem like they're holding back the economy or a good reason for further policy tightening.

From a global perspective, lower oil prices will now be good for equity indices rather than a sign of decreasing risk appetite, as is usually the case.