The main event of the day is set to be the US ISM non-manufacturing data.
MORNING OVERVIEW
The US ISM Non-Manufacturing PMI figure is due out today and could garner some interest. Yet the EUR is also in focus with Spain calling for early elections, and thus volatility may increase in the common currency. On the commodities front, the G7 has agreed to increase the oil supply by releasing some of their reserves, thus alleviating supply concerns.
MARKET SNAPSHOT
| MARKET | CURRENT | CHANGE | COMMENT |
| S&P 500 | 7710 | -0.15% | ISM Non-Mfg PMI |
| DXY | 102.17 | +0.24% | N/A |
| EUR/USD | 1.1204 | -0.47% | Spain’s early elections |
| Gold | 4162 | +0.52% | N/A |
| Brent Crude | 101.21 | -1.02% | N/A |
KEY MARKET THEMES
01 — US ISM Non-Manufacturing PMI data due today
The US ISM Non-Manufacturing PMI data is due to be released later on today. The data showcases the overall economic conditions in the non-manufacturing sector of the US economy. According to economists, the figure is set to come in at 55.1, which would be lower than the prior figure of 55.4. The release in itself could weigh on the dollar should it come in as expected or lower, yet we should note that as long as it remains above the figure of 50, it would still imply an expansion of the non-manufacturing sector. However, any figure above 55.1 could provide support for the dollar.
Market implication (USD): Bearish
02 — Yemeni Government pushes Houthi Rebels back
According to a report by Reuters, the Yemeni Government has launched a counter-offensive in a bid to seize back areas controlled by the Iranian-backed Houthi Rebels. According to Yemen’s President Rashad al-Alimi, the armed forces would press the offensive “until the country is liberated from the grip of terrorist militia”. Should the Government’s forces be successful in their endeavours to push back the Houthi Rebels, concerns about continued oil supply disruptions from the Houthi’s may ease, which could weigh on oil prices in the future.
Market implication (OIL): Bearish
03 — Spain calls for snap elections
Spain’s Prime Minister has called for early elections. The early elections are to be to be held on the 29th of November. The early elections come as the Spanish parliament on Friday rejected the government’s proposed bills to tackle the country’s housing crisis. Prime Minister Sanchez, during his address, stated that “We are going to work to earn back your trust, to bring hope and to win again”. Yet, when looking at polling data by POLITICO, the People’s Party, which is centre-right, currently leads at 34% versus 26% for Sanchez’s PSOE party. In turn, the early elections could give the PP the mandate to govern, possibly in a coalition with Vox who is currently third at 18% according to the same polling data.
Market implication (EUR) : N/A
WHAT MATTERS TODAY
US ISM Non-Manufacturing PMI figure for September
Time (GMT+2): 17:00
Expected: 55.1
Previous: 55.4
Potential market reaction:
Could weaken the dollar
ASSET FOCUS
[Gold / Commodities]
XAU/USD appears to be moving in a downwards fashion. We opt for a bearish outlook for the bullion’s price. Supporting our case is the RSI indicator below our chart which currently registers a figure below 40 implying a strong bearish market sentiment, in addition to the MACD indicator below our chart. For our bearish outlook to continue we would require a break below our 4080 (S1) support level, with the next possible target for the bears being our 3945 (S2) support line. On the other hand, for a bullish outlook we would require a clear break above our 4200 (R1) resistance line with the next possible target for the bulls being our 4350 (R2) resistance level. Lastly, for a sideways bias we would require gold’s price to remain confined between our 4080 (S1) support level and our 4200 (R1) resistance line.
KEY LEVELS
- Resistance (R1): 4200
- Resistance (R2): 4350
- Support (S1): 4080
- Support (S2): 3945
Technical View: Bearish
CROSS-ASSET VIEW
| ASSET CLASS | BIAS | KEY DRIVER |
| US Equities | Neutral | N/A |
| USD | Bearish | ISM Non-Mfg PMI figure |
| Gold | Bearish | 10YR Yields rising |
| Oil | Bearish | Oil supply increases |
TRADING SPHERE VIEW
Bearish for OIL
Our base case:
G7 and the Yemen’s Governments actions could alleviate concerns about oil supply and possible disruptions by the rebel’s which may weigh on oil prices.
What would change our view:
Strikes on oil refineries and oil pipelines
RISKS TO THE VIEW
US-Iran escalation
Should the US and Iran trade blows it may aid oil prices.
TODAY’S WATCHLIST
01 US ISM Non-Manufacturing PMI figure
