Markets seem to be wobbling seeking for direction at the start of a busy week ahead. Five Central banks, (RBNZ, BoC, Fed, ECB and BoJ) are to release their interest rate decisions, the US is to release high impact inflation and growth data as is the Euro Zone, keeping traders attention alive. In the US equities markets, the earnings season is in full swing and tensions in the Middle East are rocking the international oil market.
MORNING OVERVIEW
As the American session, is about to start the calendar for today remains rather empty of high impact financial releases, allowing for fundamentals to have the upper hand on how the markets will move today. Market worries for inflationary pressures in the US economy remain present which on the one hand tends to support the USD, while at the same time seems outweigh on gold’s price and US stock markets. Oil traders on the other hand, maintain hopes for an easing of the tensions in the Middle East which tends to weigh on oil prices, yet at the same time tensions may escalate, which could lift oil prices.
MARKET SNAPSHOT
| MARKET | CURRENT | CHANGE | COMMENT |
| US 100 | 29127 | 0.58% | Market jitters for AI related trades tend to weigh on the US Tech sector |
| DE40 | 25434 | 1.00% | Germany’s Ifo indicator for October tended to imply a better outlook for the German economy |
| USD/JPY | 157.31 | 0.28% | USD/JPY seems to be strengthening in a signal of USD strength |
| Gold | 4020 | 0.65% | Worries for inflation in the US economy and the Fed’s intentions keep gold’s price subdued |
| Crude | 101.15 | -2.05% | Hopes for a possible easing of tensions in the Middle East weigh on oil prices |
KEY MARKET THEMES
01 — US equities correct lower
US equity markets have displayed mixed performance over the past week, with bearish sentiment prevailing in premarket trading. Investor confidence remains under pressure amid concerns over substantial capital expenditure on artificial intelligence infrastructure and persistent inflationary pressures. Market participants will closely monitor this week’s earnings releases from Alphabet and Microsoft on Wednesday, followed by Amazon and Intel on Thursday. Their financial results and forward guidance are expected to provide critical insights into corporate performance, AI investment sustainability, and the broader market outlook
Market implication (Nasdaq): Neutral
02 —Oil prices correct lower
Oil prices generally declined during Asian trading on Monday, retracing some of Friday’s gains. From a fundamental perspective, expectations of a potential de-escalation of hostilities in the Gulf region have weighed on market sentiment. However, geopolitical risks remain elevated, with attacks on vessels transiting the Strait of Hormuz reaching their highest level this month. Further escalation could intensify concerns over global oil supply disruptions, providing upward support for prices. Conversely, a sustained improvement in regional stability could ease supply concerns and exert additional downward pressure on oil prices.
Market implication (WTI): Bearish
03 — Gold’s price remains stable
Gold prices remain caught between competing market fundamentals as investors await the Federal Reserve’s interest rate decision on Wednesday. The decline in oil prices during today’s Asian session may have eased concerns over US inflationary pressures, providing modest support for the precious metal. However, the continued recovery in US Treasury yields, following last Thursday’s losses, is limiting gold’s upside potential by enhancing the relative attractiveness of interest-bearing assets. Meanwhile, safe-haven demand and gold’s traditionally inverse relationship with the US dollar appear to have limited influence on price action at this stage, with monetary policy expectations remaining the primary market focus.
Market implication (USD/JPY) : XAU/USD
WHAT MATTERS TODAY
N/A
WHAT MATTERS ON MONDAY
N/A
ASSET FOCUS
[XAU/USD, Commodities]
Gold’s price rose after bouncing on the 3978 (S1) support line. We maintain a bias for a sideways motion, between the S1 and the R1, of the shiny metal’s price at the current stage. Yet the RSI indicator despite correcting higher remains at relatively low levels, just above the reading of 30, implying a bearish market sentiment that could drag the precious metal’s price lower. Should the bears actually take over, we may see gold’s price breaking the 3978 (S1) support line and start actively aiming for the 3928 (S2) support level. Should the bulls have the upper hand we may see gold’s price breaking the 4035 (R1) resistance line and start aiming for the 4075 (R2) resistance level.
KEY LEVELS
- Resistance (R1): 4035
- Resistance (R2): 4075
- Support (S1): 3978
- Support (S2): 3928
Technical View: Neutral
CROSS-ASSET VIEW
| ASSET CLASS | BIAS | KEY DRIVER |
| US Equities | Bearish | AI data infrastructure cost worries |
| USD | Bullish | US inflationary pressures expectations |
| Gold | Neutral | Precious metal’s price caught between conflicting fundamentals |
| Oil | Bearish | Hopes for easing of Middle East tensions enhanced |
TRADING SPHERE VIEW
Bearish for oil prices
Our base case:
After Friday’s rally in oil prices, the commodity’s prices seem to correct lower, with oil traders not hiding their expectations for a possible easing of tensions in the Middle East. Also the fact that Russian refiners are ramping up production of diesel after the US-Russian deal, tends to ease worries for the supply side of the international oil markets.
What would change our view:
Yet tensions are ongoing in the Gulf region with Houthi rebels at the current stage actively threatening Saudi Arabia’s oil infrastructure and thus the supply side of the international oil market. A possible escalation of tensions in the area could reverse any losses suffered by oil prices since todays’ Asian session.
RISKS TO THE VIEW
High oil prices Given the high number of attacks on ships passing through the Strait of Hormuz and tensions being ongoing it could prove to be fairly easy for the oil market’s worries to intensify and thus oil prices getting some support .
