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European indices face uncertain times as central banks take divergent stances, with the DAX showing signs of a potential correction. Source: Bloomberg DAX Indices European Central Bank Recession Monetary Policy Committee (United Kingdom) Central bank Tony Sycamore | Market Analyst, Australia | Publication date: Tuesday 26 September 2023 06:19 BoE's cash rate on top of 'Table Mountain' Last week saw the Federal Reserve (Fed) and the BoE deliver hawkish holds in contrast to the European Central Bank's (ECB’s) dovish hike the previous week. The BoE was empowered to keep its official cash rate at 5.25% after the release of a cooler-than-expected August consumer price index (CPI), just a day before the Monetary Policy Committee (MPC) meeting. Unless there is an upside in inflation or wage growth from here, the BoE’s official cash rate is now on top of Table Mountain, to borrow the analogy of the BoE’s Chief economist Huw Pill. For those unfamiliar with Table Mountain, it looks exactly like the name suggests. Pill’s analogy warns that rates in the UK will need to remain higher for longer. In the current climate, where activity data is already sliding, this increases the chance of a recession in the UK. For those looking for further evidence of why the ECB delivered a dovish hike the prior week, last night's German ifo business climate index printed at 85.7 in September, the weakest level since October 2022 when fears of a European recession and European energy crisis were at their greatest. The ifo print likely confirms the ECB’s rate hiking cycle is over and that the German economy will likely lead Europe into recession. DAX technical analysis During September, the view has been that the correction in the DAX, which started from the late August 16615 high, was missing a leg lower and had further to go. The overnight close below the 200-day moving average at 15629 and break of the mid-August low at 15511 warns that the missing and final leg (Wave C) of a three-wave ABC pullback has commenced, which targets a move to wave equality at 15000. Should the pullback play out as expected and signs of basing emerge in the 15000 area, we expect to see the uptrend resume, which would see the DAX test and break the July 16615 high. DAX daily chart Source: TradingView FTSE technical analysis In early September, contrary to our expectations, the FTSE rebounded from the critically important 7200 level, initially supported by BoE Governor Andrew Bailey's dovish comments in late August and then by the dovish ECB meeting. The hawkish hold from the BoE and the Fed last week appears to have capped the rally at 7750 and prompted the FTSE to fall back within its range and below the 200-day moving average at 7637. While the FTSE remains below resistance at 7750, there is a good chance of further rotation within the 7750/7200 range. Aware that if the FTSE were to see a sustained break of support at 7200, there is scope for it to extend its decline towards 7000 before a retest of the 2022 lows 6800/6700 area. FTSE daily chart Source: TradingView TradingView: The figures stated are as of 26 September 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. -
Crude oil prices paused rallying last week, while retail traders slightly increased upside bets and pondered the short-term outlook for WTI. Source: Bloomberg Shares Commodities Petroleum WTI Market sentiment Oil Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Tuesday 26 September 2023 05:09 Crude oil sentiment outlook: bearish Crude oil prices took a breather last week, leaving West Texas Intermediate (WTI) little changed by Friday. This meant a pause after weeks of consistent gains. Recent data from IG Client Sentiment (IGCS) shows that there has been a cautious increase in upside exposure in crude oil. IGCS tends to function as a contrarian indicator, with that in mind, could oil aim lower in the near term? According to IGCS, only 36% of retail traders are net-long crude oil. Since most of them are biased to the downside, this continues to suggest that prices may rally down the road. That said, upside exposure has increased by 7.73% and 1.81% from the last trading day and one week ago, respectively. With that in mind, recent changes in positioning hint that prices might soon reverse lower ahead. IG Client Sentiment chart Source: DailyFX WTI crude oil technical analysis On the daily chart below, WTI has pushed higher over the past 48 hours (trading days). This is somewhat undermining the emergence of a Bearish Engulfing from last week. This followed a rejection of the 61.8% Fibonacci extension level of 88.75, where support was reinforced. As such, this is leaving a neutral technical setting in the very short term. Key resistance is the 92.43 – 93.72 range, made up of highs from November. Meanwhile, the 20-day moving sverage is creeping higher. The latter may hold as support, maintaining the upside technical bias. Otherwise, a breakout below it subsequently places the focus on the 84.84 inflection zone. WTI crude oil daily chart Source: TradingView This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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Gold and silver prices weakened on Monday; XAU/USD inches closer to key rising support, while XAG/USD might have more room to consolidate. Source: Bloomberg Gold Silver XAG/USD XAU/USD Commodities Forex Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Tuesday 26 September 2023 07:32 XAU/USD technical analysis Gold and silver prices have continued lower amid the rise in longer-term US Treasury yields and a stronger US dollar. As a result, how is the near-term technical landscape evolving in precious metals? Gold continues to trade in a directionless flow from a near-term technical perspective. Prices are consolidating between the falling trendline from July and rising support from February – see chart below. Broadly speaking, XAU/USD remains unchanged form levels seen in mid-2020. With each passing day, the yellow metal is running out of room to consolidate between support and resistance. As such, the direction of the breakout could be key for the coming trend. Below, watch the August low of 1884.89. Above, resistance seems to be the 23.6% Fibonacci retracement level of 1971.63. Gold daily chart Source: TradingView XAG/USD technical analysis Meanwhile, silver faces a similar setting. Like gold, XAG/USD is consolidating between rising support and resistance. The difference here is that there is still plenty of room left for sideways price action. As such, XAG/USD could be left directionless for a longer period of time than gold. Silver’s drop on Monday has brought it to the midpoint of the Fibonacci retracement level at 23.02. As such, it is also sitting just above rising support from the end of last year. A meaningful breakout likely entails a push under the 61.8% Fibonacci retracement level of 22.29. That exposes the 78.6% point at 21.24. Otherwise, a turn higher places the focus on the 38.2% level at 23.75. Just above that is the falling zone of resistance since May. Silver daily chart Source: TradingView This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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