Global equity markets started the new week slightly higher after Israel, the United States and Egypt agreed to a ceasefire in southern Gaza, coinciding with Egypt's opening of the Rafah border crossing for the evacuation of foreign nationals. Meantime, Israeli Prime Minister Benjamin Netanyahu's office says there is 'currently no ceasefire and humanitarian aid in the Gaza Strip in exchange for the evacuation of foreigners'.
For this week, the main drivers for the markets remain the speeches from the Fed and ECB policymakers and the ongoing conflict between Israel and Palestine. On the other hand, this week the key economic event to focus on UK CPI, China's GDP and retail sales data from the US, China and the UK.
On the earnings front, major mega-cap stocks are reporting earnings this week. The Q3 earnings season kicked off last week with positive reports from JPMorgan, Citigroup, and Wells Fargo. The companies scheduled to release their last quarter financial results this week will be Bank of America, Morgan Stanley, Goldman Sachs, Netflix, Tesla and American Airlines.
Gold prices were lower on the early European session Monday, as traders took profit following a recent price rally. Middle East tensions imminently have driven safe-haven flows into gold, pushing the price of the precious metal back to above $1930 levels. Gold prices generally go up during times of geopolitical uncertainty. The impact on the price of gold is therefore unsurprisingly substantial. As conditions worsen, gold continues to pick up a strong risk-off bid and this is likely to remain the case for the coming week.
Technically the overall trend still looks bullish after last week's heavy buying pressure despite the pullback. This week as long as the metal trades above $1900 levels, the uptrend will remain in place. The next immediate resistance level for the metal is $1945, and then the stronger resistance is $1955/60, which is important to be stable above it for a continuing rise to $1980 levels. On the downside, $1900 is the immediate support level, followed by $1890. Further selling pressure will intensify only if the metal breaks below $1890 levels.
The US dollar index remains in demand as the Israel-Palastine issue continues to encourage safe-haven demand. The DXY has made a spectacular recovery in the second half of last week helped by the rising tensions between Israel and the Palestinian Islamic Resistance Movement (Hamas) Western countries. The bullish sentiment was also boosted after last week's inflation figures showed a steady headline inflation rate of 3.7% in September, while core inflation slightly decelerated to 4.1%. For this week, the main drivers for the US dollar remain the geopolitical tensions and US retail sales data. On the other hand, investors should closely monitor the comments from the FED policymakers for clues as to their outlook for interest rates.
Technically the current price action signals suggest that a medium-term bullish trend remains intact. For this week, considering heavy volatility there are chances the DXY can rally back to near the key resistance of 107.30/40 area. On the downside, any meaningful pullback now seems to find some support near the 106.30 zones, below which the slide could further get extended towards the 106/105.90 regions.
The currency pair got an early lift during the last week but reversed from the early gains after the buyers failed to hold the upside momentum. EURUSD trading marginally softer on Monday morning and the upside pressure clearly weakening amid a solid ceiling in place, the near-term bias points to euro weakness in the week ahead, when volatility is likely to be higher than usual due to geopolitical tensions. In the coming week, again the trend of the euro would largely depend on the trend of the dollar index, Eurozone inflation data and updates on the Israel-Palestine conflict.
The currency pair retreated back to near 1.0500 on Friday. On the downside, 1.0480 will act as an initial cushion, any break below this level will open doors to 1.0450/30. On the flip side, a move above 1.0560 again will push the pair into a new trading zone, which may offer further buying opportunities until the 1.0600 and 1.0630 zones.
Dow Jones and other major US indices closed last week with modest gains after dovish Fed officials and less hawkish FOMC minutes decreased market expectations for a rate hike at the next Fed meeting in November. Strong earnings reports from major banks also limited the downside sentiment. Energy shares and defence stocks experienced a boost due to escalating tensions in the Middle East. This week, the Dow traders will now turn their attention to the comments from FED policymakers and the ongoing Q3 earnings season.
This week, the first nearest support is expected at the 33,100 area, with this zone having held last week while further down, demand is also expected around 32,800/700, which will act as the next area of support. On the flip side, the first immediate resistance level for the pair is 33,900, then the stronger resistance is 34,050, which is important to be stable above it for a continuing rise to 34,300/500 levels.
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