Head and Shoulders Pattern Has Been Formed to Make New Lows

Forex

Central Bank

Summary:

The risk of economic slowdown in the eurozone is increasing, which may lead to the implementation of more aggressive monetary easing policies; meanwhile, the new Prime Minister in Japan may facilitate a strengthening of the yen.

SELL EURJPY

Close Time

CLOSED

159.276

Entry Price

154.700

161.250

162.684 +0.076 +0.05%

197.4

Pips

Loss

154.700

161.251

Exit Price

159.276

Entry Price

161.250

Fundamentals

Eurozone:

In September, the Composite PMI for the eurozone dropped to 48.9, marking its first decline below the neutral threshold since February. This indicates a contraction in the Eurozone economy and an increased risk of a significant slowdown in economic growth.

In response, Simon Wells, Chief European Economist at HSBC, along with his team, noted that the preliminary PMI for September is quite poor. While the decline in PMI aligns with market expectations, the extent of the decrease suggests that the slowdown is not solely due to the conclusion of the Olympics, but rather reflects broader economic deceleration. Consequently, policymakers at the European Central Bank (ECB) may consider implementing more aggressive easing measures, potentially initiating a cycle of interest rate cuts.

Japan:

The election for Japan's new Prime Minister has concluded, with the relatively hawkish Ishiba Shigeru winning the election. Ishiba is a strong advocate for interest rate hikes, supporting the Bank of Japan (BOJ) in raising rates to mitigate the costs of imported goods. He believes that prolonged monetary easing has led to a deterioration in both Japan's finances and the fiscal condition of the BOJ. Additionally, Ishiba has indicated that the Japan-U.S. interest rate differential is a primary factor driving the depreciation of the yen, asserting that a normal USDJPY should fall within the range of 110.00 to 140.00.

Technical Analysis

Head and Shoulders Pattern Has Been Formed to Make New Lows_1

As of the European session close, the EURJPY is hovering around the 160.00 level.

In the 1D timeframe, after experiencing a decline from July to August, the EURJPY has begun a technical recovery. However, the 164.00 level serves as a critical resistance point, with the EURJPY price having retreated from this level twice in a row, recording lower peaks. This indicates a lack of bullish sentiment in the market, leaning more towards selling at the highs.

In the 4H timeframe, a head and shoulders pattern has been formed, which clearly indicates a downward trend. Additionally, the candlestick pattern features an engulfing bearish formation, reflecting strong bearish momentum.

It is recommended to go short at the highs.

Trading Recommendations

Trading Direction: Sell

Entry Price: 159.90

Target Price: 154.70

Stop Loss: 161.25

Deadline: October 15, 2024 15:00:00

Support: 159.22, 158.09, 155.15

Resistance: 160.90, 163.48, 163.89

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Warren Takunda

Commodity

Summary:

WTI crude oil prices have dropped to a multi-week low of around $66.00, pressured by supply concerns and weak global demand.

SELL WTI

Close Time

CLOSED

67.000

Entry Price

64.000

69.000

72.811 -4.035 -5.25%

200.0

Pips

Loss

64.000

69.009

Exit Price

67.000

Entry Price

69.000

West Texas Intermediate (WTI) crude oil prices have plummeted to a multi-week low, trading around the mid-$66.00s during the first half of the European session on Tuesday. This drop comes amid mounting concerns over supply and lackluster growth in global demand. As a result, market sentiment remains bearish, raising the possibility of further declines in the near term.

The current downturn is exacerbated by reports indicating that OPEC+ plans to boost oil output by 180,000 barrels per day (bpd) starting in December. This anticipated increase overshadows fears that a potential escalation in the Middle East conflict could disrupt crude supply. The dual impact of a growing supply forecast and sluggish demand growth has weighed heavily on prices.

Additionally, the U.S. dollar's strength has contributed to the pressure on crude oil prices. Following Federal Reserve Chair Jerome Powell's hawkish remarks on Monday, there has been a notable uptick in dollar buying, further complicating the outlook for oil. As the dollar strengthens, crude oil, priced in dollars, becomes more expensive for international buyers, often leading to reduced demand and downward price pressures.

Technical Analysis

From a technical standpoint, WTI's recent decline reflects a well-entrenched bearish trend, as indicated by its movement within a descending channel over the past three months. This pattern suggests that the path of least resistance remains downward, reinforcing the prospects for additional losses.

WTI crude oil is currently facing significant pressure to break below the critical $68.55 mark. Should this level be breached, the outlook points to further declines, potentially targeting levels around $66.60, followed by a more significant support level at $64.00. The prevailing bearish sentiment suggests that we could see continued downward movement for the remainder of the trading day.

Moreover, it is crucial to note that while any attempt at recovery is likely to face robust resistance near the $67.30 region, the key level to watch is the $68.55 threshold. If WTI can break above and maintain trading above this level, it could reactivate a more positive intraday scenario, providing some relief to bulls in the market.

For today's trading, the expected range for WTI is between a support level at $66.20 and resistance at $68.80. However, given the current trend dynamics and broader market conditions, the forecast remains bearish.

TRADE RECOMMENDATION

SELL WTI

ENTRY PRICE: 67.00

STOP LOSS: 69.00

TAKE PROFIT: 64.00

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The USD/CAD pair is trading above 1.3500 as it maintains a bullish outlook, targeting 1.3653. Investors await key U.S. labor market and PMI data that could influence Federal Reserve interest rate decisions.

BUY USDCAD

Close Time

CLOSED

1.35350

Entry Price

1.36530

1.35000

1.36732 +0.00529 +0.39%

35.0

Pips

Loss

1.35000

1.34999

Exit Price

1.35350

Entry Price

1.36530

The USD/CAD pair has been trading in a narrow range just above the psychological support level of 1.3500 during Tuesday's European session. The Canadian dollar is showing sideways movement as market participants await crucial labor market data and the Purchasing Managers' Index (PMI) from the United States. These indicators are anticipated to provide insight into whether the Federal Reserve will maintain its aggressive monetary policy approach or transition towards a more gradual path of interest rate cuts.

Market sentiment remains cautious, reflected in nominal losses for S&P 500 futures during European trading hours. Meanwhile, the US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, is attempting to recover, trading near the 101.00 mark.

According to the CME FedWatch tool, the likelihood of the Federal Reserve reducing interest rates by 50 basis points (bps) to a range of 4.25%-4.50% in November has declined to 35%, down from 58% just a week ago. This change in expectations comes after Fed Chair Jerome Powell's remarks at the National Association for Business Economics conference on Monday. Powell indicated that the central bank is not in a hurry to implement rapid rate cuts, suggesting that if economic conditions evolve as anticipated, there may be two rate reductions of 25 bps at the remaining meetings this year.

As investors look ahead, the focus will shift to the upcoming U.S. ISM Manufacturing PMI for September and the JOLTS Job Openings data for August, both set for release at 14:00 GMT. These reports are expected to shed light on the health of the U.S. economy and influence future monetary policy decisions.

On the Canadian side, the Loonie will be influenced by the S&P Global Manufacturing PMI data for September, which is scheduled for publication at 13:30 GMT. It is noteworthy that the Manufacturing PMI has been on a downward trend for the past 16 months, indicating ongoing challenges in the sector.

Technical Analysis

From a technical perspective, the USD/CAD price action reveals a bullish bias as it gradually approaches the anticipated key level of 1.3562. The market appears positioned to surpass this level, which could pave the way for further gains, potentially reaching the next target at 1.3653. Maintaining the bullish trend hinges on the price holding above the support level of 1.3471.

For today, the expected trading range is likely to fluctuate between support at 1.3480 and resistance at 1.3600, reinforcing the overall bullish sentiment. The current technical outlook suggests a favorable environment for upward movement, supported by the underlying fundamentals.

TRADE RECOMMENDATION

BUY USDCAD

ENTRY PRICE: 1.3535

STOP LOSS: 1.3500

TAKE PROFIT: 1.3653

Risk Warnings and Disclaimers

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Manuel

Commodity

Energy

Summary:

BUY WTI

Close Time

CLOSED

68.119

Entry Price

75.500

64.400

72.811 -4.035 -5.25%

524.8

Pips

Profit

64.400

73.367

Exit Price

68.119

Entry Price

75.500

Fundamentals

Tensions in the Middle East have escalated dramatically. Over the past 24 hours, more than 100 people have been killed, and over 350 injured due to successive Israeli airstrikes in southern and eastern Lebanon. These bombings, which also targeted the suburbs of Beirut, have raised the death toll to over 1,000 in the past two weeks. Among the casualties are Hasan Nasrallah, the leader of Hezbollah, and an Iranian general.

Iran has vowed retaliation for these attacks, declaring that Israel’s actions "will not go unanswered." The Iranian Foreign Ministry spokesperson, Naser Kananí, warned, "We will deliver a response that will be regrettable for those violating our national interests, and we will sever the hands and feet of the aggressor."

According to U.S. media reports, Israeli special forces have been conducting selective incursions into southern Lebanon to gather intelligence and probe defenses ahead of a possible ground invasion, which could take place as early as this week.

Last week, a senior Israeli official stated that the country hoped to avoid a full-scale ground invasion. However, with the shift in focus towards fighting Hezbollah, Israel has been bolstering its northern forces, now positioning more troops on that front than in any other part of the country.

If these geopolitical tensions continue to escalate and evolve into a broader conflict, the price of crude oil could experience significant upward pressure. A potential proxy war in the Middle East, especially involving Iran and Egypt, could trigger military interventions from other regional powers. This would likely send crude prices soaring as the market reacts to the risk of supply disruptions.

Also in a major monetary policy move, the Federal Reserve enacted its first interest rate cut since March 2022, reducing the benchmark rate by 50 basis points. This follows a series of 11 consecutive hikes as the Fed tries to balance economic growth with inflation control. The central bank remains cautiously optimistic, noting that inflation appears to be moving closer to its 2% target. It described the risks to its dual mandate—maximum employment and price stability—as "roughly balanced." However, uncertainty surrounding the economic outlook persists.

Market participants now anticipate an additional 75 basis points in rate cuts before year-end, with a cumulative reduction of 175-200 basis points over the next 12 months. With key economic reports such as GDP and PCE data on the horizon, investors will be closely watching for further indications of the Fed's policy trajectory.

On the supply front, global crude oil inventories stored in tankers that have been stationary for at least seven days climbed to 60.76 million barrels as of September 27, marking a 27% decrease from a year ago. This decline suggests an uptick in demand, adding another bullish factor to the crude oil outlook.

At the same time, Russia has intensified its attacks on Ukraine’s key energy infrastructure, with even the Zaporizhzhia nuclear power plant under threat. This further complicates the global energy landscape, as disruptions to Ukraine’s power grid could have ripple effects across European energy markets. Oil Buying Opportunities Amid Rising Middle East Tensions_1

Oil Buying Opportunities Amid Rising Middle East Tensions_1

Technical Analysis

Crude oil recently dropped to a low of $64.74, a price not seen since May 4, 2023. At that time, the decline followed news of increased production by OPEC, which signaled an oversupply that pushed prices downward. Since hitting that low, crude oil has managed to recover somewhat, though the 100 and 200-period moving averages remain above $75, indicating room for a potential pullback.

With geopolitical tensions in the Middle East heating up, fund managers and speculators may view this situation as a significant risk to crude oil prices, prompting them to hedge against further disruptions. If the price fails to make a new low, there is potential for a rebound up to the $74 level. However, should the price break below recent lows, downward pressure could intensify, leading to further declines.

Trading Recommendations

Trading direction: Long

Entry price: 68.18

Target price: 75.50

Stop loss: 64.40

Validity: Oct 10, 2024 15:00:00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

Lagarde expressed optimism regarding the Eurozone's economic recovery, noting that it is expected to strengthen over time.

BUY EURCAD

Close Time

CLOSED

1.50300

Entry Price

1.51640

1.49800

1.49982 +0.00532 +0.36%

50.0

Pips

Loss

1.49800

Exit Price

1.50300

Entry Price

1.51640

Fundamentals

During her testimony before the European Parliament's Committee on Economic and Monetary Affairs on Monday, President Christine Lagarde expressed optimism regarding the Eurozone's economic recovery, noting that it is expected to strengthen over time. However, she cautioned, “Looking ahead, the suppressed levels of certain survey indicators suggest that the recovery is facing headwinds.”

Lagarde highlighted the resilience of the labor market, stating, “Employment growth slowed to just 0.2% in the second quarter, and recent indicators indicate a further deceleration in the coming quarters.” She also mentioned that inflation might temporarily increase in the fourth quarter but reinforced confidence that inflation will return to target in a timely manner.

She emphasized, “Policy rates will be maintained at sufficiently restrictive levels for as long as necessary to achieve our objectives.” The latest data, presented during the September Governing Council meeting, has further strengthened the ECB's confidence in achieving its inflation target of 2%.

The European Central Bank (ECB) predicts that inflation will stabilize around the theoretical target of 2% within the next year, and it is optimistic that the Eurozone will avoid recession. However, the Governing Council is divided on current risks. One faction is concerned about sluggish economic growth, particularly in Germany, while more orthodox members worry about persistent inflation in the services sector.

Policymakers favoring monetary easing are preparing to advocate for an interest rate cut next month, following a series of disappointing economic data. This proposal is expected to face resistance from conservative members, as reported by multiple sources.

Initially, ECB leaders viewed a rate cut on October 17 as unlikely, having already reduced borrowing costs this month due to weaker growth forecasts and an anticipated gradual decline in inflation. However, recent disappointing business surveys from the Eurozone and weak confidence data from Germany have emboldened proponents of lower rates—commonly referred to as "doves" in market terminology.

In contrast, Bank of Canada (BoC) Governor Tiff Macklem expressed optimism about inflation dropping to 2%, highlighting the importance of maintaining price stability. At an event in Toronto, he suggested that further rate cuts may be forthcoming, given the progress on inflation. Statistics Canada recently reported an annual inflation rate of 2% in August, the lowest in over three years. The BoC aims for additional cooling in core inflation and housing prices before making further policy decisions.

The BoC’s next rate announcement is scheduled for October 23. Market expectations currently forecast a 25 basis point cut at each of the next seven meetings, with a 50% chance of a 50 basis point cut in the next two meetings. This could lead to a total reduction of 175 basis points by mid-next year. Buying Opportunities at the Resistance Zone_1

Buying Opportunities at the Resistance Zone_1

Technical Analysis

Currently, the EUR/CAD pair is rebounding off the 100 and 200-period moving averages on the 4-hour chart while approaching an ascending trendline. This trendline could provide renewed buying interest and bullish momentum.

The local low was reached on September 1, while the upper resistance level is around 1.5164, where the price has historically encountered demand. This resistance zone has previously caused price declines, suggesting that long positions could be viable up to this level from the lower part of the ascending trendline.

Trading Recommendations

Trading direction: Long

Entry price: 1.5030

Target price: 1.5164

Stop loss:1.4980

Validity: Oct 10, 2024 15:00:00

Risk Warnings and Disclaimers

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Eva Chen

Forex

Summary:

EURNZD showed a downward trend near 1.7600 at the end of last week's trading. Moving averages indicate a downtrend in 4-hour and shorter timeframes, but appear relatively neutral in daily and longer timeframes.

BUY EURNZD

EXP

PENDING

1.74500

Entry Price

1.79110

1.73800

1.79480 +0.00319 +0.18%

Pips

PENDING

1.73800

Exit Price

1.74500

Entry Price

1.79110

Fundamentals

From the current structural trend, EURNZD appears to be nearing a potential rebound in shorter timeframes. Still, the conditions are not yet mature, suggesting that selling pressure remains significant and could lead to further declines from the current level.

As part of this week's euro forecast, we expect EURNZD to experience a slight bearish correction to test the bottom of the consolidation range formed since mid-June before experiencing some rebound. We also expect EURNZD to rise again to the key descending resistance level next month, with a short-term target below 1.7804, followed by a further decline to the demand zone around 1.7274 from May 24.

Focus on Buying Low and Selling High on Range Trading_1

Technical Analysis

A technical signal supporting the upcoming rebound in EURNZD is the market testing the RSI near the support line. The second signal is the relatively crowded downside space. Meanwhile, the price is close to the range bottom. The market is expected to close this month with a bearish candlestick with an upper shadow, followed by a potential demand for retracement next month. Multiple structural patterns suggest that the price may undergo a rally after briefly reaching a bottom.

Nonetheless, the longer-term downtrend is likely to continue following the bearish candlestick recorded this month, and the decline may resume in mid-next month. The recommended strategy is to focus on buying low and selling high.

Trading Recommendations

Trading Direction: Buy

Entry Price: 1.7450

Target Price: 1.7911

Stop Loss: 1.7380

Valid Until: Oct 15, 2024 23:55:00

Support: 1.7482, 1.7425, 1.7393

Resistance: 1.7633, 1.7728, 1.7804

Risk Warnings and Disclaimers

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Alan

Forex

Central Bank

Summary:

The relatively hawkish Shigeru Ishiba will serve as Japan's Prime Minister, potentially pushing the Bank of Japan (BOJ) towards a more hawkish monetary policy stance, which could strengthen the yen. Meanwhile, the US dollar is in a depreciation cycle due to the Fed's rate cuts, keeping the USD/JPY outlook bearish.

SELL USDJPY

Close Time

CLOSED

143.231

Entry Price

138.400

144.600

148.306 +0.135 +0.09%

136.9

Pips

Loss

138.400

144.601

Exit Price

143.231

Entry Price

144.600

Fundamentals

Last Friday, the USDJPY pair saw an unexpected sharp decline, dropping 1.82% in a single day, closing at 142.07. We believe there are two reasons for this decline:

1. Shigeru Ishiba won the Liberal Democratic Party (LDP) presidential election and will become Japan's new Prime Minister. Ishiba is considered a relatively hawkish political figure, and the market expects that he may adopt relatively tighter monetary and fiscal policies. This shift in policy expectations could affect Japan's economic outlook and monetary policy direction, leading to yen appreciation and a decline in the USDJPY rate.

2. Market expectations for the Fed's monetary policy have shifted with anticipation of further rate cuts. The Fed's rate cut decisions reduce the attractiveness of the US dollar, as rate cuts lower dollar yields. With the BOJ's monetary policy remaining relatively stable, a narrowing of the interest rate differential between Japan and the US increases the relative returns of holding yen, which leads to capital flowing into the yen and a decline in the USDJPY rate.

Currently, although the BOJ's monetary policy remains accommodative, the hawkish shift under Ishiba's leadership may indicate a marginal turn toward a hawkish stance, increasing the yen's attractiveness and putting downward pressure on the USDJPY rate.

Technical Analysis

Japan's Incoming PM to Boost Yen Strength_1

From the daily chart, USDJPY broke above the Fibonacci retracement level at 144.84 on Thursday and Friday, but neither day's closing price held above this level. On the contrary, the asset's price fell significantly on Friday influenced by recent news, forming a bearish candle with a long upper shadow to indicate strong bearish momentum.

Currently, USDJPY has fallen back below the middle band of the Bollinger Bands, suggesting active selling pressure on the dollar. A further decline is likely to test the support around 140.00 again.

Overall, USDJPY has seen some recovery today after the decline last Friday. We will first see if the asset's price weakens under pressure around the resistance level of 143.10; if confirmed, a short entry can be considered. Otherwise, we will look at the next resistance level at 144.20. The recommended strategy is to focus on selling at highs.

Trading Recommendations

Trading Direction: Sell

Entry Price: 143.00

Target Price: 138.40

Stop Loss: 144.60

Valid Until: Oct 14, 2024 15:00:00

Support: 141.65, 140.60, 139.57

Resistance: 143.20, 144.55, 146.48

Risk Warnings and Disclaimers

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Head and Shoulders Pattern Has Been Formed to Make New Lows

Fundamentals

Technical Analysis

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Focus on Buying Low and Selling High on Range Trading

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Risk Disclosure