Market Drivers – US Session, October 18

Mohamed Abdelhamid 19 October, 2023 5:53 am Commodities, Forex Market, Market Update

Gold initially jumped and reached $1,963, its highest level in two months, despite the moves in the bond market. The yellow metal later pulled back and settled around $1,950.

The positive market sentiment that followed bright economic data from China was offset by rising tensions in the Middle East, higher yields and crude oil prices. The Dow Jones lost 0.98%, and the Nasdaq declined by 1.62%. Meanwhile, the price of WTI crude oil rose by 1.70%.

The risk-off sentiment and stronger US yields pushed the US Dollar higher. The US Dollar Index (DXY) rose 0.35%, surpassing the 106.50 level. The 10-year Treasury yield climbed to 4.92%, reaching its highest level since 2007. Federal Reserve Chair Powell is scheduled to speak at the Economic Club of New York on Thursday, and his comments will be closely watched.

Economic Data

US housing market data showed mixed figures. Building Permits dropped in September to 1.475 million, better than the expected 1.45 million, while Housing Starts rebounded to 1.35 million, slightly below the market consensus of 1.38 million. The Beige Book noted that economic activity had “little to no change” during September and early October.

Upcoming US data on Thursday includes Existing Home Sales, the Philly Fed index, and the weekly Jobless Claims report. Further signs of a robust economy and a tight labor market could keep the US Dollar in demand.

Key Developments

EUR/USD failed once again to rise above 1.0600 and turned to the downside, finding support around 1.0530. Risks remain tilted to the downside, but consolidation could persist if the pair remains above 1.0520.

The Pound initially rose following a higher-than-expected UK inflation reading but later gave up all its gains. GBP/USD is trading dangerously close to the key support area around 1.2120.

USD/JPY posted its highest daily close since October of last year, slightly below the 150.00 area. A rally above that area could lead to intervention from Japanese authorities, triggering volatility.

AUD/USD was rejected from above the 20-day Simple Moving Average (SMA) and reversed course near 0.6400, falling towards 0.6330. The key support level stands at 0.6285 (October lows). Australia will release the September employment report early on Thursday.

The New Zealand Dollar (NZD) lagged once again. The technical outlook for NZD/USD points to further losses, as it posted the lowest daily close in almost a year, below 0.5860.

The Canadian Dollar (CAD) did not benefit from the rally in crude oil prices. USD/CAD rose above 1.3700 and closed above it, leaving room for further upside potential.

What to watch on Thursday:

The key event during the Asian session is the Australian employment report. Japan will release trade data, and China will update house prices. Later in the day, market participants will closely monitor the US Jobless Claims and the Philly Fed index. Federal Reserve Chair Powell is due to speak.

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