USD/JPY back below 150, Gold bugs reclaim $2000: Asian Open – 30/10/2023

Market Summary:

• Wall Street indices are on track for their third bearish month, with the S&P 500 falling to a 5-month low on Friday ahead of a busy week of economic events, including an FOMC meeting and nonfarm payrolls report.
• Rising bond yields, disappointing earnings and the Middle East conflict continue to weigh on sentiment. Israel began their ground assault of Gaza over the weekend and warned of a long war.
• Gold closed above $2000 for the first time in five months on Friday as it continues to attract safe-haven flows.
• USD/JPY closed below 150 on Friday and formed a bearish engulfing day as the yen attracted safe-haven flows. A report from the Nikkei newspaper over the weekend also suggested that tomorrow’s BOJ meeting could be live, with reports it will discuss the potential for the central bank to widen or abandon its YCC band
• Australian producer prices rose 1.8% q/q in Q3, according to the ABS (Australian Bureau of Statistics), which now sees the RBA cash rate futures implying a 47% chance of a 25bp rate hike next week. This follows on from a much hotter-than-expected inflation report.
• AUD/USD managed to close above 63c once again during a week of choppy trade. Whilst there’s no apparent appetite to buy the Aussie, it has done well to not break lower and continues to burn bearish fingers with false breakouts.
• WTI crude oil remains choppy on the daily chart but continues to hold above the January and April highs, suggesting demand around the 83.50 area

Events in focus (AEDT):

• 11:30 – Australian retail sales
• 17:30 – German State CPI
• 19:00 – Spanish CPI
• 20:00 – German State CPI
• 20:30 – BOE consumer credit
• 21:00 – European Sentiment Indicator, CPI expectations, selling price expectations
• 00:00 – German CPI

ASX 200 at a glance:

• The ASX 200 closed beneath its 200-week EMA for the first time this year.
• 9 of its 11 sectors closed lower for the week, with real estate and info tech leading the declines
• Lower SPI futures and a weak lead from Wall Street suggests the ASX 200 cash market will open below 6800 today
• 6700 is the next major support level for bear to target, and 6800 / 6830 make likely resistance levels

USD/JPY technical analysis (daily chart):

Safe-haven demand for the Japanese yen saw USD/JPY trade below 150 on Friday and form a bearish engulfing candle. This follows on from a single day above 150 – a level considered by many as a threshold for BOJ intervention. However, it does not appear that the rise through 150 was volatile enough to warrant any BOJ action, and market forces have done the work for the central bank. All eyes are now on tomorrow’s BOJ meeting where weekend reports from the Nikkei newspaper suggest they are due to discuss their YCC policy, which leaves the potential for a live meeting and a lower USD/JPY is the central bank allows yields to climb higher.

Gold technical analysis (daily chart):

Gold closed to its highest level in five months on Friday, with a strong bullish candle closing firmly above $2000. Gold consolidated for a few days before posting its bullish close, and with little in the way of obvious resistance levels and the metal clearly in demand, it could simply be a case of seeking round numbers such as $2050 to target whilst prices remain above the prior swing low ~1953. Low volatility pullbacks with Friday’s range could improve the reward to risk ratio. Whereas a surprise resolution in the Middle East conflict could send gold sharply lower.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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