EUR/USD is seen consolidating last week’s post-ECB rejection slide from the 100-day SMA. Traders seem reluctant to place aggressive bets ahead of the key central bank event risks. A sustained break below the 0.9900 mark is needed to support prospects for further losses. The EUR/USD pair extends its sideways consolidative price move below the parity mark through the Asian session on Monday amid uncertainty over the pace of future rate hikes by the European Central Bank. The ECB last Thursday lifted borrowing costs by a jumbo 75 bps for the second consecutive meeting and is expected to raise interest rates further to bring record inflation under control. The ECB, however, adopted a more dovish tone in the wake of the worsening economic outlook, forcing traders to trim their bets for a more aggressive tightening. This is seen as a key factor that continues to act as a headwind for the shared currency. On the other hand, the US dollar draws support from last week's stronger-than-expected US macro data, though speculations about a potential Fed pivot keep a lid on any further gains. It is worth recalling that the Advance US GDP report showed that the world's largest economy grew by 25.6% annualized pace during the third quarter. Moreover, the Core PCE Price Index, the US central bank's preferred inflation gauge, increased to 5.1% YOY in September from 4.9% previous. That said, signs of a slowdown in the US economy might force the Fed to soften its hawkish stance, which, in turn, is holding back the USD bulls from placing fresh bets. Hence, investors prefer to move to the sidelines and wait for the highly-anticipated FOMC decision, due to be announced on Wednesday. The outcome of a two-day monetary policy meeting will play a key role in influencing the USD price dynamics and help determine the near-term trajectory for the EUR/USD pair. In the meantime, traders on Monday will take cues from the flash Eurozone CPI and the first reading of the third quarter GDP. The immediate market reaction, however, is likely to be limited as the focus remains glued to the key central bank event risk. Furthermore, worries about the economic headwinds stemming from the protracted Russia-Ukraine war suggest that any positive intraday move might still be seen as a selling opportunity. Technical Outlook From a technical perspective, the post-ECB rejection slide from the 100-day SMA, so far, stalls near a descending trend-line resistance breakpoint, now turned support, currently around the 0.9925-0.9920 area. The said region should act as a pivotal point for intraday traders, below which the EUR/USD pair could accelerate the fall towards the 0.9860-0.9855 horizontal support. Some follow-through selling will negate any near-term positive bias and drag spot prices back below the 0.9800 round-figure mark, towards testing the next relevant support near the mid-0.9700s. On the flip side, the 1.0000 psychological mark could be an immediate strong barrier. Sustained strength beyond might allow bulls to aim back to challenge the 100-day SMA, currently around the 1.0075region. This is closely followed by the monthly peak, just above the 1.0100 mark, which, if cleared decisively, will set the stage for additional gains. The EUR/USD pair might then aim to reclaim the 1.0200 round figure with some intermediate resistance near the 1.0155 zone.

US Dollar: Dec '22 USD is Up at 110.850. Energies: Dec '22 Crude is Down at 87.82. Financials: The Dec '22 30 Year note is Down 29 ticks and trading at 121.14. Indices: The Dec '22 S&P 500 Emini ES contract is 126 ticks Lower and trading at 3788.00. Gold: The Dec'22 Gold contract is trading Down at 1651.00. Gold is 146 ticks Lower than its close. Initial conclusion This is not a correlated market. The dollar is Up, and Crude is Down which is normal, but the 30-year Bond is trading Lower. The Financials should always correlate with the US dollar such that if the dollar is lower, then the bonds should follow and vice-versa. The S&P is Lower, and Crude is trading Lower which is not correlated. Gold is trading Lower which is correlated with the US dollar trading Up. I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down. I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong. As traders you need to be aware of this and proceed with your eyes wide open. Currently Asia is trading Lower with the exception of the Singapore and Sensex exchanges. All of Europe is trading Lower at this time. Possible challenges to traders today Core PCE Price Index is out at 8:30 AM EST. This is Major. Employment Cost Index is out at 8:30 AM EST. Major. Personal Income is out at 8:30 AM EST. This is Major. Personal Spending is out at 8:30 AM EST. This is Major. Pending Home Sales is out at 10 AM EST. Major. Revised UoM Consumer Sentiment is out at 10 AM Major. Revised UoM Consumer Sentiment is out at 10 AM.Major Treasuries Traders, please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same. We've elected to switch gears a bit and show correlation between the 10-year bond (ZN) and the S&P futures contract. The S&P contract is the Standard and Poor's, and the purpose is to show reverse correlation between the two instruments. Remember it's likened to a seesaw, when up goes up the other should go down and vice versa. Yesterday the ZN made its move at around 9:45 AM EST. The ZN hit a Low at around that time and the S&P moved Lower shortly thereafter. If you look at the charts below ZN gave a signal at around 9:45 AM and the S&P gave a signal at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a Low at around 9:45 AM and the S&P moved Lower shortly thereafter. These charts represent the newest version of MultiCharts and I've changed the timeframe to a 15-minute chart to display better. This represented a Long opportunity on the 10-year note, as a trader you could have netted about 30 plus ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Dec '22. The S&P contract is also Dec' 22. I've changed the format to Renko Bars such that it may be more apparent and visible. Charts courtesy of MultiCharts built on an AMP platform ZN - Dec 2022 - 10/27/22 S&P - Dec 2022 - 10/27/22 Bias Yesterday we gave the markets a Neutral or Mixed bias as we saw no evidence of Market Correlation at all. The Dow traded Higher by 194 points, however the other indices traded Lower resulting in a Mixed market at the close. Today we aren't dealing with a correlated market and our bias is Neutral. Could this change? Of Course. Remember anything can happen in a volatile market. Commentary So, when we viewed the market early Thursday morning, our first reaction was Mixed market as we saw no real evidence of correlation yesterday morning. The Dow traded Higher, but the other indices traded Lower, resulting in a Mixed market. Today we have Personal Income and Personal Spending, both of which are major and proven market movers. The surprise yesterday came in the form of Advance GDP which came in higher than expected. Any positive news in this market is well received.

Queen Elizabeth II died. She was a powerful anchor and symbol in the political sphere, just like gold in the financial realm. The Power of Symbols Her Majesty Queen Elizabeth II, the Sovereign of the United Kingdom of Great Britain and Northern Ireland and the Head of the Commonwealth, died on September 8, 2022. I’m not a British or Commonwealth citizen, nor a devoted supporter (and observer) of the British monarchy. And yet – together with millions of people all over the world – I was saddened by the death of the Queen. I began to wonder why it was such poignant news, given that she was not my monarch and that her role was purely ceremonial and formal (the Queen reigned, but didn’t rule). The first common explanation is that Queen Elizabeth II was a fixture, a source of continuity and stability in an ever-changing world. In the words of the former Prime Minister, Lizz Truss, Queen Elizabeth was “the rock on which modern Britain was built”. Indeed, she acceded to the throne in February 1952, when Winston Churchill was Prime Minister and Harry Truman was President of the United States. It means that she ruled for more than 70 years, the longest of any British monarch and the longest recorded of any female head of state in history. She has simply always been there as Queen, many years before I and many other people were even born. However, there must be much more than that – actually we don’t despair after the death of every old person who remembers WWII. It seems that, despite how modern and progressive we are, there is a magic in the monarchy that resonates with something deep in us. Please note that the UK’s Parliament is practically the supreme authority, but its members exercise their power in the name of the Crown. The government was, for seventy years, Her Majesty’s government, while the opposition was Her Majesty’s most loyal opposition. Of course, from the pragmatic point of view, it was just a play, but thanks to these rituals, the British monarchy remains a symbolic but integral part of the UK’s power structure. Don’t underestimate the power of symbols! According to polls, more than a third of Britons regularly dream about the Queen and other members of the royal family. Elizabeth II could play just a symbolic role – but the symbol she embodied in herself was very powerful, almost religious nature. Actually, we can say that Elizabeth II was the most well-known representation of an archetype of the queen, one of the most important archetypes that symbolizes the wholeness and full potential of a woman and the ultimate in female leadership. The archetypal good queen is beloved as she takes care of her people and provides them with the structure they look to for safety. This is why her death disheartened so many people in the world. The Queen and Gold OK, but what does the Queen and her death have in common with gold (except she apparently liked gold pianos)? Should we expect some geopolitical turmoil right now that could support the price of the yellow metal? I don’t think so. Elizabeth was automatically replaced by her son as the next king, Charles III. And whoever reigns in the UK, he or she doesn’t rule, so the change on the throne shouldn’t disturb the functioning of the government. Perhaps some countries will leave the Commonwealth now, or this structure will disintegrate, but it shouldn’t pose any significant geopolitical risks that could support, even temporarily, gold prices. I decided to write about the Queen’s death rather than because I see some parallels between the perception of the Queen in the political realm and gold in the financial sphere. Why do people despair after the death of Elizabeth? Because, as previously stated, Queen was a fixture and a symbol. So why do people buy gold? Well, because gold is also a fixture, the rock on which the modern financial system was built. The golden anchor was removed only in the early 1970s, but to this day we say “gold standard” to describe a certain ideal (for example, we say that randomized double-blind placebo control studies are the “gold standard” of epidemiologic studies). Elizabeth Windsor ruled for 70 years, while gold ruled as money for centuries, and although dethroned, it’s still with us. People purchase gold also because it’s a powerful symbol, or even an archetypical form of money. You can easily verify it – please stop reading for a while and imagine a great treasure. What came to your mind? I bet that you saw precious metals, diamonds, etc., rather than credit cards or paper money. This is also why in times of crisis, people used to seek comfort in gold, an ultimate safe-haven...

As kids growing up, many of us would have played the game of chicken; where you and a friend do something dangerous, and whoever backs out first loses. The energy markets feel just like this at the moment - except the game is on steroids and the stakes are the highest they have been since World War 2. The current energy crisis in Europe is extremely complex, with so many layers ebbing and flowing, that have exposed the weaknesses of many historical decisions. The crisis is pulling at the very fabric of the European Union, and Russia knows it. Divide and conquer is Putin's mantra as the game of chicken escalates into a 4-dimensional game of chess between East and West. So, what is going on and how will the squeeze affect the Australian economy and AUD and where will the opportunities lie for traders? To help us, we include insights from Naeem Aslam, chief market analyst for forex trading in Australia with AvaTrade to weigh in on the likely effects on the Aussie market. The cause of the European energy squeeze As the northern hemisphere eases away from summer on its lonely journey toward winter, temperatures are falling. Winter means rugging up and staying indoors, and with the news breaking that Russia will stop pumping gas through the Nordstream pipeline to Germany, the coming European winter could be very painful. With short days and long, cold nights, household gas and electricity usage will be at its highest. With the ongoing war in Ukraine, sanctions are hurting Russia's economy and Russia is fighting back. It is weaponising its gas supply. It controlled 40% of European gas usage prior to the Ukrainian invasion. With careful EU planning, Gasworld reports this has now reduced to 9%. In line with the war, the EU began importing Liquid Natural Gas (LNG) to replace the natural gas from Russia, despite the extra expense. During the summer, the EU built up the storage capacity of LNG with recent analysis showing that steady supplies of LNG globally continue to arrive in Europe. The volumes now in place exceeding with the target of having storage inventories filled to 80% by November. Reuters reports the storage inventories are currently over 85%. Naturally, this increased demand for LNG has pushed up its price as global producers ship LNG to those that are prepared to pay the highest price. So why are natural gas and LNG so popular? The transition to renewables The UN's long-term goal is to transition away from using fossil fuels towards renewables for power generation. There are, however, challenges: Renewables rely on new technologies that take time to mature. Renewable energy only performs when nature allows. The lead times to deploy renewables is long. Combined, renewables alone are just too early to provide the certainty required for electricity production. Natural gas is cleaner than other fossil fuel sources and is a transition fuel from Fossil fuels to renewable energy. The challenge, however, is that Russia decided overnight to cut gas to Germany. Renewable energy cannot be deployed quickly enough to plug the gap, which means there may be shortfalls, which means the potential for rationing and blackouts. Government priorities Protests are on the increase in Europe over rising electricity costs. These protests will get even worse if there are blackouts. Governments across Europe face a delicate choice between social unrest and recession if gas restrictions apply to industry. A second recession will severely test companies already weakened by the pandemic. Inflation is likely to get much worse The energy squeeze could see prices for LNG explode. Not only are global supplies already limited through pre-committed long-term contracts, but also any ramping up of LNG production will involve significant costs. Rising LNG prices will compound already rising inflation, which is pressuring governments to further raise interest rates. The harsher the winter in Europe, the greater the chances of rationing and the greater the chances of recession and inflation - ie stagflation. What does this mean for Australia? Naeem Aslam, chief market analyst with AvaTrade gave us his thoughts, which are provided as guidance and should not be considered financial advice. How are we fixed for natural gas? "In Australia, we have 160 natural gas power stations powered by locally produced natural gas. The European energy squeeze is unlikely to affect Australia directly. With Russia closing off their gas supply to Europe, they need to find alternative buyers, who will need discounts, supported by the latest proposed EU price caps." Inflation - Australia is fairly cushioned from the supply side shock of LNG - so any addition to existing inflationary pressure is likely to be soft. Interest Rates - European interest rates are likely to rise with increased inflation, and we may see some upward pressure on Aussie rates to...

The Canadian dollar is lower today. In the European session, USD/CAD is trading at 1.3617, up 0.39%. Markets eye Canada’s GDP The week wraps up with Canada’s GDP for August. The economy is expected to have expanded by 0.1%, which would be unchanged from July. The economy is likely heading into a recession, and Finance Minister Chrystia Freeland stated recently that the coming months would be a “challenging economic time.” The government’s key priority is curbing high inflation, which has eased slightly. In September, inflation fell to 6.9%, down from 7.0% in August. Still, this was higher than the consensus of 6.7%, as soaring food prices kept inflation from falling further. The good news is that inflation appears to have peaked from the June level of 8.1%, which marked a 40-year high. The bad news is that core inflation was unchanged at 5.3% in September, a sign that inflation remains sticky, despite the Bank of Canada’s aggressive rate-hiking cycle. High inflation pushed the BoC to deliver another oversize rate on Wednesday, but the 0.50% hike was considered dovish, as the consensus stood at 0.75%. The cash rate is now at 3.75%, its highest level since 2008. Although inflation is far from being beaten, Canada’s economy is clearly slowing down as a result of the steep increase in rates, and the BoC is easing up on the rate pedal just a bit, in the hopes of guiding the economy to a soft landing and avoiding a recession. High rates are weighing on households and businesses and the BoC is concerned that further oversize rates may pose a risk to financial stability. The US releases Personal Income and Spending data later today as well as the Fed’s preferred inflation indicator, the Core PCE Price Index. The index is expected to rise to 5.2%, up from 4.9%, but I don’t expect today’s numbers to change the Fed’s plan to raise rates by 0.75% next week. USD/CAD technical There is support at 1.3656 1.3467. 1.3718 and 1.3807 are resistance lines.

XAU/USD Spot gold price was down around 1.5% by early US trading on Friday, pressured by stronger dollar on growing expectations that the Fed will deliver another 75 basis point hike in the policy meeting next week. Optimism on further policy tightening inflates dollar, weighing on its safe-haven counterpart. Fresh acceleration lower has so far retraced over 50% of $1617/$1674 upleg, with the metal being on track for the biggest daily fall since Oct 19. Weekly action is also going to end in red, with more significant signal that the yellow metal will register seventh consecutive monthly loss. Weakening daily studies (MA's turning to bearish setup and momentum remains in negative zone) add to downside risk, which will be boosted by today's close below $1646 (50% retracement of 1617/$1674/daily Tenkan-sen). Also, gold price is on track for the second monthly close below pivotal Fibo support at $1681 (38.2% of $1046/$2074) that would add to reversal signals and re-confirm a monthly double-top ($2074/$2070) as well as a double bull-trap above psychological $2000 barrier. Bears need to clear temporary footstep at $1647 (Oct low, reinforced by rising 55MMA) to open way for attack at monthly cloud base ($1598) and 50% retracement of $1046/$2074 ($1560). Res: 1652; 1668; 1674; 1681. Sup: 1639; 1630; 1614; 1598. Interested in XAU/USD technicals? Check out the key levels