DAX 40 falls through key support as AUD/USD, copper price remain under pressure

Macro update

Asian stocks open the fourth quarter on a mixed note: Japanese and South Korean technology shares rallied after Micron forecast strong demand for AI memory chips, while broader Asian markets remained subdued amid elevated bond yields and uncertainty over the global interest-rate outlook.

Treasury yields remain elevated: The US 10-year Treasury yield climbed to 5.31%, its highest level since 2007, despite softer-than-expected August inflation, as investors remained concerned about persistent price pressures, higher oil costs and the prospect of interest rates staying higher for longer.

Oil prices retreat as Gulf supplies recover: Brent crude slipped towards $97 a barrel as recovering Gulf exports and an unexpected increase in US inventories eased supply concerns, although stalled US-Iran peace talks continued to support prices after Brent gained around 14% in September.

Softer US inflation eases rate-hike pressure: August inflation came in below expectations and July’s reading was revised lower, reducing bets on an October Federal Reserve rate increase, although markets continued to price a high probability of a December hike, helping the US dollar reach three-month highs.

Japanese business sentiment improves: The Bank of Japan’s Tankan survey showed manufacturing confidence rising to 24 in the third quarter from 22 previously, although the reading fell short of expectations, while services sentiment eased slightly to 35.

UK and US economic data in focus: Nationwide house prices, final manufacturing PMI readings from the UK and eurozone, eurozone unemployment and US ISM manufacturing and jobless claims are among today’s key releases, while speeches from several FOMC members and Friday’s US payrolls report will provide further clues on the Fed’s rate outlook.

DAX 40 falls through key support

The DAX 40's fall has now taken the index below its key 25,176-to-25,164 support zone, made up of the mid-June high and September lows.

The index is seen sliding towards the 200-day simple moving average (SMA) at 24,829, around which it may at least short-term stabilise. If not, the July lows at 24,697-to-24,651 may be reached next.

Because of inverse polarity previous support at 25,176-to-25,164 is now expected to act as resistance.

Short-term outlook: bearish while below the 29 September high at 25,617

Medium-term outlook: bearish while below the 17 September high at 25,800, targeting the late June low at 24,548

DAX 40  daily candlestick chart

AUD/USD drops like a stone

AUD/USD has so far fallen by nearly 4% from its $0.7238 early September high and is fast approaching the July low at $0.6923. If slipped through, the March low at $0.6834 may be back in sight.

Minor resistance may be encountered around the 11 June low at $0.6979 and the 3 August trough at $0.6984.

Short-term outlook: bearish while below the 24 September $0.7045 high

Medium-term outlook: bearish while below the 24 September $0.7045 high 

AUD/USD daily candlestick chart

Copper comes further off record high

The price of Copper is still seen coming off last week's $6.8181 record high even though it is trying to find support in the $6.5000 region.

Minor support may be spotted between the mid-August-to-late August lows at $6.4661-to-$6.4482. If slipped through, the early August and early September lows at $6.3923-to-$6.3826 may well be revisited.

Minor resistance sits at the 30 September high at $6.5930.

Short-term outlook: bearish while below the 30 September high at $6.5930

Medium-term outlook: neutral with a bullish undertone while above the 29 July low at $6.2206

Copper daily candlestick chart