FTSE 10, GBP/USD hold above support as gold price drops

Macro Update

Oil prices rebound sharply: Brent crude jumped 2.7% to $107.16 a barrel after President Trump rejected Iran’s proposal to reopen the Strait of Hormuz, taking monthly gains to almost 18% and keeping tensions in the Middle East elevated.

Asian equities come under pressure: Chinese blue-chip stocks fell 1.9% to a one-year low as US lawmakers moved to restrict Chinese-made components in federal AI systems, while South Korea’s market dropped 2% and Japan’s Nikkei ended flat.

Long-dated Treasury yields rise: The 30-year Treasury yield edged up to 5.52%, close to its highest level since 2004, having risen 27 basis points this month amid persistent inflation concerns and expectations of higher-for-longer Federal Reserve policy.

Fed rate-hike expectations remain elevated: Markets are pricing in a 70% probability of a second consecutive rate increase in October, while the Reserve Bank of Australia is also expected to tighten policy on Tuesday following a run of stronger-than-expected US economic data.

Dollar climbs to two-month peak: The dollar index advanced to 101.39 on the back of upbeat US economic figures, leaving the euro at $1.1383 and sterling near a three-month low of $1.3240 despite hawkish signals from the Bank of England.

Gold prices retreat: Bullion fell 2.2% to $4,192 an ounce and is down more than 4% this month, as rising bond yields and inflation concerns fuelled by higher oil prices increased the opportunity cost of holding the non-yielding metal.

FTSE 100 range trades

The FTSE 100 continues to sideways trade above its March-to-September uptrend line at 10,647 and last week's low at 10,664.

While the 18 September low at 10,616 underpins, the medium-term uptrend is deemed to be intact with the 17 September high at 10,832 representing a possible upside target. If exceeded, the early September high at 10,868 should be next in line.

Short-term outlook: bullish while above the 10,583 September low

Medium-term outlook: bullish while above the 15 June high at 10,568

FTSE 100 daily candlestick chart

GBP/USD hovers above minor support

GBP/USD's August-to-September descent is ongoing even though the cross is currently still hovering above last week's $1.3204 low. If slid through, the March-to-June lows at $1.3160-to-$1.3140 may be reached.

Resistance above Friday's $1.3264 high may be spotted around the $1.3274 late July low and the May-to-early June lows at $1.3303-to-$1.3306.

Short-term outlook: bearish while below the 21 September high at $1.3400

Medium-term outlook: neutral with a bearish bias while trading within the March-to-September boundaries at $1.3676-to-$1.3140

GBP/USD daily candlestick chart

Gold drops

Spot gold's August-to-September decline is ongoing with the 2024-to-2026 uptrend line at $4,131.00 per troy ounce being in focus, were a slip through the 22 July high at $4,166.13 to be seen.

Further down lies the 11 June trough at $4,220.22 which may also act as minor support ahead of the major support area made up of the June-to-July lows at $3,996.06-to-$3,942.10.

Minor resistance above the early July $4,202.70 high may be spotted around the mid-September low at $4,235.17 and at Friday's $4,315.79 high.

Short-term outlook: bearish while below the 18 September high at $4,399.67

Medium-term outlook: bearish while below the 18 September high at $4,399.67, targeting the June-to-July lows at $3,996.06-to-$3,942.10

Gold daily candlestick chart