FTSE 100, GBP/USD and gold price bounce off support

Macro Update

Markets trade unevenly ahead of earnings season: Global equities moved erratically as investors prepared for corporate results, with South Korean shares falling 3.1% while S&P 500, Nasdaq and European futures rose 0.3% to 0.6%. Trading remained subdued with Japan closed for a holiday and US markets partly shut.

Oil retreats on hopes of Russian supply relief: Brent crude fell around 1.4% to $103.30 a barrel, while US crude dropped 1.7% to $90.29 after Donald Trump announced an energy ceasefire between Ukraine and Russia and a diesel supply agreement with Moscow. However, Houthi attacks on Saudi Arabia and tanker strikes near the Strait of Hormuz kept prices elevated.

Dollar stays near 18-month peak amid geopolitical tensions: The dollar index held at 102.16 as escalating Middle East conflict kept investors cautious. The euro remained near $1.121 after five consecutive weekly declines amid French fiscal concerns, while the yen traded at ¥158.24 per dollar as the threat of Japanese intervention deterred speculators.

US inflation report in focus as rate-hike bets build: Economists expected Wednesday’s CPI data to show annual inflation rising to 3.7% on higher energy costs, while core inflation was forecast at 2.5%. Markets priced in an 18% chance of a Fed hike this month and around 85% by December, following a surge in Treasury yields to 24-year highs.

Major US banks open third-quarter earnings season: JPMorgan, Goldman Sachs, Citigroup and Wells Fargo are due to report on Tuesday, with S&P 500 earnings forecast to rise more than 30% year on year. However, much of the expected growth is concentrated in technology and banking shares have fallen 7.5% over the past month.

Gold edges up as dollar and oil prices ease: Spot gold gained 0.1% to $4,198 an ounce, supported by a weaker dollar and lower oil prices that helped temper inflation concerns and expectations of further rate increases. Silver also advanced 0.4% to $61.02 an ounce.

FTSE 100 probes resistance

The FTSE 100 is in recovery mode and is currently grappling with last week's high and the mid-September lows at 10,583-to-10,616. If broken through, the August low at 10,684 may be reached next.

Were resistance to cap, however, a slip back towards the 200-day simple moving average (SMA) at 10,489 may ensue.

Below the 200-day simple moving average (SMA) at 10,489 lies last week's low at 10,364 which represents key support.

Short-term outlook: bullish while above the 200-day simple moving average (SMA) at 10,489

Medium-term outlook: neutral while above the 10,113 May low but below the 10,832 mid-September high

FTSE 100 daily candlestick chart

GBP/USD hovers above minor support

GBP/USD continues to range trade above its early October low at $1.3181. If fallen through, the March-to-June lows at $1.3160-to-$1.3140 are expected to be reached.

Minor resistance sits between the late July $1.3274 low and the 6 October high at $1.3285. The next higher 30 September high at $1.3311 would need to be exceeded for a bullish reversal to become probable.

Short-term outlook: neutral while below the 30 September high at $1.3311 but above the early October low at $1.3181

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 bounces off support zone

Spot gold bounced off last week's low at $4,066.54 and is approaching its mid-September low-to-early October high resistance zone at $4,227.53-to-$4,367.42. If overcome, the early September trough at $4,282.63 and the 55-day simple moving average (SMA) at $4,312.46 may be reached.

Support sits around the $4,110.87 late September low and, more importantly, at the 7 October $4,066.54 low. Were a slip through this level to occur, major support consisting of the June-to-July lows at $3,996.06-to-$3,942.10 may be reached instead.

Short-term outlook: neutral while below the 2 October high at $4,227.53 but above the 7 October $4,066.54 low

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

Gold daily candlestick chart