FTSE 100 recovers while GBP/USD, gold price hover above support

Macro Update

Asian stocks rally on AI chip demand: Strong appetite for AI-related data boosted semiconductor stocks, with South Korea’s tech-heavy index rising 1.4% and Taiwan gaining 1% to reach a three-month high. MSCI’s broadest Asia-Pacific index excluding Japan added 0.9%, while US equity futures pointed higher and Japanese markets remained closed for the Silver Week holiday.

Oil prices fall to one-week low: Brent fell 1.7% to $102.08 a barrel and US crude dropped 1.8% to $98.53, their lowest levels since September 10, as hopes for US-Iran diplomacy at this week’s UN gathering reduced the geopolitical risk premium. Saudi exports also recovered to more than 4 million barrels a day in September after August’s decline, easing supply concerns despite continued Houthi attacks.

Yen holds near ¥157 per dollar: The Japanese currency traded around ¥156.85 after losing 2% last week, with thin holiday liquidity keeping investors alert to possible intervention following reports of official rate checks. The euro was little changed at $1.1482, while sterling traded at $1.339.

Gold slips as Treasury yields rise: Higher US government bond yields weighed on demand for the non-yielding metal, pushing gold 0.5% lower to around $4,355 an ounce.

US bond yields hit multi-year highs: Two-year Treasury yields have climbed 36 basis points over the past fortnight to 4.76%, their highest since mid-2024, as hawkish Fed guidance left markets pricing a 56% chance of an October hike and an almost certain move by year-end. Growing concerns over fiscal deficits also pushed the risk premium on French government debt to its widest since the eurozone debt crisis.

Merz faces election setback: German Chancellor Friedrich Merz’s conservatives suffered their weakest result since 1949 as the far-right Alternative for Germany led state polls in the northeast, potentially adding further pressure to German government bonds.

FTSE 100 bounces off support

The FTSE 100 continues to trade above its March-to-September uptrend line at 10,610 and last week's low at 10,583. While the latter level underpins, the medium-term uptrend is deemed to be intact with last week's high at 10,832 remaining in sight. If overcome, the early September high at 10,868 should be next in line.

Support may be spotted between the late August and early September lows at 10,686-to-10,684 ahead of Friday's 10,616 trough.

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

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

FTSE 100 daily candlestick chart

GBP/USD slides towards support

GBP/USD's August-to-September descent is ongoing with the cross hovering above Friday's low at $1.3336, a fall through which may lead to the May, early June and late July lows at $1.3306-to-$1.3274 being revisited.

As long as last week's low at $1.3336 underpins, a rise above Friday's high at $1.3398 may ensue. If so, a recovery towards the 200-day simple moving average (SMA) and mid-August-to-early September lows at $1.3452-to-$1.3475 may unfold.

Only a bullish reversal and rise above the 9 September high at $1.3568 may lead to the April-to-August highs at $1.3599-to-$1.3676 being reached.

Short-term outlook: bullish while above the 18 September low at $1.3336

Medium-term outlook: neutral while trading between the March-to-September boundaries at $1.3676-to-$1.3140

GBP/USD daily candlestick chart

Gold remains above support

Spot gold's August-to-September decline has taken the precious metal to last week's $4,235.17 low before recovering to the $4,400 region.

If Friday's high at $4,399.67 were to be exceeded, an attempt at reaching the early September high and 200-day simple moving average (SMA) at $4,510.93-to-$4,541.83 may be made.

Support remains to be seen between the mid-August-to-early September lows at $4,324.68-to-$4,282.63. This support zone lies above last week's $4,235.17 low, a fall through which would likely engage the early July high at $4,202.70.

Short-term outlook: bullish while above the 16 September low at $4,235.17

Medium-term outlook: neutral while above the 16 September low at $4,235.17; a fall through this level would change the outlook to a bearish one

Gold daily candlestick chart