SAFE HAVENS RISE AS GLOBAL STOCKS TANK
It was a sea of red in the global stock exchanges as investors sought to take profit after yesterday’s increases. In Asia, China’s Shanghai Composite Index and Hang Seng declined by 2.40% and 3.10% while Japan’s Nikkei and South Korea’s KOSPI declined by 2.70% and 2.60% respectively. In Europe, stocks declined to the lowest level in 22 months. Germany’s DAX, France’s CAC, and Eurozone’s Stoxx declined by 1.70%, 1.10%, and 1% respectively. US futures pointed to a lower open with the Dow and S&P 500 falling by more than 1%. Today, the earnings season will continue with companies like 3M, Biogen, Capital One, and McDonalds expected to report. In response to the slump, investors flew to safety that led to an increase in the haven assets like gold and Japanese Yen.
Crude oil fell to a monthly low after Saudi Arabia committed itself to adequate supplies. In a statement, Saudi oil minister said that the embargo-style tactics were off the table as the country continued to face an outrage over the murder of journalist Jamal Khashoggi. Today, Turkish president disputed the explanation given by Saudi Arabia about what happened. He said that the murder was planned in advance disputing Saudi’s explanation that it was a mistake. Later today, the American Petroleum will release the inventories data. This number will be watched closely after last week’s inventory numbers.
The sterling dropped slightly against the USD after data from Confederation of British Industry (CBI) showed that manufacturing orders had declined at the fastest pace since 2015. A net six percent of companies said that orders declined in the third quarter compared to a balance of 15% in the second quarter. Worse, the volume of export orders declined at a faster rate from a balance of 21% saying order books improved to a net deficit of 8%. These numbers were the lowest since 2015 and were attributed to the ongoing Brexit negotiations.
The XAU/USD reached a YTD low of 1160 in August. Since then, the pair has moved higher and today, it reached an important high of 1236. This was the highest level since July this year. It was also an important resistance level as shown in the daily chart below. The double EMA indicators show that the pair could continue the upward trend. However, since this is an important resistance level, there is a likelihood that the pair will either move down slightly or start moving in a sideways direction.
The EUR/USD pair attempted to move up but found resistance at the 1.1485 level. It is now trading at the 1.1470 level, which is along the 14 and 28-day EMA. The momentum indicator crossed the neutral level of 100 heading upwards while the RSI is currently at 55. The pair will likely remain in the sideways direction as traders wait for the decision by the ECB on Thursday.
The price of crude oil dropped sharply ahead of today’s inventory numbers from API. This was a continuation of a downward trend that started on October 10. The XBR/USD pair declined to an intraday low of 77.68. This was the lowest level since September 20. It was also an important support level as shown in the four-hour chart below. The downward trend is likely to continue as shown by the Ichimoku Kinko Hyo indicator. This path of least resistance is also shown by the momentum indicator. However, the pair could see a small bounce depending on the inventory numbers.