The Week Ahead – Supply uncertainty

Jing-Ren has extensive experience in currency and commodities trading. He began his career in metal sales and trading at Societe Generale in London. He went on to work as a senior analyst within the FX industry where he developed and refined his own trading and risk management strategies. Having a solid understanding of market dynamics, he founded his own research and asset management services and works with Orbex to provide timely market commentary on the global financial markets.

The euro sinks as the market grows wary of the cost of high interest rates in the bloc. After policymakers lifted key rates to a record high of 4% they will need to thread the needle to avoid tightening too much. Traders might find it hard to believe that a ‘soft landing’ could be achieved as easily in the euro zone as in the US. Higher borrowing costs may once again reveal vulnerability of peripheral economies and those showing a lack of fiscal discipline, known as the fragmentation risk. How the ECB shifts its focus towards managing risks would drive the single currency. 1.0230 is the next support and 1.0720 the first resistance.

USDCAD awaits breakout ahead of BoC meeting

The S&P 500 pulls lower as market participants dial down their risk appetite amid heightened uncertainty. Military escalations in the Middle East are keeping investors on their toes but might not seriously dent sentiment as long as they are contained within the Israeli-Palestinian borders. Still, outflows into safe haven assets like gold and bonds could cap equities in the near-term. What may prevent the prospect for equities to turn outright gloomy would be a decent earnings season and the belief that the Federal Reserve is probably done with the tightening. The index is holding above 4200 and 4510 is the first resistance ahead.

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Brent crude jumped as the Israel-Hamas conflict raised fears of supply disruptions in the region. A potential contagion in the Middle East with the involvement of Iran would send oil prices surging, as markets still have vivid memories of the invasion of Ukraine last year. With everyone’s attention fully focused on the supply side, prices are likely to remain choppy as traders try to game out different scenarios. However, only a de-escalation, though unlikely in the short-term, would calm the nerves and drive energy prices back down. The price has found support over 82.00 and 99.00 is the next obstacle.

SPX 500 struggles amid geopolitical tensions

EURUSD falls as high rates could be costly

The Canadian dollar steadies as traders ponder whether the Bank of Canada would raise rates again. Home sales have been falling for three months in a row and GDP showed signs of stagnation. However, inflation has proven sticky and the job market strong with solid wage growth, leaving some market participants to believe that policymakers could use these underlying pressures to justify another uptick in interest rates. While other central banks are wrapping up their tightening cycle, a surprise hike by the BoC to ‘get things done’ could press the US dollar below 1.3400. Otherwise, the pair may climb above 1.3850.

UKOIL rallies in fear of supply disruptions

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منبع: https://www.orbex.com/blog/en/2023/10/the-week-ahead-supply-uncertainty