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EUR/USD has made a significant bearish breakdown. The pair traded as low as 1.1161 during today’s Asian session, below 1.1200 and at a new 16-month low. The Euro is under pressure from reports that Spain may hold an early election and from wider concern over European fiscal risks, including stress in French government bonds. This is technically significant as this pair has tended to trend quite reliably, so trend traders will be happily short here, especially as the Euro is the weakest major currency over the long term.
Weak US employment data changed the Fed outlook. US nonfarm payrolls increased by only 29,000 in September, far below consensus expectations of about 84,000 to 90,000. The prior two months were revised lower by a combined 60,000, while the unemployment rate rose from 4.1% to 4.2% and wage growth slowed. Markets have consequently reduced the implied probability of a Fed rate hike at the October meeting to only 18%.
The US Dollar is firm despite reduced Fed rate hike expectations. The Dollar weakened immediately after Friday’s payrolls report but has since recovered against most major currencies, helped by Europe-specific weakness. The Dollar is especially strong against the Euro, while USD/JPY is trading near 158.10. This is a reminder that currency pairs are not always driven by fundamentals: the Euro can fall even when the case for further Fed tightening becomes less persuasive.
US stock markets ended last week strongly. Friday’s softer employment data eased concerns that the Fed may need to tighten again, lifting the S&P 500 by 0.7%, the Dow Jones Industrial Average by 0.5%, and the Nasdaq 100 Index briefly traded at a new all-time high. The S&P 500 is now within 1% of its record high, while today’s risk-positive mood has helped Asian markets.
The Nikkei 225 is up more than 2.5% today at a fresh 3-month high, briefly trading above 70,000 for the first time since early July. AI- and semiconductor-related shares are leading the advance, following Wall Street’s technology rally last Friday.
Crude oil is easing as supply concerns recede. Brent Crude is near $101.60, and WTI is close to $90.50. Recovering Middle East exports and a planned G7 release of 100 million barrels from strategic reserves have reduced the immediate supply-risk premium, outweighing recent Houthi claims of attacks on Saudi facilities. In spot WTI, traders will be closely watching if the support level at $87.68 - a sustained break below this would invalidate the long-term bullish channel and represent a significant victory for the USA in its war against the Iranian regime.
Bitcoin and Ethereum continue to coil within textbook breakout patterns just below significant resistance levels - Bitcoin at $87,293 and Ethereum at $2,800. Trend traders will already be long here.
It may be a relatively quiet day in the market today, as there are no high-impact data releases scheduled.