After four consecutive 75bp hikes, the Federal Reserve will likely look to slow the pace of rate hikes from December. The key US data release next week is month-on-month core CPI, which we expect to be 0.5%. Other releases of note include consumer credit and confidence data, however these are shadowed by the mid-term elections on Tuesday.. US: Mid-term elections in focus Federal Reserve chair Jerome Powell has successfully brought the market on board with the notion that while the central bank will likely look to slow the pace of rate hikes from December after four consecutive 75bp moves, the terminal interest rate will likely end up being higher than what it signalled back in September. Nonetheless, this will depend on the data flow. If inflation and job numbers continue to come in on the strong side it may be that officials end up doing a fifth 75bp. Given this uncertainty, markets are currently pricing around 58bp for the December meeting and 42bp for February, with a final 25bp hike coming at some point in the second quarter. Next week’s data will be important, but not critical in determining the path forward. The key release is the consumer price index with the focus within that being the month-on-month core (ex-food and energy) number. Over the past six months, we have had one 0.7%, four 0.6% and one 0.3% print. We need to see numbers closer to 0.2% to bring the annual rate down toward the 2% target over time. The consensus right now is for 0.5% next week, which is also our prediction. There is a second bite of the cherry ahead of the December FOMC meeting on 14 December given November CPI is published on 13 December. Nonetheless, if we get a downside surprise we could see markets looking to price in a greater chance of a 50bp December hike and possibly a slightly lower terminal rate. Other data includes consumer credit and consumer confidence along with small business optimism. However, these will be overlooked given the mid-term elections on Tuesday. Opinion polling appears to show momentum is building for Republican party candidates with a majority in both the House and the Senate now looking like the most likely outcome. We have written up a scenario analysis of the possible outcomes, but essentially if the Republicans gain control of Congress, President Joe Biden’s ability to pass legislation will be severely curtailed. Indeed, there is far less probability of any fiscal support for the economy through the recession than if the Democrats retained control of Congress given Republicans will look to block it. Consequently, if the Democrats lose then it is more likely that we will see interest rate cuts in the second half of 2023 to provide the stimulus to help the economy rebound, rather than if they win where fiscal policy would likely do more of the heavy-lifting and interest rates stay higher for longer to offset any inflation impulse. Key events in developed markets next week Read the original analysis: Key events in developed markets next week

Gold price ended up closing a volatile week in positive territory. The US Dollar lost its strength toward the end of the week despite the Fed's hawkish stance. XAUUSD could extend its recovery in case it confirms $1,675 as support. Following Monday's decline, Gold price gained traction and registered strong daily gains on Tuesday. Although the US Federal Reserve's hawkish tone forced XAUUSD to lose its traction mid-week, the improving market mood and the broad-based US Dollar weakness ahead of the weekend helped the pair stage a rebound and close the week in positive territory. Next week's Consumer Price Index (CPI) data could help Gold price determine its next short-term direction.  What happened last week? The negative shift witnessed in the risk mood at the beginning of the week helped the US Dollar (USD) stay resilient against its rivals and caused Gold price to continue to push lower. The disappointing PMI data from China, which showed that business activity contracted in October, caused investors to seek refuge. On Tuesday, Gold price reversed its direction as US Treasury bond yields declined after the Reserve Bank of Australia's decision to hike its policy rate by only 25 basis points. In the second half of the day, the data from the United States revealed that JOLTS Job Openings increased to 10.7 million on the last business day of September, compared to the market expectation of 10 million, and helped the US Dollar find its footing. Additionally, the ISM Manufacturing PMI came in at 50.2 in October, surpassing analysts' forecast of 50. Although Gold price struggled to preserve its bullish momentum during the American trading hours on upbeat United States data, it ended up gaining nearly 1% on the day on Tuesday. The monthly report published by Automatic Data Processing (ADP) revealed on Wednesday that employment in the US private sector rose by 239,000 in October. This print beat the market projection of 193,000 but failed to provide a boost to the US Dollar with investors staying on the sidelines ahead of the US Federal Reserve's (Fed) highly-anticipated policy announcements. Meanwhile, Gold price managed to build on Tuesday's gains and advanced toward $1,660. As expected, the Fed raised its policy rate by 75 basis points (bps) to the range of 3.75-4% following the November meeting. In its policy statement, the Fed noted that it will take "cumulative tightening, policy lags and economic and financial developments" into account when determining the pace of rate hikes. This comment triggered a risk rally as it hinted at a smaller 50 bps rate increase in December. FOMC Chairman Jerome Powell, however, reaffirmed the Fed's hawkish stance by noting that he was expecting the terminal rate to be revised higher in December's Summary of Economic Projections (SEP), the so-called dot plot. Powell explained that it was more important for them to reach the upper limit of the policy rate rather than the size or the speed of rate increases. In turn, US Treasury bond yields gained traction and Gold price made a sharp U-turn, closing the day deep in negative territory below $1,640. With the positive impact of the Fed's policy stance on the USD remaining intact on Thursday, XAUUSD slumped to its lowest level since late September and came within a touching distance of the multi-year low set at $1,615 on September 28. The improving market mood on renewed optimism about China easing coronavirus restrictions provided a boost to Gold price and opened the door for a decisive rebound. The US Dollar struggled to find demand as a safe haven and helped XAUUSD stretch higher toward $1,650 ahead of the October jobs report. The US Bureau of Labor Statistics reported on Friday that Nonfarm Payrolls rose by 261,000 in October, surpassing the market expectation of 200,000 by a wide margin. Annual wage inflation, as measured by the Average Hourly Earnings, however, declined to 4.7% from 5%. Wall Street's main indexes opened decisively higher after this report and XAUUSD built on earlier gains to end the week on a firm footing above $1,660.  Next week In the absence of high-impact macroeconomic data releases in the first half of the week, market participants will pay close attention to developments surrounding China's zero-covid policy. In case China decides to soften its stance on re-opening and confirm market rumours, Gold price is likely to gather strength on the back of an improving demand outlook. On Tuesday, the United States midterm elections will be held but it's difficult to say what kind of an impact the outcome could have on the US Dollar performance against its rivals or the overall market mood. The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data on Thursday. The annual Core CPI is forecast to rise to 6.9% in October from 6.6% in September....

Going into the November meeting markets were fully expecting a 25 bps rate hike. This was despite the latest trimmed mean reading of 6.1% CPI which was on the high side, so there was always a chance of a surprise 50bps hike. In the event, the RBA hiked by only 25bps. The decision as growth revised lower Central banks around the world are trying to balance hiking interest rates to control inflation without over-tightening. The risk, for example, that many economists see is that the Fed is on the brink of over-tightening. So, the RBA has one eye on growth and one eye on inflation. Growth revised lower The RBA is concerned about slowing growth. They revised growth projections lower to 3% this year and 1.5% in 2023 and 2024. So, the RBA will not want to overreact to inflation, by going too hard on rates for too long. Inflation expected to peak this year Inflation is now forecasted to peak at 8% this year before falling to 4.7% over 2023 and just over 3% in 2024. The reaction For many central banks, and the RBA is no exception, a slower path of rate hikes is supportive for stocks. The reaction in the AUDUSD pair was an initial drop and the ASX 200 picked up a little. The expectations of slower rate hikes from the RBA are broadly supportive for Australian stocks. The Short Term Interest Rate market reaction the day after the decision is also affirming for a slower rate path ahead. The terminal rate is expected to be just over 4% down from 4.24% prior to the meeting. See the Financial Source Implied Interest Rate Curve tool below. The RBA also said that it recognises ‘that monetary policy operates with a lag and that the full effect of the increase in interest rates is yet to be felt in mortgage payments. Higher interest rates and higher inflation are putting pressure on the budgets of many households’. So, the bottom line is that the RBA will be data-dependent going forward and will watch the labour market and inflation closely. Learn more about HYCM

US payrolls rose by 239,000 in October, according to Wednesday’s report out of the Automatic Data Processing firm (ADP), beating economists’ estimates for a 178,000 increase. The main highlight of the day, however, was the Fed delivering its fourth consecutive 75-basis point rate hike. This hauled the Federal Funds Rate to a target range of 3.75% to 4.00%. Interestingly, December’s Fed Funds Futures market is now pricing in a 59% probability of only a 50bp hike at 14th December meeting. The aftermath of the release witnessed the US Dollar Index plunge 0.6%, taking the DXY back to within striking distance of 110.00. Dollar weakness was short-lived, nevertheless, pulling off session lows to within pre-announcement levels as markets staged a U-turn amid Fed Chair Powell’s Hawkish comments during his presser: ‘Rates need to move beyond the September Dot Plot forecasted (median 4.6%)’. ‘It is very premature to be thinking about pausing rates’. Essentially, his message was repricing the terminal rate higher and price out any rate cuts for next year. Major US equity indices initially rallied on the back of the release, though upside proved short-lived for the S&P 500, topping at a high of 3,894 and stepping beneath pre-announcement levels. A similar whipsaw was seen in EUR/USD, punching to a session peak of $0.9976 before retreating south of the $0.99 figure, leaving behind a ghastly upper candle shadow on the hourly chart. EUR/USD: Daily trendline resistance-turned support on the daily timeframe, extended from the high of $1.1495, remains in the spotlight, evidently under pressure and on the verge of ceding ground. This follows last week’s rejection of daily Quasimodo resistance from $1.0090. Clearing the noted trendline support uncovers a familiar daily Quasimodo resistance-turned support coming in at $0.9753. A break lower is supported by the overall trend: lower since topping in January 2021. Adding to the bearish narrative is the daily chart’s relative strength index (RSI) retesting resistance between 60.00 and 50.00. This places a bold question mark on H1 Quasimodo support from $0.9864, with the unit threatening to push lower today and possibly encourage short-term breakout selling towards H1 Quasimodo support at $0.9826 and possibly the $0.98 region. GBP/USD: It was a similar story for GBP/USD on Wednesday; the currency pair initially staged an advance in the aftermath of the release, spiking to a high of $1.1564 and touching gloves with H1 Quasimodo resistance coming in at $1.1549. As evident from the H1 chart, price dipped under Quasimodo support from $1.1445 in recent trading and is now within a stone’s throw of reaching $1.14 and a neighbouring channel support, taken from the low $1.1503. Breaching the aforementioned levels casts light towards H1 Quasimodo resistance-turned support at $1.1355 and then potentially to $1.13. Technically speaking, recent downside should not be a surprise. The weekly timeframe has price action testing the inside of a decision point at $1.1751-1.1413, alongside the daily chart’s relative strength index (RSI) resistance between 60.00 and 50.00 welcoming the indicator. This is also supported by the dominant downtrend visible on the weekly timeframe since topping at $1.4250 in June 2021. Therefore, going on the above, a break under $1.14 on the H1 scale should not surprise, action perhaps igniting short-term breakout selling in the direction of H1 Quasimodo resistance-turned support at $1.1355 and potentially to $1.13.

The Reserve Bank of Australia will likely hike the cash rate by 25 bps. Mortgage rates in Australia are becoming a problem for households. AUD/USD is at risk of resuming its bearish trend and testing the 0.6300 area. The Reserve Bank of Australia (RBA) will announce its monetary policy decision on November 1, with board members stuck between a rock and a hard place. The Australian central bank hiked the cash rate in every single meeting since May but was the first to slow the pace of quantitative tightening, going for a modest 25 bps hike in October. The latter followed five-consecutive 50 bps hikes. Australian policymakers joined the global tightening train amid spiraling inflation in May, when the benchmark rate stood at 0.1%. The decision to downsize in October resulted from soaring mortgage costs. With rates going from 0.1% to 2.6%, roughly 30% of homeowners started struggling to pay their home loans, according to Finder’s consumer sentiment tracker. But if the RBA wants inflation to return to target, it would need a more restrictive rate. Australian inflation out of control According to the Australian Bureau of Statistics, the Consumer Price Index (CPI) rose by 1.8% in the third quarter of the year, while the annualized pace of inflation hit 7.3%. The Trimmed Mean CPI, which tends to soften the average prices´ increase, rose by 6.1% YoY, the highest reading since the series commenced two decades ago. Finally, like most major central banks, the RBA Board has the mandate to control inflation. Policymakers may keep an eye on a potential recession, but controlling prices is their priority. For the time being,  financial markets anticipate another 25 bps rate hike and one more of the same size in December, although a 50 bps move is still on the table, given the most recent inflation estimates. Either way, the RBA will likely disappoint markets. A surprise higher-than-anticipated hike will lift the risks of a recession, while a conservative one will hardly affect inflation. It is worth adding that the US Federal Reserve (Fed) will meet this week itself to decide on monetary policy. The United States central bank has aggressively tightened its monetary policy, and another 75 bps rate hike is already priced in for this meeting. US policymakers are also expected to pave the way for smaller hikes starting in December. The current interest rate in the US is 3.0%-3.25% and is expected to reach 4.5% by the end of the year. The RBA began later with hikes and kick-started easing the first. The conservative stance is dovish itself, and markets are not expecting a hawkish surprise from Governor Philip Lowe. AUD/USD possible scenarios The AUD/USD pair hovers around 0.6400 ahead of the event. The pair recovered from a 2022 low of 0.6169, reaching 0.6521 before easing. It is currently meeting buyers at around the 38.2% retracement of the aforementioned rally at 0.6385. A break below the latter should favor a slide towards the 0.6300 price zone, where buyers may stand ready to defend the 61.8% retracement. The pair will resume its bearish trend on a daily close below 0.6300. An unexpected bullish surprise could help AUD to resume its bullish run. The first resistance level comes in at 0.6440, followed by the 0.6500 figure. Yet it seems unlikely AUD/USD will strengthen beyond the monthly high ahead of US first-tier events scheduled for later in the week.

AUD/USD Current Price: 0.6387 Australian inflation surged by more than anticipated in October, according to TD Securities Inflation. The Reserve Bank of Australia will announce its monetary policy decision on Tuesday. AUD/USD is technically bearish in the near term, but further slides depend on the RBA. The AUD/USD pair trades in the 0.6380 price zone, falling on Monday for a third consecutive day. The Australian dollar was hit by Chinese figures, as the official NBS Manufacturing PMI fell to 49.2 in October, while the Non-Manufacturing PMI slid to 48.7,  missing the market’s estimates and signaling a steep contraction in business activity. Australian data added pressure on the pair as October TD Securities Inflation surged by 5.2% YoY, higher than the previous 5%. Private Sector Credit, in the meantime, increased a modest 0.7% MoM in September. Finally, the sour tone of global equities maintained the pair on the losing side. Equities eased as global inflation figures show that aggressive quantitative tightening has done little to take price pressures down. Speaking of which, the Reserve Bank of Australia will announce its decision on monetary policy first thing Tuesday. Governor Philip Lowe and co are anticipated to proceed with a modest 25 bps rate hike amid the risk of a recession, although a 50 bps is not completely out of the table. The Australian Consumer Price Index (CPI) rose by 1.8% in the third quarter of the year, while the annualized pace of inflation hit 7.3%. The Trimmed Mean CPI, which tends to soften the average prices´ increase, rose by 6.1% YoY, the highest reading since the series commenced two decades ago. AUD/USD short-term technical outlook The AUD/USD pair is hovering around the 38.2% retracement of its latest daily run measured between 0.6169, the year low, and 0.6521, at 0.6385. The daily chart shows that the pair is also above a mildly bearish 20 SMA, which stands a few pips below the daily low. The longer moving averages keep heading south far above the current level, maintaining the long-term bearish trend in place. In the meantime, the Momentum indicator remains flat above its 100 level, but the RSI indicator already turned south, now standing at around 47. The pair is at risk of falling, according to the 4-hour chart, as the pair trades below bearish 20 and 100 SMAs, both converging with the immediate Fibonacci resistance at 0.6440. Technical indicators, in the meantime, consolidating within negative levels after a failed attempt to advance. The 61.8% retracement of the aforementioned rally provides relevant support at around 0.6305, with a break below it opening the door for a retest of the year low. Support levels: 0.6345 0.6305 0.6270 Resistance levels: 0.6440 0.6495 0.6540   View Live Chart for the AUD/USD

EUR/USD is seen consolidating last week’s post-ECB rejection slide from the 100-day SMA. Traders seem reluctant to place aggressive bets ahead of the key central bank event risks. A sustained break below the 0.9900 mark is needed to support prospects for further losses. The EUR/USD pair extends its sideways consolidative price move below the parity mark through the Asian session on Monday amid uncertainty over the pace of future rate hikes by the European Central Bank. The ECB last Thursday lifted borrowing costs by a jumbo 75 bps for the second consecutive meeting and is expected to raise interest rates further to bring record inflation under control. The ECB, however, adopted a more dovish tone in the wake of the worsening economic outlook, forcing traders to trim their bets for a more aggressive tightening. This is seen as a key factor that continues to act as a headwind for the shared currency. On the other hand, the US dollar draws support from last week's stronger-than-expected US macro data, though speculations about a potential Fed pivot keep a lid on any further gains. It is worth recalling that the Advance US GDP report showed that the world's largest economy grew by 25.6% annualized pace during the third quarter. Moreover, the Core PCE Price Index, the US central bank's preferred inflation gauge, increased to 5.1% YOY in September from 4.9% previous. That said, signs of a slowdown in the US economy might force the Fed to soften its hawkish stance, which, in turn, is holding back the USD bulls from placing fresh bets. Hence, investors prefer to move to the sidelines and wait for the highly-anticipated FOMC decision, due to be announced on Wednesday. The outcome of a two-day monetary policy meeting will play a key role in influencing the USD price dynamics and help determine the near-term trajectory for the EUR/USD pair. In the meantime, traders on Monday will take cues from the flash Eurozone CPI and the first reading of the third quarter GDP. The immediate market reaction, however, is likely to be limited as the focus remains glued to the key central bank event risk. Furthermore, worries about the economic headwinds stemming from the protracted Russia-Ukraine war suggest that any positive intraday move might still be seen as a selling opportunity. Technical Outlook From a technical perspective, the post-ECB rejection slide from the 100-day SMA, so far, stalls near a descending trend-line resistance breakpoint, now turned support, currently around the 0.9925-0.9920 area. The said region should act as a pivotal point for intraday traders, below which the EUR/USD pair could accelerate the fall towards the 0.9860-0.9855 horizontal support. Some follow-through selling will negate any near-term positive bias and drag spot prices back below the 0.9800 round-figure mark, towards testing the next relevant support near the mid-0.9700s. On the flip side, the 1.0000 psychological mark could be an immediate strong barrier. Sustained strength beyond might allow bulls to aim back to challenge the 100-day SMA, currently around the 1.0075region. This is closely followed by the monthly peak, just above the 1.0100 mark, which, if cleared decisively, will set the stage for additional gains. The EUR/USD pair might then aim to reclaim the 1.0200 round figure with some intermediate resistance near the 1.0155 zone.

US Dollar: Dec '22 USD is Up at 110.850. Energies: Dec '22 Crude is Down at 87.82. Financials: The Dec '22 30 Year note is Down 29 ticks and trading at 121.14. Indices: The Dec '22 S&P 500 Emini ES contract is 126 ticks Lower and trading at 3788.00. Gold: The Dec'22 Gold contract is trading Down at 1651.00. Gold is 146 ticks Lower than its close. Initial conclusion This is not a correlated market. The dollar is Up, and Crude is Down which is normal, but the 30-year Bond is trading Lower. The Financials should always correlate with the US dollar such that if the dollar is lower, then the bonds should follow and vice-versa. The S&P is Lower, and Crude is trading Lower which is not correlated. Gold is trading Lower which is correlated with the US dollar trading Up. I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down. I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong. As traders you need to be aware of this and proceed with your eyes wide open. Currently Asia is trading Lower with the exception of the Singapore and Sensex exchanges. All of Europe is trading Lower at this time. Possible challenges to traders today Core PCE Price Index is out at 8:30 AM EST. This is Major. Employment Cost Index is out at 8:30 AM EST. Major. Personal Income is out at 8:30 AM EST. This is Major. Personal Spending is out at 8:30 AM EST. This is Major. Pending Home Sales is out at 10 AM EST. Major. Revised UoM Consumer Sentiment is out at 10 AM Major. Revised UoM Consumer Sentiment is out at 10 AM.Major Treasuries Traders, please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same. We've elected to switch gears a bit and show correlation between the 10-year bond (ZN) and the S&P futures contract. The S&P contract is the Standard and Poor's, and the purpose is to show reverse correlation between the two instruments. Remember it's likened to a seesaw, when up goes up the other should go down and vice versa. Yesterday the ZN made its move at around 9:45 AM EST. The ZN hit a Low at around that time and the S&P moved Lower shortly thereafter. If you look at the charts below ZN gave a signal at around 9:45 AM and the S&P gave a signal at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a Low at around 9:45 AM and the S&P moved Lower shortly thereafter. These charts represent the newest version of MultiCharts and I've changed the timeframe to a 15-minute chart to display better. This represented a Long opportunity on the 10-year note, as a trader you could have netted about 30 plus ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Dec '22. The S&P contract is also Dec' 22. I've changed the format to Renko Bars such that it may be more apparent and visible. Charts courtesy of MultiCharts built on an AMP platform ZN - Dec 2022 - 10/27/22 S&P - Dec 2022 - 10/27/22 Bias Yesterday we gave the markets a Neutral or Mixed bias as we saw no evidence of Market Correlation at all. The Dow traded Higher by 194 points, however the other indices traded Lower resulting in a Mixed market at the close. Today we aren't dealing with a correlated market and our bias is Neutral. Could this change? Of Course. Remember anything can happen in a volatile market. Commentary So, when we viewed the market early Thursday morning, our first reaction was Mixed market as we saw no real evidence of correlation yesterday morning. The Dow traded Higher, but the other indices traded Lower, resulting in a Mixed market. Today we have Personal Income and Personal Spending, both of which are major and proven market movers. The surprise yesterday came in the form of Advance GDP which came in higher than expected. Any positive news in this market is well received.

Queen Elizabeth II died. She was a powerful anchor and symbol in the political sphere, just like gold in the financial realm. The Power of Symbols Her Majesty Queen Elizabeth II, the Sovereign of the United Kingdom of Great Britain and Northern Ireland and the Head of the Commonwealth, died on September 8, 2022. I’m not a British or Commonwealth citizen, nor a devoted supporter (and observer) of the British monarchy. And yet – together with millions of people all over the world – I was saddened by the death of the Queen. I began to wonder why it was such poignant news, given that she was not my monarch and that her role was purely ceremonial and formal (the Queen reigned, but didn’t rule). The first common explanation is that Queen Elizabeth II was a fixture, a source of continuity and stability in an ever-changing world. In the words of the former Prime Minister, Lizz Truss, Queen Elizabeth was “the rock on which modern Britain was built”. Indeed, she acceded to the throne in February 1952, when Winston Churchill was Prime Minister and Harry Truman was President of the United States. It means that she ruled for more than 70 years, the longest of any British monarch and the longest recorded of any female head of state in history. She has simply always been there as Queen, many years before I and many other people were even born. However, there must be much more than that – actually we don’t despair after the death of every old person who remembers WWII. It seems that, despite how modern and progressive we are, there is a magic in the monarchy that resonates with something deep in us. Please note that the UK’s Parliament is practically the supreme authority, but its members exercise their power in the name of the Crown. The government was, for seventy years, Her Majesty’s government, while the opposition was Her Majesty’s most loyal opposition. Of course, from the pragmatic point of view, it was just a play, but thanks to these rituals, the British monarchy remains a symbolic but integral part of the UK’s power structure. Don’t underestimate the power of symbols! According to polls, more than a third of Britons regularly dream about the Queen and other members of the royal family. Elizabeth II could play just a symbolic role – but the symbol she embodied in herself was very powerful, almost religious nature. Actually, we can say that Elizabeth II was the most well-known representation of an archetype of the queen, one of the most important archetypes that symbolizes the wholeness and full potential of a woman and the ultimate in female leadership. The archetypal good queen is beloved as she takes care of her people and provides them with the structure they look to for safety. This is why her death disheartened so many people in the world. The Queen and Gold OK, but what does the Queen and her death have in common with gold (except she apparently liked gold pianos)? Should we expect some geopolitical turmoil right now that could support the price of the yellow metal? I don’t think so. Elizabeth was automatically replaced by her son as the next king, Charles III. And whoever reigns in the UK, he or she doesn’t rule, so the change on the throne shouldn’t disturb the functioning of the government. Perhaps some countries will leave the Commonwealth now, or this structure will disintegrate, but it shouldn’t pose any significant geopolitical risks that could support, even temporarily, gold prices. I decided to write about the Queen’s death rather than because I see some parallels between the perception of the Queen in the political realm and gold in the financial sphere. Why do people despair after the death of Elizabeth? Because, as previously stated, Queen was a fixture and a symbol. So why do people buy gold? Well, because gold is also a fixture, the rock on which the modern financial system was built. The golden anchor was removed only in the early 1970s, but to this day we say “gold standard” to describe a certain ideal (for example, we say that randomized double-blind placebo control studies are the “gold standard” of epidemiologic studies). Elizabeth Windsor ruled for 70 years, while gold ruled as money for centuries, and although dethroned, it’s still with us. People purchase gold also because it’s a powerful symbol, or even an archetypical form of money. You can easily verify it – please stop reading for a while and imagine a great treasure. What came to your mind? I bet that you saw precious metals, diamonds, etc., rather than credit cards or paper money. This is also why in times of crisis, people used to seek comfort in gold, an ultimate safe-haven...

As kids growing up, many of us would have played the game of chicken; where you and a friend do something dangerous, and whoever backs out first loses. The energy markets feel just like this at the moment - except the game is on steroids and the stakes are the highest they have been since World War 2. The current energy crisis in Europe is extremely complex, with so many layers ebbing and flowing, that have exposed the weaknesses of many historical decisions. The crisis is pulling at the very fabric of the European Union, and Russia knows it. Divide and conquer is Putin's mantra as the game of chicken escalates into a 4-dimensional game of chess between East and West. So, what is going on and how will the squeeze affect the Australian economy and AUD and where will the opportunities lie for traders? To help us, we include insights from Naeem Aslam, chief market analyst for forex trading in Australia with AvaTrade to weigh in on the likely effects on the Aussie market. The cause of the European energy squeeze As the northern hemisphere eases away from summer on its lonely journey toward winter, temperatures are falling. Winter means rugging up and staying indoors, and with the news breaking that Russia will stop pumping gas through the Nordstream pipeline to Germany, the coming European winter could be very painful. With short days and long, cold nights, household gas and electricity usage will be at its highest. With the ongoing war in Ukraine, sanctions are hurting Russia's economy and Russia is fighting back. It is weaponising its gas supply. It controlled 40% of European gas usage prior to the Ukrainian invasion. With careful EU planning, Gasworld reports this has now reduced to 9%. In line with the war, the EU began importing Liquid Natural Gas (LNG) to replace the natural gas from Russia, despite the extra expense. During the summer, the EU built up the storage capacity of LNG with recent analysis showing that steady supplies of LNG globally continue to arrive in Europe. The volumes now in place exceeding with the target of having storage inventories filled to 80% by November. Reuters reports the storage inventories are currently over 85%. Naturally, this increased demand for LNG has pushed up its price as global producers ship LNG to those that are prepared to pay the highest price. So why are natural gas and LNG so popular? The transition to renewables The UN's long-term goal is to transition away from using fossil fuels towards renewables for power generation. There are, however, challenges: Renewables rely on new technologies that take time to mature. Renewable energy only performs when nature allows. The lead times to deploy renewables is long. Combined, renewables alone are just too early to provide the certainty required for electricity production. Natural gas is cleaner than other fossil fuel sources and is a transition fuel from Fossil fuels to renewable energy. The challenge, however, is that Russia decided overnight to cut gas to Germany. Renewable energy cannot be deployed quickly enough to plug the gap, which means there may be shortfalls, which means the potential for rationing and blackouts. Government priorities Protests are on the increase in Europe over rising electricity costs. These protests will get even worse if there are blackouts. Governments across Europe face a delicate choice between social unrest and recession if gas restrictions apply to industry. A second recession will severely test companies already weakened by the pandemic. Inflation is likely to get much worse The energy squeeze could see prices for LNG explode. Not only are global supplies already limited through pre-committed long-term contracts, but also any ramping up of LNG production will involve significant costs. Rising LNG prices will compound already rising inflation, which is pressuring governments to further raise interest rates. The harsher the winter in Europe, the greater the chances of rationing and the greater the chances of recession and inflation - ie stagflation. What does this mean for Australia? Naeem Aslam, chief market analyst with AvaTrade gave us his thoughts, which are provided as guidance and should not be considered financial advice. How are we fixed for natural gas? "In Australia, we have 160 natural gas power stations powered by locally produced natural gas. The European energy squeeze is unlikely to affect Australia directly. With Russia closing off their gas supply to Europe, they need to find alternative buyers, who will need discounts, supported by the latest proposed EU price caps." Inflation - Australia is fairly cushioned from the supply side shock of LNG - so any addition to existing inflationary pressure is likely to be soft. Interest Rates - European interest rates are likely to rise with increased inflation, and we may see some upward pressure on Aussie rates to...

The Canadian dollar is lower today. In the European session, USD/CAD is trading at 1.3617, up 0.39%. Markets eye Canada’s GDP The week wraps up with Canada’s GDP for August. The economy is expected to have expanded by 0.1%, which would be unchanged from July. The economy is likely heading into a recession, and Finance Minister Chrystia Freeland stated recently that the coming months would be a “challenging economic time.” The government’s key priority is curbing high inflation, which has eased slightly. In September, inflation fell to 6.9%, down from 7.0% in August. Still, this was higher than the consensus of 6.7%, as soaring food prices kept inflation from falling further. The good news is that inflation appears to have peaked from the June level of 8.1%, which marked a 40-year high. The bad news is that core inflation was unchanged at 5.3% in September, a sign that inflation remains sticky, despite the Bank of Canada’s aggressive rate-hiking cycle. High inflation pushed the BoC to deliver another oversize rate on Wednesday, but the 0.50% hike was considered dovish, as the consensus stood at 0.75%. The cash rate is now at 3.75%, its highest level since 2008. Although inflation is far from being beaten, Canada’s economy is clearly slowing down as a result of the steep increase in rates, and the BoC is easing up on the rate pedal just a bit, in the hopes of guiding the economy to a soft landing and avoiding a recession. High rates are weighing on households and businesses and the BoC is concerned that further oversize rates may pose a risk to financial stability. The US releases Personal Income and Spending data later today as well as the Fed’s preferred inflation indicator, the Core PCE Price Index. The index is expected to rise to 5.2%, up from 4.9%, but I don’t expect today’s numbers to change the Fed’s plan to raise rates by 0.75% next week. USD/CAD technical There is support at 1.3656 1.3467. 1.3718 and 1.3807 are resistance lines.

XAU/USD Spot gold price was down around 1.5% by early US trading on Friday, pressured by stronger dollar on growing expectations that the Fed will deliver another 75 basis point hike in the policy meeting next week. Optimism on further policy tightening inflates dollar, weighing on its safe-haven counterpart. Fresh acceleration lower has so far retraced over 50% of $1617/$1674 upleg, with the metal being on track for the biggest daily fall since Oct 19. Weekly action is also going to end in red, with more significant signal that the yellow metal will register seventh consecutive monthly loss. Weakening daily studies (MA's turning to bearish setup and momentum remains in negative zone) add to downside risk, which will be boosted by today's close below $1646 (50% retracement of 1617/$1674/daily Tenkan-sen). Also, gold price is on track for the second monthly close below pivotal Fibo support at $1681 (38.2% of $1046/$2074) that would add to reversal signals and re-confirm a monthly double-top ($2074/$2070) as well as a double bull-trap above psychological $2000 barrier. Bears need to clear temporary footstep at $1647 (Oct low, reinforced by rising 55MMA) to open way for attack at monthly cloud base ($1598) and 50% retracement of $1046/$2074 ($1560). Res: 1652; 1668; 1674; 1681. Sup: 1639; 1630; 1614; 1598. Interested in XAU/USD technicals? Check out the key levels