The Japanese yen finds a little relief as bears grow wary of a currency intervention. A steep liquidation from the psychological milestone of 150 has led some market participants to believe that Tokyo was behind the scene. The authority’s remarkable silence may leave traders guessing. A recent buildup in officials’ remarks about the depreciation of the yen has made the market nervous, limiting its losses above a 12-month low. But unless there is a substantiated reversal of rate differential, any intervention would prove to be artificial and unlikely to keep yen bears away. In the near term, 151.80 is the last hurdle and 146.00 the first support.
The euro slips as traders bet on the strength of the US economy to withstand a restrictive rate environment. With both sides of the Atlantic signalling a pause in their respective rate cycle, market participants have moved on to tangible economic fundamentals. The euro may have a hard time competing against a firm dollar backed by a more resilient US economy and near 5% Treasury yields. Expectations for stagnation across the euro zone could undermine the appeal of the single currency, especially if recovering energy prices bite back into the winter. 1.0300 is the next support while 1.0720 has turned into a fresh resistance.
Brent crude retreats as traders tread cautiously amid choppy demand. An extension of production cuts by both Saudi Arabia and Russia until the end of the year did little to support the price action, suggesting that traders are still wary of an uncertain demand outlook. As major central banks went into a pause mode, pessimists would be expecting more cracks to appear as businesses and consumers tighten their belts. Weak US demand supported by the EIA’s latest data has definitely given the bulls a window of opportunity to take profit after a three-month long rally. 82.00 is the closest support and 99.00 a key hurdle to clear.
The S&P 500 drifts lower as economic resilience means no rate cuts. After the Fed’s pivot, investors might need to adjust their expectations and finally realise that interest rates could stay higher for longer, and not get ahead of themselves about rate cuts. The bulls are looking for reassurance to hold onto their positions amid the recent surge in bond yields. While policymakers’ emphasis on the need to keep rates steady does little to help, an anchored belief in an economic soft landing might keep risk assets attractive enough into the upcoming earnings season. The index is on its way to 4110 and 4530 is a key resistance to lift.