Despite the Federal Reserve's recent half-point interest rate cut, Treasury yields—particularly the 10-year notes—have risen, signalling potential concerns. Market professionals attribute this to expectations of higher inflation and the US's precarious fiscal situation. The yield curve has steepened, suggesting investors believe inflation risks are ahead, even as the Fed focuses on labour market softness. While the Fed is expected to cut rates further, bond investors are wary of long-term fiscal challenges, with some lightening their Treasury allocations amid volatile conditions. A steeper yield curve could raise recession alarms.
SILVER
Silver surged to its highest level in nearly 12 years on Thursday, reaching $32.71 per ounce, buoyed by gold's rally to record highs and central bank interest rate cuts. Silver has risen over 36% this year, driven by industrial demand, particularly for solar panels, and safe-haven investment. Analysts predict silver could hit $37 per ounce in the coming quarters.
XAGUSD (Daily). Unlike gold, which has reached multiple all-time highs, silver price moves more steadily. However, it now appears to break through the resistance level at $32.50 and set a new all-time high. Look to go Long when the price breaks above 32.50.
YEN
The Bank of Japan (BOJ) board is divided on future interest rate policy, as revealed in July's meeting minutes. Some members argue for gradual rate increases to manage inflation risks, while others caution against hasty normalisation, citing weak long-term inflation expectations. In July, the BOJ raised its benchmark rate to 0.25% in a split decision and outlined a plan to cut government bond purchases by 2026. The yen strengthened post-decision, leading to an unwinding of the "yen carry trade," which, combined with weak US economic data, caused significant drops in Japan’s Nikkei index.
USDJPY (Daily). Following the Fed's interest rate cut, the pair rebounded from 140.00, which serves as a major support level. We expect USDJPY to reach the Fibonacci 38.2% level at 148.50.
BITCOIN
Bitcoin has seen a rally, but experts, like Wolfe Research’s Rob Ginsberg, remain sceptical. Despite positive developments, such as the Fed’s interest rate cuts, presidential support for crypto, and strong stock market performance, Bitcoin has been stuck in a downtrend, down 13% from its March highs. While Bitcoin has gained 50% year-to-date, Ginsberg sees the crypto market in a bearish state, pointing to a lack of enthusiasm for speculative assets. Traders are cautious, waiting for a potential seasonal upside in Q4. Experts, like Ginsberg, expect rallies to fade.
BTCUSD (Daily). Despite a strong rebound in September, we anticipate that Bitcoin will reach its bearish projection upper line of around $68,000. The price remains within the downward channel, suggesting a longer-term bearish trend.
OIL
US crude oil price dropped nearly 3% on Thursday following reports that Saudi Arabia plans to increase production in December, despite potential lower oil prices. Saudi Arabia may abandon its unofficial target of $100 per barrel. Rising production in Libya and weak demand in China are also weighing on prices.
WTIUSD (Daily). According to our prediction from last week, this commodity reached $71 per barrel. The nearest target for oil is $65 per barrel, which represents the lowest price seen in September.
Fullerton Markets Research Team
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