Fundamental Overview
Markets begin October and Q4 with a continuation of the mixed conditions that characterised the end of September. Yesterday’s quarter-end positioning contributed to indecisive price action, but several underlying themes remain firmly in place.
US private-sector employment came in slightly above expectations, while Core PCE was lower than anticipated and final GDP was stronger. Taken together, those releases provided a broadly supportive backdrop for risk assets.
At the same time, US Treasury yields remain at exceptionally elevated levels. The 10-year yield has reached another 52-week high around 5.2%, reinforcing concerns around the cost and availability of capital. Central banks also remain restrictive, with the Federal Reserve having recently raised rates by 25 basis points and expectations of further increases still present.
Geopolitical uncertainty surrounding the Middle East remains another important market driver, particularly for energy prices.
Risk Sentiment
Risk sentiment remains unusually divided.
Bond yields and the strengthening US dollar continue to reflect a risk-off environment, yet US equities remain remarkably resilient. The Nasdaq has reached new all-time highs, while the S&P 500 continues to maintain an underlying upside bias.
This divergence remains one of the defining features of current market conditions: bond markets are signalling increasing financial pressure while technology-led equities continue to attract capital.
With the first trading day of both October and Q4 now underway, the focus shifts away from quarter-end portfolio adjustments and back toward whether these competing narratives can finally produce a clearer directional move.
Technical Overview
The Nasdaq has broken to new all-time highs following its recent consolidation, keeping its broader upward structure intact.
The S&P 500 also retains an upside bias despite recent choppy price action. Strong support remains beneath current levels, although the lack of broader market coherence continues to favour patience.
EUR/USD remains in a clear downward structure. Following yesterday’s pullback, selling pressure has returned and further downside remains the preferred direction. The Dollar Index is simultaneously pushing higher, with a move above 101.50 supporting the case for additional dollar strength.
USD/JPY remains a different proposition. The medium-term expectation continues to favour eventual yen strength, particularly if intervention emerges, although the pair remains around significant resistance and patience may be required.
Oil continues to show downside momentum but remains less clear from a trading perspective.
Focus for Today
- EUR/USD: Further downside remains the clearest near-term opportunity.
- US dollar: Strength remains supported, with the Dollar Index approaching the important 101.50 area.
- Nasdaq: New all-time highs maintain the underlying upside bias.
- S&P 500: Broader structure remains constructive despite recent indecision.
- Japanese yen: Continue watching for eventual yen strength and potential intervention.
- US oil: Downside momentum remains, but current conditions require additional confirmation.
The central challenge remains the conflict between risk-on equity markets and risk-off signals from bonds and the dollar. Rather than forcing these signals into a single narrative, the priority is to identify the clearest opportunities within each market and remain patient where direction is uncertain.
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