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Shutdown Halted, Dollar Climbs

October 2, 2023
Frank Cabibi

Just before the scheduled shutdown at 12:01 am on Sunday, Congress voted to extend the deadline for another 45 days. Yields jumped higher to above 5.1% which has remained elevated for some time. As we enter an historically bullish month for the indices, here are some setups on dollar, gold and index setups

EdgeFinder Analysis

The SPX500 is still a very bearish reading on the EdgeFinder as a result of recent events. Retail and COT seem to be mixed in net positioning, although last Friday's report suggested another shift in sentiment. What we can also take away from last week from lower GDP and PCE is that the Fed may consider pausing again in November.

Investors are very much going to pay attention to this week's JOLTS and NFP numbers this week. Expectations are higher job openings and lower NFP. Although analysts are expecting higher openings, the lower number of jobs actually added could be lower, which is what index bulls want to see.

Gold continues to make lower lows on the 1D timeframe. Price is now between two levels of support and resistance that are quite a ways from each other. These levels are key in figuring out the longer term trend. After breaking underneath the $1880s level, the metal may continue lower to test $1810.

Last week, a death cross formed between the 50 and 200 DMAs suggesting that a downtrend has formed. With higher dollar prices and higher yields, it seems likely for the metal to move lower onto this support zone. COT also suggests bearishness as they reported to be 3.5% bearish in net change last week.

EURUSD is one of the strongest bearish readings on the EdgeFinder right now. Seasonality and trend readings point to further lows this month as the dollar kicks off strong. October is the second most bearish month of the year for the pair.

Smart money is selling the pair this week, and retail is majority long. There is not one category that the euro has over the dollar. This Friday's NFP will add some more damage to the score if they come out higher than expected. But if NFP falls again, this could be a bullish sign for the pair.

Retail Spotlight

Retail is mostly short the USD and indices as well. AU, NU and GU are the top three most longed in the retail crowd. However, COT positioning has a different idea.

Smart Money Spotlight

The smart money tracker shows a good bit of buying in the SPX500, NZD and JP225. Meanwhile, gold, pound and US30 are getting sold. This week looks like some mixed sentiment on the indices as investors await the jobs number this week.

Fundamental Spotlight

The chart above is unemployment rates around the world. They have all experienced some sort of decline since 2020, but a handful of them seem to be flatter in recent quarters. If the US can see higher unemployment and lower NFP, then this would be a bullish case for the indices and weakness for the dollar.

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