American stocks crashed hard on Thursday as worries of a US government debt default rose. The Dow Jones index declined by more than 400 points while the S&P 500 and Nasdaq 100 indices declined by more than 40 and 50 points respectively. While the Senate managed to find a breakthrough on preventing a government shutdown, there are risks that a bill to suspend the debt ceiling will not pass. Therefore, investors are worried that such defaults by the US government will have significant consequences for the US economy. The stocks also rose after data revealed that the number of initial jobless claims rose for the second straight week.
The euro declined sharply ahead of the preliminary Eurozone consumer price index (CPI) that is due in the morning session. Economists polled by Reuters expect the data to show that the headline CPI rose from 3.0% in August to 3.3% in September. Excluding food and energy, analysts expect that inflation rose from 1.6% to 1.9%. On Thursday, preliminary data showed that German inflation jumped to 4.1% in September while Italian inflation rose to 2.6%. While these numbers are bigger than the ECB target of 2.0%, the bank believes that inflation will normalize in the coming few months.
The economic calendar will have several important economic numbers today. In Germany, the statistics agency will release the latest retail sales numbers. At the same time, Markit will publish the latest manufacturing PMI data from most countries like the US, UK, and the Eurozone. These numbers are expected to show that manufacturing activity declined slightly in September. Finally, the US statistics agency will deliver the latest personal income and spending and PCE numbers. PCE is the Fed’s favourite gauge of inflation.
EURUSD
The steep sell-off of the EURUSD pair continued in the overnight session. The pair declined to a low of 1.1566, which was the lowest level since last year. The pair has also dropped substantially from this week’s high of 1.1750. It has moved below the 25-day and 50-day moving averages and is along the lower line of the Bollinger Bands. The pair will likely have a relief rally as bulls attempt to buy the dips as the month starts.
NDX100
The Nasdaq 100 index declined to a low of $14,680, which is substantially below the all-time high of $15,708. On the daily chart, the index moved below the 25-day moving average. The MACD managed to move below the neutral level. The Williams %R has also declined to the oversold level. Therefore, the index will likely keep falling as bears target the next key support at $14,500.
XAUUSD
The XAUUSD pair popped on Thursday as investors moved to safe havens. It jumped to a high of 1,764, which was the highest level since Monday. On the four-hour chart, it moved to the 50% Fibonacci retracement level. It also rose above the 25 and 50-day moving averages. The pair also tested the upper side of the descending channel. Therefore, the pair will likely resume the bearish trend as bears target the key support at 1,720.
