All eyes on UK budget today

All eyes on UK budget today – Today’s budget is expected to be highly significant for the foreseeable future. Chancellor of the Exchequer Rachel Reeves is likely to raise taxes to support increased government spending. Additionally, the UK’s fiscal rules may undergo a revision to allow for borrowing aimed at investment. If the government does loosen its policy as anticipated, it could indicate that the Bank of England might reduce interest rates more slowly than other central banks.

The UK budget is viewed as a crucial opportunity for the Labour government to gain the backing of international investors. This means Chancellor of the Exchequer Rachel Reeves will need to balance the nation’s growth objectives without unsettling the debt markets. If she successfully navigates this challenge, the pound is likely to be among the early beneficiaries.

Alphabet’s earnings exceed expectations

On Tuesday, Alphabet Inc., Google’s parent company, announced that its significant investment in artificial intelligence (AI) is beginning to yield results. The company reported stronger-than-expected growth in its cloud computing business and increased usage of its flagship search engine.

Reporting strong gains in both revenue and profit, Google has eased Wall Street’s concerns that it has wasted its early advantage in AI. The company’s substantial investments to compete with Microsoft Corp. and OpenAI are beginning to pay off. Revenue, excluding partner payouts, rose to $74.6 billion, reflecting an increase of about 16% from the same quarter last year, and surpassing analysts’ average prediction of $72.9 billion, according to Bloomberg data. Additionally, net income was reported at $2.12 per share, exceeding the estimated $1.84 per share, as stated by the company on Tuesday.

Alphabet shares climbed over 5% in extended trading after the report, bringing the stock’s total gain to 21% for the year.

Focus on U.S. ADP Non-Farm Employment and GDP Data

The recently released JOLTS job openings data for September was disappointing and was revised downward for August as well. However, it’s important to note that the survey has a very low response rate. Despite this, total job openings remain significantly higher than pre-pandemic levels. Yields seem to be reacting skeptically to this data, remaining largely unchanged after the weaker results, bolstered by a rise in consumer confidence that supports yields.

Payroll data, which will be updated on Friday, includes a much larger sample of businesses compared to the JOLTS survey—approximately 122,000 establishments versus around 6,600 – with a response rate that is double that of JOLTS. Therefore, the market is right to overlook this survey and focus on the upcoming payroll data.

Gold near $3000

Gold continues to gain more grounds as the US elections is around the corner, and its safe to say that Gold is concerned about Trump’s policies which is considered inflationary. However, traders should keep some room for surprises, despite the fact that everyone is expecting trump to win this election which is a concern as traders have always over estimate the polls. We saw the same scenario in 2016 elections and also during Brexit.

In the meantime, the area between 2785 and 3000 could be the area where sellers are likely to appear. A break above $3000 is unlikely to be an easy task.

DXY failed below 104.50

The US Dollar has struggled to break above 104.50 for the past five trading days. Technical indicators show that it is heavily overbought, suggesting that the upward rally may be reaching its end or that a temporary retracement is more probable.

Currently, the immediate support level is at 104.0. If this level is breached, it could lead to further declines, potentially down to 103.60 and then 103.40 in the coming days. As long as the 104.50 level holds strong, the likelihood of a downward retracement remains intact.

EURUSD holding above 1.08

EURUSD has shown resilience over the past week, remaining well above the 1.08 support level. The technical indicators on the daily chart are heavily oversold, which reduces downside pressure and sets the stage for a potential increase in the coming days.

Currently, the next resistance level is at 1.0860, followed by 1.09 and 1.0940. The upward trend is likely to continue as long as the pair trades above 1.08 on the weekly chart.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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