Midday Market Update: Energy Crisis throws Europe into Catastrophe

The Dollar rallied against the Euro as the energy shortage weigh. The European energy crisis sparks recession fears ahead of the ECB meeting on Thursday. There is limited movement from US and Canada as major banks observed holidays. UK’s New Prime Minister will be announced today and sworn in on Tuesday by the queen. Investors will be keenly watching the OPEC+ meeting today regarding oil markets.

AUDUSD plunged by -0.51% ahead of the RBA policy meeting early Tuesday morning. The RBA is expected to hike rates by 50bps to 2.35% as inflation soars. The US dollar remains stronger lifted by risk-off sentiment on the market. The pair slid to 8-week support at 0.6780, however, a bullish hold above that level could cause a rally towards the 0.6850 level.

EURCHF edged lower by -0.21% as the German service sector tumbled in August on soaring inflation. The Sentix Investor Confidence index fell to -31.8 from the -27.5 forecast mirroring the deteriorating economic outlook. The Services PMI dropped to 49.8 from 50.2 indicating a contraction in the economy. The pair extended its Friday fall from 0.9870 and bears may target 0.9680 in the near term.

GBPNZD gained +0.33% despite disappointing UK PMI data. The data showed a contraction in the UK economy in August with the Composite PMI dropping to 49.6 from 52.1 in July. The services PMI data came in at 50.9 vs 52.5 expected. China’s extended lockdown weighed down the risk-sensitive NZD. In response to the key data, the pair rallied to 1.8900 from 1.8800. Further up, bulls may reclaim 1.8950 and 1.9000 in the near term. However, a rejection at the current resistance may drive the price down to 1.8780 1nd 1.8750.

European stocks slumped on Monday weighed by renewed energy supply worries. DAX plunged by -2.72% as bulls lost handles at the 13050 level and bears are currently holding above the 12600 level. A break below the near-term support could open the way for the 12400 level.

CAC40 gained +0.44% as the French Services sector outperformed in August. Upside gains are capped by the 6150 and a failure to challenge that level could trigger selling pressure towards the 5900 level. FTSE100 advanced by +0.15% after bouncing off the 7180 level and bulls may target the 7300 level in the near term. A technical breach of the 7180 level could trigger selling pressure towards the 7050 level.

US stock futures were slightly lower on Monday as investors observe US Labor Holiday. Nasdaq100 futures were down -0.18% after closing below the 12200 level on Friday. Bears could target the 11600 if the 12200 level holds as new resistance.

DJIA index futures rose by +0.11% after bulls defended near-term support at 31200 and bulls are capped by the 32000 level. A failure to hold above the near-term support could trigger selling pressure towards the 30500. S&P500 was flat at +0.04% inside a range between 3950 resistance and 3900 support.

In Commodities, oil rallied as the energy supply crisis worsens in Europe. The indefinite shutdown of the Russian Nord Stream pipeline caused panic as alternative supply remains slim. USWTI crude oil futures rose by +2.52% after defending the 86.50 level, 6-month support. Upside gains are capped by the 90.50 level. Brent crude oil futures soared by +2.56% from the 92.00 level and near-term resistance is at 98.80.