Elev8 Broker Analysis: Momentum Indicators and Market Trends

Overview

Momentum indicators assist traders in gauging market direction. Elev8 broker examines several momentum indicators, including the 14-week Relative Strength Index (RSI), overextension analysis, and trader positioning based on the Commodity Futures Trading Commission's (CFTC) Commitments of Traders (COT) report. However, the drivers behind the momentum are not always apparent. To provide a comprehensive view, Elev8 broker will detail the fundamental developments and real-world events currently influencing FX pairs and commodities.

Momentum Indicator Rankings

Major currencies and commodities are ranked across various momentum indicators. Dark khaki indicates commodities, deep teal represents currencies with indirect quotes, and olive green marks all other currencies (direct quotes). DXY is the ticker for the U.S. Dollar Index. For the Chinese renminbi, the onshore rate (USDCNY) is employed.

USDMXN, sugar, European coal, European natural gas (TTF), and UK natural gas (NBP) show the highest 14-week RSI readings. Elevated 14-week RSI in these five markets suggests sustained multi-month upward momentum. They share a common driver: the Iran war's cascading energy shock, worsened by El Nino weather disruption. These price moves are interconnected.

USDMXN gains as the dollar attracts safe-haven demand and Mexico's central bank shifts toward a more dovish stance. Sugar climbs due to a global El Nino-related supply shortage. European coal, TTF, and NBP all rise because of the same energy crisis, which involves Middle East refining losses, Norwegian supply outages, and upcoming winter demand.

A high RSI for USDMXN indicates persistent peso weakness versus the dollar. Several factors are at play. The Bank of Mexico kept rates at 6.50% in September but eliminated wording that indicated an extended pause. Additionally, the minutes released on 8 October revealed that three of five board members said future rate cuts could be considered if the inflation outlook improves.

International investors are losing appetite for Mexican assets, and Elev8 broker's analysts highlight 18.50 as a resistance level that could be tested soon if anxiety continues. The International Monetary Fund (IMF) has said that more effort is needed to reduce Mexico's debt. It forecasts growth of only 1.5% in 2026 and 1.8% in 2027, with public debt climbing to 55% of Gross Domestic Product (GDP). Furthermore, broad dollar strength near 18-month highs, fueled by safe-asset demand from the Middle East conflict and relatively hawkish Federal Reserve (Fed) policy, further weakens the peso.

Raw sugar reached a 19-month peak of 21.24 cents per pound on 7 October, up 1.6% for the week. Severe weather events are damaging yields globally, resulting in waterlogged cane in Brazil, drought-affected beet in Europe, and delayed planting in western India.

European coal gains from the wider energy crisis. Middle East refining damage has removed approximately 2.3 million barrels per day (Mbbl/d) of refining capacity, pushing fuel prices to records worldwide. The International Energy Agency recommended that member countries evaluate whether more diesel releases are needed before governing board meetings. When natural gas prices spike, European utilities shift from gas-fired to coal-fired power generation, directly increasing demand for thermal coal. Plant data indicates that several large European coal plants are coming back online in Germany, Poland, and the Netherlands.

Prices at the Dutch TTF and UK NBP natural gas hubs are highly correlated and pushed up by common factors. Over the summer, Norwegian gas operator Gassco experienced several unplanned outages that hindered European storage builds. Since Norway is Europe's largest pipeline gas supplier, these outages tighten TTF and NBP prices. Wider energy drivers include the Iran war spillover lifting energy commodities and the start of October, which initiates the European heating season.

On the other hand, the lowest 14-week RSI values are seen in EURUSD and iron ore.

EURUSD has recorded five straight weekly declines and touched an 18-month low, with analysts calling it a potential 'falling knife' scenario. The biggest drag on the euro is France, where government borrowing costs and risk premiums against Germany have climbed to levels not seen since the 2011 euro crisis. The French 10-year yield hit a 24-year peak of 4.994%, the budget deficit is above 5% of GDP, and a contentious presidential election next year adds political risk.

Pressure is compounded by a leadership vacuum at the European Central Bank (ECB): board member Isabel Schnabel is leaving for the IMF, chief economist Philip Lane departs by May, and Christine Lagarde faces ongoing resignation rumors. Germany is pushing to keep the seat left by Schnabel, so the presidency contest is expected to be between Spain and the Netherlands, with neither viewed as an interventionist.

Global money market funds saw heavy inflows as a global bond selloff, European fiscal worries, and inflation anxiety drove investors to safe assets. At the same time, the U.S. 10-year Treasury yield rose to a peak of 5.365%, boosting the dollar. On a technical basis, EURUSD is trading above structural support, but Elev8 broker thinks substantial buying may not emerge until lower levels are reached.

Iron ore stays in a prolonged downtrend, with declines extending to multi-month lows, pressured by weak steel consumption and expectations of higher supply. China accounts for about 70% of global seaborne iron ore, and its prolonged property slump continues to curb steel demand from construction. Additionally, the Iran war caused record freight rates through Strait of Hormuz disruptions, compressing miners' margins. Australian and Brazilian producers are still shipping at high volumes, while India aims for major steel capacity expansion.

Overextension Metric

Overextension analysis calculates how far each currency's exchange rate has shifted from its three-year historical trading range, shown as a percentage (0% = range lower bound, 100% = range upper bound). A three-year lookback period is used to achieve a balance. That timeframe is long enough to cover more than half of a typical business cycle (the National Bureau of Economic Research estimates the average cycle at about 60 months) but short enough to preserve meaningful volatility and produce actionable signals.

Through this metric, USDCNY, USDSGD, USDPEN, USDINR, and USDTRY look overextended. More specifically, the Chinese yuan, Singapore dollar, and Peruvian sol are overvalued, whereas the Indian rupee and Turkish lira are undervalued.

USDCNY has fallen close to its 44-month low, reaching 6.692 even as the dollar index stays strong. The unusual yuan strength is driven by managed appreciation from the People's Bank of China (PBoC), which favors pro-market conditions and lets the yuan strengthen to underpin confidence. China also implemented fiscal stimulus to meet its GDP goal and bolster the stock market, increasing the appeal of yuan assets. In addition, rising international yuan use, with brokers promoting offshore clearing, boosts demand.

USDSGD reflects tightening by the Monetary Authority of Singapore (MAS), spurred by strong growth from the AI boom. Singapore controls inflation through currency appreciation to absorb higher import costs, backed by solid fiscal fundamentals, as seen in its low government bond yields compared to U.S. Treasuries.

USDPEN profits from record copper prices around $6.50 per pound, amplified by supply disruptions like a mudslide at Chile's El Teniente mine. As the second-largest copper producer globally, Peru earns large export revenues that enter the domestic forex market, structurally boosting the sol. Along with orthodox central bank policy, the sol stays a top emerging-market currency.

USDINR shows how a massive oil import bill makes central bank interventions futile. The rupee trades near record lows even after the Reserve Bank of India took emergency steps: opening special dollar windows for state oil firms, cutting derivatives limits, imposing risk reserves, and conducting open market bond sales to absorb liquidity as foreign exchange reserves fell.

USDTRY is a distinct case of managed depreciation, where the Turkish lira weakens by design. Recent stresses include a capital markets investment fund crisis impacting hundreds of thousands of savers, increased central bank foreign-exchange volatility, and carry-trade dynamics where investors hold long positions to earn high policy rates while watching domestic confidence in the currency.

Market Positioning

Trader positioning shows distinct trends in commodities and currencies. Speculative long positions are focused on soybeans, sugar, gasoline, corn, and the Brazilian real.

• Sugar has strong bullish momentum from supply cuts in Brazil, India, the EU, and the US because of irregular rainfall, severe weather deficits, and smaller planted areas.
• Soybeans get support from China reducing its domestic output forecast and from Black Sea sunflower oil supply disruptions, even as US production estimates rise and Brazilian planting progresses quickly.
• Gasoline gains from Middle East refining capacity cuts, removing over 2.3 Mbbl/d, which keeps crack spreads elevated along with robust Asian import demand.
• Corn is supported by active Asian buying and rising Chinese industrial demand for starch production, despite higher US production forecasts.
• The Brazilian real draws long positions because high policy interest rates make it appealing for carry trades.

In contrast, speculative short positions are focused on the euro, the British pound, and natural gas.

• The euro is hurt by the French sovereign debt crisis, ECB leadership uncertainty, and policymakers playing down rate-hike expectations.
• The British pound encounters severe fiscal pressure, with a large budget funding gap, rising gilt yields, and a deteriorating consumer environment where inflation acts as a tax on household spending.
• Natural gas is an unusual energy commodity without a strong supply-disruption story: LNG shipments continue via alternative routes, autumn weather stays mild, and US production is near record highs above 105 billion cubic feet per day (bcf/d).

For both the euro and the pound, the underlying factor is the same: US dollar strength near 18-month highs, driven by safe-asset demand from the Middle East conflict, relatively hawkish Fed expectations, and serious fiscal fragility in Europe and the UK.

Elev8 broker will keep monitoring momentum indicators to help traders identify opportunities and manage volatility.

Disclaimer: This content does not provide investment advice or recommendations and does not account for your investment objectives, financial situation, or needs. Any actions based on this material are taken at your own risk; Elev8 assumes no liability for any resulting losses or consequences.

About Elev8

Elev8 is a licensed global broker serving over 18 million traders in more than 100 countries. It provides market access through three platforms: Elev8Trader, MetaTrader 4, and MetaTrader 5. Operating under licences from Mauritius and Seychelles, Elev8 gives traders tools to spot and capture market opportunities. The broker received the 'Best Trading Experience Broker 2026' and 'Best Trading Platform Provider 2026' awards from FxDailyInfo.

Elev8's Space is an analytics hub inside the Elev8Trader platform, offering a personalised feed, daily expert analytics, and community content to speed up access to information and market data.