EURJPY Price Analysis: Next on the upside emerges 147.00

• EURJPY adds to Monday’s uptick and surpasses 145.00.
• The recovery faces the next hurdle at the 147.00 zone.

EURJPY extends the auspicious start of the week and reclaims the area above the 145.00 barrier on Tuesday.

If the corrective bounce gathers extra steam, then the cross should face initial resistance at the so far November high at 147.11 (November 9). The surpass of this level could open the door to a more meaningful move to the 2022 peak at 148.40 (October 21).

In the longer run, while above the key 200-day SMA at 138.21, the constructive outlook is expected to remain unchanged.

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GBPUSD set to test the August 26 high near 1.19 – BBH

GBPUSD edges higher and is currently trading around the mid-1.1700s. Economists at BBH expect Cable to test the August 26 high near 1.19.

Monthly UK data dump began

“Cable broke above its September 13 high near 1.1740 and sets up a test of the August 26 high near 1.19.”

“Q3 growth came in at -0.2% QoQ vs. -0.5% expected and 0.2% in Q2, which translated into a YoY rate of 2.4% vs. 2.1% expected and 4.4% in Q2. This is just the beginning, as the BoE has warned that the recession had already started and would likely last two years. Of note, strong government spending, GFCF, and net exports all boosted the overall number and those components are likely to be large drags in Q4 and beyond.”

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EURUSD looks somewhat fragile again

EURUSD slides below parity. The Euro looks vulnerable again, in the view of economists at Scotiabank.

Euro stocks may support

“Ironically, the recent gains in spot have perhaps been getting some support from relatively better equity market returns in Europe versus North America which has seen better relative investor interest in FX unhedged European equity ETFs, data suggests. Investors want exposure to European stocks and the (cheap looking) EUR, in other words.” 

“Intraday patterns – very tentatively –  suggest some better EUR demand is emerging in the mid-0.99s but the failure to press higher after a strong advance from last week's low leaves the EUR looking somewhat fragile again.” 

“Support is 0.9890/00. Resistance is 1.0040/50.”

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USD Index Price Analysis: Losses expected to accelerate below 109.00

• DXY regains some poised following three daily pullbacks.
• The 9-month support line appears around 109.00.

DXY picks up some buying interest and briefly tests the area just beyond 110.00 the figure on Wednesday.

Further weakness in the dollar should not be ruled out despite the current bullish attempt. That said, the loss of the 9-month support near 109.00 carries the potential to magnify the decline and open the taps to extra retracement in the near term.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 104.66.

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GBPUSD eases from multi-day high, still well bid below mid-1.1400s amid softer USD

• GBPUSD gains traction for the second successive day amid sustained USD selling.
• Hopes for less aggressive Fed rate hikes, the risk-on impulse weighs on the buck.
• The BoE's gloomy outlook might act as a headwind for the Sterling and cap gains.

The GBPUSD pair attracts some buying following an early dip to the 1.1290 area on Monday and is building on the previous session's goodish rebound from a two-week low. This marks the second successive day of a positive move and lifts spot prices to the 1.1475 region, or a three-day high during the mid-European session.

The US Dollar adds to the post-NFP heavy losses and drops to over a one-week low, which, in turn, is seen as a key factor pushing the GBPUSD pair higher. The mixed results from Friday's release of the US jobs report fueled speculations that the Federal Reserve might slow the pace of its policy tightening. This, along with a generally positive tone around the equity markets, continues to weigh on the safe-haven greenback.

That said, worries about the headwinds stemming from China's commitment to maintaining its economically disruptive zero-COVID policy might keep a lid on the optimism. Moreover, the markets are still pricing in the possibility of at least a 50 bps Fed rate hike move in December. This remains supportive of elevated US Treasury bond yields, which should act as a tailwind for the buck and cap the upside for the GBPUSD pair.

Apart from this, the Bank of England's dovish rate hike last week warrants some caution for aggressive bullish traders. It is worth recalling that the UK central bank raised interest rates by 75 bps - its most forceful act to tame inflation since 1989 - but indicated a lower terminal peak than is currently priced into markets. Moreover, the BoE said that it expects a recession to last for all of 2023 and the first half of 2024.

This, in turn, suggests that any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. There isn't any major market-moving economic data due for release on Monday. Hence, the US bond yields, along with the broader market risk sentiment, will play a key role in influencing the USD price dynamics and produce short-term trading opportunities around the GBPUSD pair.

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Gold Price Forecast: XAUUSD unlikely to move much further from the lows

Gold climbed toward $1,650 despite the hawkish Fed tone. However, the recovery is set to stall, strategists at Commerzbank report.

Gold under pressure following the hawkish remarks made by the Fed chair

“Fed Chair Jay Powell stressed that the speed of rate hikes was not so important anymore and that the key question was the level at which interest rates would finally peak. And this, Fed members now believe, looks set to be higher than they had assumed in September.”

“The Fed’s goal is to bring real interest rates into positive territory. This means that the key rate will remain at a high level until such time as the rate of inflation has fallen below it.”

“Generally speaking, the FOMC meeting turned out to be more hawkish than expected, which was then reflected in higher interest rate expectations and a firmer dollar and ultimately caused the Gold price to fall. Shortly before hitting its yearly low, Gold did a U-turn and began climbing again, though today’s US labour market report could put the brakes on its recovery again.”

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Stronger USD heading into year-end amid higher terminal rate expectations – MUFG

The US Dollar has continued to trade at stronger levels after the Fed dashed hopes again for a dovish policy pivot. Higher terminal rate expectations for Fed's hiking cycle are set to continue strengthening the greenback into year-end, economists at MUFG Bank report.

The Fed is shifting to plans for a slower but more extended hiking cycle

“The US rate market is now pricing in 62 bps of hikes at the December FOMC meeting as it weighs up whether the Fed will deliver one final 75 bps hike or step down to a 50 bps hike.” 

“The updated policy statement added as well that the Fed would take into account ‘the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments’.”

“The comments signal that the Fed is shifting to plans for a slower but more extended hiking cycle. The increase in market expectations for the Fed’s terminal policy rate support our outlook for an even stronger US dollar heading into year-end.” 

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USD Index Price Analysis: Upside target remains at 114.00

• DXY comes under pressure soon after hitting daily highs near 111.60.
• Next on the upside still emerges the 114.00 region.

DXY reverses three consecutive daily advances and slips back below the 110.00 mark on turnaround Tuesday.

Despite the ongoing corrective downside, the near-term bullish stance in the dollar remains unchanged and with the immediate target at the 114.00 area ahead of the 2022 high at 114.78 (September 28).

The near-term upside bias is expected to hold while above the 8-month support line near 108.60. The proximity of the 100-day SMA also reinforces this area of contention.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 104.22.

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EURUSD recovered ground towards the end of the NY session, despite hot US Core PCE

• The US Dollar got bolstered by US core PCE but weakened towards the close of Wall Street.
• GDP in France and Spain weakened, while inflation in Germany continued its uptrend, above 10%.
• EURUSD is neutral-to-downward biased, though slightly tilted to the upside, facing strong resistance at the 100-DMA.

The EURUSD finished Friday’s session almost flat at around 0.9960s with minuscule gains of 0.02%. US economic data bolstered the US Dollar due to further action warranted by the Fed; as its preferred gauge of inflation, the core Personal Consumption Expenditure (PCE) jumped above August’s figures, a headwind for the EUR. Nevertheless, the Shared currency recovered some ground against the USD at the New York close. At the time of writing, the EURUSD is trading at 0.9966, slightly above its opening price.

The Federal Reserve’s gauge of inflation jumps the 5% threshold

Wall Street finished the day with solid gains. Even though the narrative of a possible Federal Reserve pivot circulates in the financial markets, US economic data, particularly inflation, could prove it wrong.

The US Department of Commerce revealed that the US core PCE expenditure for September expanded by 0.5% MoM, in line with estimates, while the year-over-year reading increased by 5.1%, below expectations but above the previous month’s 4.9%, on Friday. Another report revealed by the US Labor Department reported that the Employment Cost Index (ECI) for Q3 increased by 1.2%, in line with Bloomberg’s estimates, and lower than the second quarter by 1.4%.

Data did not surprise traders, which turned to risk-perceived assets, speculating that a Fed pivot is imminent. Nevertheless, Friday’s data further justified the case for the Fed’s 75 bps interest-rate hike at the November meeting, while odds for another significant increase at the December meeting jumped from yesterday’s 34.1% to 44.9%.

The markets’ reaction to the headlines witnessed the EURUSD sliding from the daily high of 0.9989 to the daily low of around 0.9920s. However, as the North American session progressed, the EURUSD bounced off the lows and finished the session around the 0.9960s.

Consumer sentiment is unchanged, while US inflation expectations ease

Aside from US inflation data, the University of Michigan Consumer Sentiment October’s final reading came at 59.9, while inflation expectations barely moved. According to the survey, expectations for inflation in a one-year horizon rose to 5% from 5.1%, while for five years is estimated at 2.9%.

Of late, the Dallas Fed Trimmed Mean PCE for September edged lower from 6% to 4.3%. At the same time, the Atlanta Fed GDPNow Forecast for Q4 is 3.1%.

Growth in France and Spain decelerated, and Germany’s inflation spiked

In the meantime, the European economic calendar reported Gross Domestic Product (GDP), inflation, and the EU’s Economic Sentiment, for France, Spain, Germany, and the Euro area, respectively. Growth in France and Spain for the Q3 came in line with estimations, though they flashed recession signs as both countries trail the second quarter readings.

At the same time, Germany reported inflation for October on its preliminary reading, increasing by 10.4% YoY, vs. estimates of 10.1%, and exceeding the previous month’s reading.

Therefore, estimations for further tightening by the European Central Bank (ECB) are warranted,  as some ECB speakers, namely Muller, Vasle, and Villeroy, commented that interest rates are still low, not at a restrictive level. It’s worth pointing out that Vasle said he expects further rate increases, while Villeroy added that the ECB will decide on interest rate increases, meeting by meeting.

Given the abovementioned backdrop, the ECB and the Federal Reserve will continue to tighten monetary conditions, which is positive for both the Euro and the US Dollar. Nevertheless, interest rate differentials and peak objectives amid the current high inflationary outlook would favor the US Dollar, so the EURUSD would likely be under selling pressure, keeping the exchange rates below parity.

EURUSD Price Forecast: Technical outlook

Despite closing in an upbeat tone on Friday, the EURUSD remains neutral-to-downward biased, as depicted by the daily chart. Traders should note that the EUR had risen in four of the last five trading days and stayed above the 50-day Exponential Moving Average (EMA). Nevertheless, on the only day that the EURUSD climbed toward the 100-day EMA, it was rejected, and the pair tumbled toward the October 27 daily low at 0.9957.

The Relative Strength Index (RSI) oscillates in bullish territory, which suggests that buyers are gathering momentum. However, to shift the bias to neutral, EURUSD buyers must conquer the 100-day EMA and 1.0100. And if the Euro clears 1.0200, a move towards the 200-EMA is on the cards.

On the flip side, key support levels lie at the 50-day EMA at 0.9887. Once cleared, the following support would be the 20-day EMA at 0.9838, ahead of 0.9800, followed by October’s monthly low of 0.9631.

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 EUR/USD Price Analysis: The next hurdle comes at 1.0050

• EUR/USD surpasses the parity in a sustainable fashion.
• There is scope for a visit to the 1.0050 level in the near term.

The weekly upside in EUR/USD remains healthy and manages to leave behind the key parity zone on Wednesday.

The surpass of this key region could spark a more serious recovery in the short-term horizon. Against that, the immediate barrier is expected at the weekly top at 1.0050 (September 20).

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0516.

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GBP will likely continue to be under pressure in the time to come – Nordea

In the UK, rates have continued their fall on a policy U-turn. Still, economists at Nordea see more pain ahead for the British pound.

The policy U-turn will lessen the GBP blow, but it is not enough

“The proposal of the UK government – lower taxes and higher spending financed by more debt – broke havoc in the gilt markets while sending the pound in a free fall. Since then UK markets have stabilised. But it takes a long time to build up trust which can be easily lost in a moment.”

“Investors are unlikely to have strong renewed confidence in UK’s governance no matter who take over the helm – trust takes years to build, seconds to break and forever to repair.”

“The poor economic fundamentals in the UK, sky-high inflation, financial imbalances and pension funds under strain will continue to weigh upon the pound.”

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 EUR/USD regains some ground lost and re-targets 0.9800

• EUR/USD bounces off lows near the 0.9750 region.
• German 10-year bund yields surpass the 2.45% level.
• Weekly Claims, Philly Fed index, Fedspeak come next in the NA session.

The European currency regains a small smile and motivates EUR/USD to rebound from earlier lows in the mid-0.9700s on Thursday.

EUR/USD supported near 0.9750 so far

EUR/USD manages to regain some buying interest and recoup part of the ground lost following Wednesday’s strong decline, retargeting the 0.9800 region amidst the so far tepid downside momentum in the dollar.

Also underpinning the daily uptick in spot, the German 10-year benchmark bund yields rise past the 2.45% level for the first time since August 2011, in line with the uptrend observed in their US pees across the curve.

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Gold Price Forecast: XAU/USD hits three-week low amid surging bond yields, stronger USD

• A combination of factors drags gold to a fresh three-week low on Wednesday.
• Hawkish Fed expectations, rising US bond yields, stronger USD exert pressure.
• The risk-off impulse could lend some support and help limit any further losses.

Gold continues losing ground through the early North American session and hits a fresh three-week low, around the $1,630 area in the last hour. The downtick is exclusively sponsored by a strong pickup in demand for the US dollar, which tends to weigh on the dollar-denominated commodity.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, has now recovered a major part of its weekly losses amid rising bets for aggressive rate hikes by the Fed. The US central bank remains committed to bringing inflation under control and is expected to deliver another supersized 75 bps rate increase at the next policy meeting in November.

Hawkish Fed expectations trigger a fresh leg up in the US Treasury bond yields and continue to act as a tailwind for the buck. In fact, the yield on the rate-sensitive 2-year US government bond rallies to a new 15-year peak and the benchmark 10-year Treasury note hit its highest level since 2008. This is seen as another factor driving flows away from the non-yielding gold.

The USD maintains its strong bid tone and seems rather unaffected by mixed US housing market data. This, along with rising bets for a jumbo rate hike by the European Central Bank and the Bank of England, suggests that the path of least resistance for the XAU/USD is to the downside. Hence, a slide back towards the YTD low, around the $1,615 area, remains a distinct possibility.

That said, a turnaround in the global risk sentiment - as depicted by a generally weaker tone around the equity markets, could lend support to the safe-haven gold. That said, any attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

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EUR/USD Price Analysis: There is an interim hurdle at the 55-day SMA

EUR/USD trades without conviction around the 0.9830 region.

Next on the upside aligns the 55-day SMA at 0.9956.

EUR/USD gives away the initial advance to the 0.9870 region and deflates to the 0.9830 area on Tuesday

Further recovery in the pair looks probable in the very near term. Against that, the 55-day SMA at 0.9956 emerges as the next temporary hurdle prior to the more relevant October top at 0.9999 (October 4).

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0561.

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Gold Price Forecast: XAU/USD to come under pressure if real rates remain elevated – SocGen

Gold has resisted higher real rates, strong dollar and fund outflows, but remains vulnerable, in the view of strategists at Société Générale.

Gold has outperformed treasuries and TIPS so far this year

“In the past, we have observed that gold seems to correlate well with three factors – US real rates, the dollar and ETF flows (regression r-squared of almost 95%). However, the price of gold has remained quite elevated compared to the theoretical value yielded by our models.”

“If real rates remain elevated for the foreseeable future, one of the assets that could come under pressure is gold.”

“Gold has outperformed treasuries and TIPS so far this year, but may not be able to resist the high yield for much longer if there is no pivot in the near-term from the Fed.”

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US: Retail Sales stay unchanged at $684 billion in September

Retail Sales in the US stayed unchanged in September.

US Dollar Index clings to strong daily gains above 113.00.

The data published by the US Census Bureau showed on Friday that Retail Sales in the US, adjusted for seasonal variation, holiday and trading-day differences but not for price changes, stayed virtually unchanged at $684 billion in September. This reading followed August's increase of 0.4% and came in below the market expectation of +0.2%.

"Total sales for the July 2022 through September 2022 period were up 9.2% from the same period a year ago," the publication further read. "The July 2022 to August 2022 percent change was revised from up 0.3% to up 0.4%."

Market reaction

The US Dollar Index showed no immediate reaction to this data and was last seen rising 0.55% on the day at 113.08.

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GBP/USD: Break below 1.0905 to set up a test of 1.0540 – BBH

GBP/USD traded below 1.10 briefly before bouncing modestly. The pair could test the September 28 low near 1.0540 on failure to hold 1.0905, economists at BBH report.

Bank of England announced more measures to support the gilt market

“A break below 1.0905 would set up a test of the September 28 low near 1.0540.”

“The BoE will now buy inflation-linked debt in order to maintain orderly markets. It said it would buy up to GBP10 bln of gilts daily until its emergency program ends, double the GBP5 bln in place. Can the new measures prevent another gilt crash? Only time will tell but we note that whatever measures the BoE takes, it can only address the symptoms (disorderly markets) and not the underlying malady (irresponsible fiscal policy). Only the government can turn this thing around.”

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EUR/USD Price Analysis: Key resistance lies at the parity zone

EUR/USD wobbles around the 0.9800 zone ahead of NFP.

Bullish attempts face a tough barrier at the parity level.

EUR/USD gyrates around the 0.9800 region ahead of the release of US Nonfarm Payrolls on Friday.

The resumption of the buying interest is expected to meet a solid hurdle at recent peaks around the parity zone. Ideally, EUR/USD should leave behind this key resistance zone in the near term to allow for the continuation of the rebound.

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0616.

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AUD/NZD to slide towards the 1.12 level – OCBC

AUD/NZD continued to trade with a heavy downside bias amid growing policy divergence between the Reserve Bank of Australia and the Reserve Bank of New Zealand. Economists at OCBC Bank maintain a short bias targeting 1.12.

Risks remained skewed to the downside

“RBNZ’s accompanying MPS was slightly more hawkish than expected as it noted that the MPC considered 50, 75 bps at this meeting; core CPI is ‘too high’ and lower NZD if sustained poses further upside risk to CPI.”

“We maintain our tactical short play on AUD/NZD, targeting 1.12, 1.1050 objectives.”

“Daily momentum is bearish while RSI fell. Risks remained skewed to the downside.”

“Support at 1.1240, 1.1210 levels.”

“Resistance at 1.1305 (21 DMA), 1.1380 levels.”

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Gold Price Forecast: XAU/USD sits near three-week high, above $1,700 amid weaker USD

Gold gains strong follow-through traction and rallies to a three-week high on Tuesday.

Retreating US bond yields weighs heavily on the USD and offers support to the metal.

Bulls shrug off the risk-on impulse, though hawkish Fed expectations could cap gains.

Gold is extending the overnight breakout momentum through the $1,680-$1,685 supply zone and building on its recovery from the lowest level since April 2020. The strong follow-through positive move lifts the XAU/USD to a three-week high, around the $1,710 region during the first half of the European session on Tuesday.

The US dollar retreats further from a two-decade top touched last week and turns out to be a key factor driving flows towards the dollar-denominated commodity. The Bank of England's willingness to buy up to £5 billion of long-dated gilts drags the US bond yields away from a multi-year top and continues to weigh on the greenback.

Apart from this, growing worries about a deeper economic downturn in the US and Europe offer additional support to the safe-haven gold. The fears were further fueled by Monday's disappointing US data, which showed that manufacturing activity grew marginally in September, at its slowest pace in nearly 2-1/2 years.

This, to a larger extent, helps offset the risk-on mood and does little to dent the prevalent bullish sentiment surrounding gold. That said, the prospects for a more aggressive policy tightening by major central banks could act as a headwind for the non-yielding yellow metal and keep a lid on any further gain, at least for now.

Market participants now look forward to the US monthly employment details, scheduled for release on Friday. The popularly known NFP report will play a key role in influencing the Fed's future rate hike path. This, in turn, should help investors to determine the next leg of a directional move for the greenback and gold.

In the meantime, Tuesday's US economic docket features JOLTS Job Openings and Factory Orders data. This, along with speeches by FOMC members and the US bond yields, will drive the USD demand and provide impetus to the XAU/USD. Traders will also take cues from the broader risk sentiment for short-term opportunities around gold.

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