GBP/USD could test 1.1300 on a dovish BoE – ING
“We continue to highlight the risk of a dovish surprise (50 bps hike) by the BoE tomorrow. The combination of a USD-positive FOMC and a GBP-negative BoE means cable could test 1.1300 by the end of the week.”
“EUR/GBP may climb back into the 0.8650-0.8700 area in the coming days.”
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EUR/USD Price Analysis: The next hurdle comes at 1.0050
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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EUR/USD regains some ground lost and re-targets 0.9800
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 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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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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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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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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Brent Oil: Below $83.00 next supports align at $77.50 and $73.00 – SocGen
On the first day of the last week of September, crude oil extended last week’s losses. Economists at Société Générale expect Brent to head towards $77.50, then $73.00 on a drop under $83.00.
An initial rebound is on the cards
“Daily MACD is anchored within negative territory which denotes steady downward momentum.”
“An initial bounce is not ruled out, however, $93.50 should provide resistance.”
“Brent is close to downside projections of $83.00. Next potential supports are at the lower band of a descending channel at $77.50 and $73.00.”
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EUR/USD Price Analysis: Scope for further losses near term
EUR/USD bounces off fresh cycle lows near 0.9550.
Extra downside could revisit the 0.9411 level near term.
EUR/USD keeps the bearish note well in place and drops to new 2-decade lows near 0.9550, where some initial contention seems to have emerged.
Rising prospects for extra weakness in the European currency remain well on the table for the time being. That said, the loss of the 2022 low at 0.9552 (September 26) should leave the pair vulnerable to a challenge to the round level at 0.9500 prior to the weekly low at 0.9411 (June 17 2002).
In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0685.
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US Dollar Index Price Analysis: Bearish moves seen as buying opportunities
DXY climbs to fresh highs near 112.00 before losing momentum.
Further upside remains well on the cards for the dollar near term.
DXY corrects lower after two consecutive daily advances, including new 20-year highs just below the 112.00 mark earlier on Thursday.
The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 7-month support line near 106.80. That said, occasional bouts of weakness could be deemed as buying opportunities with the immediate target at the 2022 high at 111.81 (September 22).
In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 101.95.
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NZD/USD struggles near its lowest level since April 2020 as another big Fed rate hike looms
The NZD/USD pair recovers a few pips from its lowest level since April 2020 touched in the last hour and is currently placed in neutral territory, around the 0.5885 region. That said, any meaningful recovery still seems elusive as investors gear up for another supersized rate hike by the Federal Reserve.
The stronger US CPI report released last week reaffirmed expectations that the USD central bank will continue to tighten its monetary policy at a faster pace. This remains supportive of a strong follow-through US dollar move up to a fresh 20-year peak, which, in turn, should continue to act as a headwind for the NZD/USD pair.
That said, a softer tone surrounding the US Treasury bond yields and a generally positive risk tone keep a lid on any further gains for the safe-haven greenback. Apart from this, slightly oversold conditions on short-term charts offer some support to the risk-sensitive kiwi and help limit losses for the NZD/USD pair.
Apart from this, the intraday bounce could further be attributed to some repositioning trade ahead of the highly-anticipated FOMC policy decision, scheduled to be announced later during the US session. The Fed is widely expected to stick to its aggressive policy tightening path and hike interest rates by at least 75 bps.
Apart from this, the focus will be on the updated economic projections and the dot plot. Furthermore, Fed Chair Jerome Powell's remarks at the post-meeting press conference will be looked upon for clues about future rate hikes. This, in turn, will influence the USD and provide a fresh directional impetus to the NZD/USD pair.
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US Dollar Index to extend upward momentum on a break above 111 – SocGen
The US Dollar Index (DXY) moves sideways slightly above 109.50. Economists at Société Générale expect the index to enjoy further gains on a break past 111.
Short-term downtrend likely on a dip under 107.60
“If the index establishes itself above the high formed earlier this month at 111 – which is also a graphical level, the up move is expected to extend further towards next projections at 112.60/113.00.”
“It is worth noting that the daily MACD has started posting negative divergence. Although this is not a reversal signal, it does point towards receding upward momentum.”
“Defending the 50-DMA at 107.60 would be essential for persistence in uptrend. Should a break materialize, a short-term downtrend is likely.”
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GBP/USD remains on the defensive amid modest USD uptick, eyes US data for fresh impetus
GBP/USD comes under renewed selling pressure on Thursday, though lacks follow-through.
Aggressive Fed rate hike bets revive the USD demand and exert some downward pressure.
A positive risk tone caps the safe-haven buck and helps limit the downside for the major.
The GBP/USD pair struggles to capitalize on the previous day's modest uptick and meets with a fresh supply on Thursday. Spot prices remain on the defensive through the first half of the European session, though manage to hold above the 1.1500 psychological mark.
The US dollar catches fresh bids amid expectations for a more aggressive policy tightening by the Fed and turns out to be a key factor exerting some downward pressure on the GBP/USD pair. The stronger US consumer inflation data released on Tuesday all but confirmed that the Fed will hike interest rates at a faster pace. In fact, the implied odds for a full 1% lift-off at the September FOMC meeting currently stand at 30%.
Furthermore, the markets have been pricing in the possibility of another supersized Fed rate hike move in November. This remains supportive of elevated US Treasury bond yields and continues to underpin the greenback. That said, a generally positive risk tone is capping gains for the safe-haven buck. Apart from this, prospects for a 75 bps rate hike by the Bank of England on September 22 offer support to the GBP/USD pair.
This makes it prudent to wait for strong follow-through selling before positioning for an extension of the post-US CPI sharp retracement slide from a two-week high. In the absence of any relevant economic data from the UK, traders look forward to the US macro releases for some impetus later during the early North American session.
Thursday's US economic docket features the release of monthly Retail Sales figures, Weekly Initial Jobless Claims, Regional Manufacturing Indices, and Industrial Production data. This, along with the US bond yields and the broader risk sentiment, will influence the USD and produce short-term trading opportunities around the GBP/USD pair.
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EU proposes windfall levy to claw back surplus profits from fossil fuel companies
The European Commission announced on Thursday that it proposed a voluntary target for European Union countries to cut overall monthly electricity use by 10% compared to the same period in recent years, as reported by Reuters.
Additional takeaways
"EU Commission proposes 180 euros per megawatt hour revenue cap for non-gas fuelled power generators."
"EU revenue cap would apply to wind, solar, biomass, lignite, nuclear and some hydropower generators."
"EU proposes windfall profit levy to claw back surplus profits from fossil fuel companies."
"EU levy would recoup 33% of oil, gas, coal, refining companies' surplus taxable profits in the fiscal year 2022."
"EU levy would apply to fossil fuels companies that have tax obligations in EU countries."
"EU proposes mandatory target for EU countries to cut electricity use 5% during peak price periods."
Market reaction
The shared currency holds its ground following this development and the EUR/USD pair was last seen rising 0.32% on the day at 1.0002.
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USD/JPY: A move to 150 can not be ruled out – Rabobank
The pullback in the broad-based value of the USD in recent sessions has offered a reprieve to various stressed currency pairs, among them USD/JPY. Nonetheless, economists at Rabobank still believe that the pair could reach the 150 level.
“The dip back towards 142.00 this week will be welcomed by Japanese officials. That said, it is our view that USD strength will sustain for some months yet. It is also possible that the BoJ will maintain loose policy settings into next year. This suggests scope for USD/JPY to head higher in the coming months.”
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AUD/USD ascends to 0.6900 neighbourhood, nearly two-week high amid weaker USD
The AUD/USD pair catches some bids for the successive straight day on Monday and builds on last week's bounce from sub-0.6700 levels or the lowest since July 14. This also marks the third day of a positive move in the previous four and lifts spot prices to a more than one-week high, closer to the 0.6900 mark during the mid-European session.
A combination of factors force the US dollar to prolong its recent sharp pullback from a two-decade high, which, in turn, is seen lending support to the AUD/USD pair. The markets already seem to have priced in a supersized 75 bps rate hike by the Federal Reserve at the next policy meeting on September 20-21. Furthermore, a modest downtick in the US Treasury bond yields seems to weigh on the greenback.
Apart from this, a generally positive tone around the equity markets further undermines the safe-haven buck and benefits the risk-sensitive aussie. That said, growing recession fears, amid the prospects for a faster policy tightening by major central banks and economic headwinds stemming from fresh COVID-19 curbs in China could cap optimism. This, in turn, warrants some caution for bullish traders.
Investors might also refrain from placing aggressive bets and prefer to move to the sidelines ahead of the latest US consumer inflation figures, due for release on Tuesday. The crucial US CPI report for August will play a key role in influencing the Fed's policy outlook. This will drive the USD demand in the near term and help determine the next leg of a directional move for the AUD/USD pair.
In the meantime, spot prices are more likely to consolidate in a range amid absent relevant market-moving economic releases from the US on Monday. That said, the US bond yields, along with the broader risk sentiment, might provide some impetus to the greenback and allow traders to grab short-term opportunities around the AUD/USD pair.
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EUR/USD: Further worsening of energy crisis can trigger a drop to the 0.96-0.97 area – ING
Post the European Central Bank (ECB) meeting, the energy crisis should remain the key driver for the euro. Therefore, economists at ING expect the EUR/USD pair to remain skewed to the downside.
The 0.98-0.99 area could prove to be a near-term anchor
“We expect the energy story to return firmly to the driving seat for EUR/USD after the post-ECB reaction. Barring a very hawkish surprise, this should keep EUR/USD below parity and prevent it to reconnect with the more supportive rate differential.”
“The 0.98-0.99 area could prove to be a near-term anchor for EUR/USD, but a further worsening of the energy crisis and/or further dollar strengthening can trigger a drop to the 0.96-0.97 area.”
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EUR/JPY Price Analysis: The 142.30 region emerges as the next target
EUR/JPY adds to Friday’s small gains below 140.00.
The next hurdle of note turns up at the 142.30 zone.
EUR/JPY alternates gains with losses around 139.00 after bottoming out in earlier lows near 138.70 on Monday.
Extra gains in the cross are now favoured once it clears the recent high at 140.74 (September 2). Beyond this level, another visit of the weekly top at 142.32 (July 21) should re-emerge on the horizon prior to the 2022 peak at 144.27 (June 28).
While above the 200-day SMA at 134.54, the prospects for the pair should remain constructive.
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EUR/USD to decline towards the 0.95 over the coming month – Rabobank
On Wednesday, EUR/USD closed at its highest level since mid-August. Nevertheless, economists at Rabobank expect the pair to slide towards 0.95 in the next month.
USD strength to remain in place for a further six months or so
“Going into the Jackson Hole meetings, the market was pricing in a full 1 ppt of ECB rate hikes by the October meeting and these expectations have only increased since then. However, rate hikes will do little to prop up the EUR vs. the USD given that investors are likely to remain focused on stagflation risks in the Eurozone and given the USD’s haven function.”
“We continue to expect broad-based USD strength to remain in place for a further six months or so.”
“We maintain our target of EUR/USD 0.95 on a one-month view.”
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GBP/USD remains heavy and on track to test the March 2020 low near 1.1410
GBP/USD traded at a new low for this move on Monday near 1.1650 but has rebounded to trade just above 1.17. Economists at BBH expect the pair to test the March 2020 low near 1.1410.
The notion of a Truss-led UK government is concerning
“Cable remains heavy and on track to test the March 2020 low near 1.1410.”
“We’ve been pointing out for a while that the notion of a Truss-led UK government is concerning. The main planks of her platform are 1) large-scale tax cuts, 2) BoE mandate review, and 3) hard Brexit. None of these can be seen as positive for sterling and gilts and so along with likely recession in Q4, the reasons to be underweight UK assets are piling up.”
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