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.

WANT DIRECT TALK TO OUR EXPERTS CONTACT THE LEARNING ART

GBP/USD could test 1.1300 on a dovish BoE – ING

GBP/USD continues to fluctuate at around 1.15. But a USD-positive FOMC and a dovish surprise by the Bank of England (BoE) could drag cable down to 1.13, economists at ING report.

EUR/GBP may climb back into the 0.8650-0.8700 area

“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.”

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

 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.

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

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.”

WANT DIRECT TALK TO OUR EXPERS CONTACT MONEY LIFE RESEARCH

 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.

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

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.

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

GBP/USD eases from daily high, still well bid around 1.1050 area as traders await FOMC minutes

mixed signals about BoE's bond-buying program prompt some short-covering around GBP/USD.

Subdued USD price action provides an additional lift, though the uptick lacks bullish conviction.

Investors now look to FOMC minutes for a fresh impetus ahead of the US CPI report on Thursday.

The GBP/USD pair stages a goodish bounce from the 1.0925 area, or a nearly two-week high set earlier this Wednesday and snaps a five-day losing streak. Spot prices, however, struggle to capitalize on the move and retreat around 40-50 pips from the vicinity of the 1.1100 round-figure mark.

The British pound attracts some buyers amid reports that the Bank might be willing to extend its purchases beyond Friday and prompts short-covering around the GBP/USD pair. This, along with subdued US dollar price action, offers additional support to the major. That said, BoE Governor Andrew Bailey said on Tuesday that the central bank will stop buying UK government bonds on October 14. Apart from this, the dismal UK macro data contributes to capping the upside for the major.

The UK Office for National Statistics reported that the economy unexpectedly shrank by 0.3% in August, reinforcing the BoE's prediction for a recession this year. Furthermore, expectations that the Fed will continue to tighten its monetary policy at a faster pace to tame inflation acts as a tailwind for the greenback. This further holds back traders from placing bullish bets around the GBP/USD pair ahead of the crucial FOMC meeting minutes, due later during the US session.

The focus will then shift to the latest US consumer inflation figures on Thursday, which should play a key role in influencing the Fed's future rate-hike path. This, in turn, will drive the USD demand in the near term and provide a fresh directional impetus to the GBP/USD pair. In the meantime, elevated US Treasury bond yields might underpin the greenback and continue to keep a lid on any meaningful gains for the major amid concerns about the UK government's fiscal plans.

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

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.”

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

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.”

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

EUR/USD: Bullish push above is unsustainable – ING

EUR/USD is now pressing the 1.000 resistance. But in the view of economists at ING, a return to above-parity levels looks unsustainable.

EUR/USD to suffer a drop to the low 0.90 area into year-end

“We struggle to see much more behind the pair’s rally other than a position-squaring event and a broad dollar correction. Despite European assets rebounding quite sharply, it’s hard to point to any material change in the eurozone’s outlook that would warrant a significant return of market appetite for the euro just yet.”

“There is not enough bullish push to keep EUR/USD above parity on a sustainable basis, and we still forecast a drop to the low 0.90 area into year-end.”

 WANT DIRECTLY TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

EUR/USD Price Analysis: Bears now target 0.9500

EUR/USD drops for the seventh straight session and tests 0.9535.

Below the 2022 low at 0.9535 comes the 0.9500 region.

EUR/USD extends the leg lower to the proximity of 0.9530 earlier on Wednesday, an area last traded back in June 2002.

Odds for extra weakness in the European currency remain well on the table so far with the immediate target at the 2022 low at 0.9552 (September 26). A deeper drop could challenge the round level at 0.9500 ahead of the weekly low at 0.9411 (June 17 2002).

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0667.

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH 

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.”

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

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.

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

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.

WANT DIRECT TALK TO OUR EXPERT CONTACT MONEY LIFE RESEARCH

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.”

WANT TO DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

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.

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

 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.

Scope for USD/JPY to head higher in the coming months

“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.”

WANT TO DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

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.

WANT DIRECT TALK TO OUR MARKET EXPERTS CONTACT MONEY LIFE RESEARCH

US Dollar Index retreats from cycle highs near 110.00 ahead of Payrolls

The index comes under pressure and recedes from 110.00.

The risk complex regains some composure and trims recent losses.

All the attention remains on the August’s Nonfarm Payrolls due later.

The greenback, in terms of the US Dollar Index (DXY), gives away part of the recent advance to fresh cycle highs in the 110.00 region (September 1).

US Dollar Index looks to key data

The index now comes under pressure and sheds some ground following Thursday’s advance to levels last seen back in June 2002 in the 110.00 neighbourhood.

The recent strong climb in the dollar has been underpinned by the equally intense move higher in US yields, particularly in the short end of the curve, which was at the same underpinned by persistent expectations of the continuation of the normalization process by the Federal Reserve.

On the latter, the probability of a 75 bps rate raise at the September event is now at nearly 75% as per CME Group’s FedWatch Tool.

Still looking at the next Fed’s rate hike, Friday’s focus of attention is expected to remain on the release of US Nonfarm Payrolls for the month of August due later in the NA session. Consensus expects the economy to have added 300K jobs during last month and the jobless rate to stay unchanged at 3.5%.

Additional data will also see Factory Orders for the month of July.

What to look for around USD

Despite the ongoing knee-jerk, the greenback keeps the bullish outlook well in place in the area of 20-year highs near the 110.00 zone.

Bolstering the dollar’s strength appears the firm conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market. This view was recently reinforced by Chair Powell’s speech at the Jackson Hole Symposium.

Extra volatility in the dollar, however, should not be ruled out considering the ongoing debate around the size of the September’s interest rate hike by the Federal Reserve.

Looking at the more macro scenario, the greenback appears propped up by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate, Factory Orders (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation over a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

US Dollar Index relevant levels

Now, the index is retreating 0.18% at 109.43 and faces the next support at 107.58 (weekly low August 26) seconded by 106.69 (55-day SMA) and then 104.63 (monthly low August 10). On the upside, a breakout of 109.97 (2022 high September 1) would aim for 110.00 (round level) and finally 112.17 (high May 31 2002).

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

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.”

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH