The data published by Automatic Data Processing (ADP) showed on Wednesday that private sector employment in the US rose by 239,000 in October. This reading came in better than the market expectation of 193,000. September print of 208,000 got revised down to 192,000.
Developing story...
The US Dollar Index showed no immediate reaction to this data and was last seen losing 0.22% on the day at 111.30.
EUR/JPY seems to have met decent resistance around daily highs near 142.30 at the end of the week.
The continuation of the bounce off last week’s lows remains on the table in the very near term. That said, the cross could therefore extend the bullish attempt to the weekly top at 144.04 (September 20), which is deemed as the last defense for a move to the 2022 peak at 145.63 (September 12).
In the meantime, while above the key 200-day SMA at 135.84, the constructive outlook for the cross should remain unchanged.
Gold price slides to fresh two-and-half-year lows dampened by a risk-off mood and flows towards the US dollar, which rose to new two-decade highs. Overall, US dollar strength and higher US Treasury bond yields are two reasons for the fall in the precious metals complex, mainly the yellow metal. At the time of writing, XAU/USD is trading at $1643.50 a troy ounce.
US equities dropped as Wall Street closed with hefty losses between 1.62% and 1.80% on Friday. The US 10-year benchmark note rate retraced from yielding 3.829% and is set to end the week below the 3.70% threshold. On the same note, the US 10-year Treasury Inflation-Protected Securities (TIPS) bond yield weighed on the non-yielding metal, set to finish at 1.33%.
The AUD/USD pair continues losing ground through the first half of the European session on Friday and drops to the 0.6565 area or its lowest level since May 2020.
The US dollar catches fresh bids on the last day of the week and hits a new 20-year peak, which turns out to be a key factor exerting downward pressure on the AUD/USD pair. The Federal Reserve struck a more hawkish tone on Wednesday and signalled that it will undertake more aggressive rate increases to cap inflation. This, in turn, remains supportive of elevated US Treasury bond yields and continues to act as a tailwind for the greenback.
In fact, the yield on the rate-sensitive two-year US government bond touched a fresh 15-year high and the benchmark 10-year Treasury note jumped to its highest level since 2011 on Thursday. Meanwhile, investors remain concerned that rapidly rising borrowing costs will lead to a deeper global economic downturn. This, in turn, tempers investors' appetite for riskier assets and is further underpinning demand for the traditional safe-haven buck.
Apart from this, economic headwinds stemming from China's zero-covid policy and the risk of a further escalation in the Russia-Ukraine conflict, have been fueling recession fears. This is seen as another factor contributing to driving flows away from the risk-sensitive aussie. With oscillators still far from being in the oversold territory, the fundamental backdrop supports prospects for an extension of the depreciating move for the AUD/USD pair.
Market participants now look forward to the release of the flash US PMI prints, due later during the early North American session. This, along with the US bond yields and Fed Chair Jerome Powell's speech at an event in Washington, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities heading into the weekend.
Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group review the latest interest rate decision by the BNM.
“As widely expected, Bank Negara Malaysia (BNM) raised the Overnight Policy Rate (OPR) today (8 Sep) by 25bps to 2.50%. This marks the third back-to-back rate hike since BNM started the hiking cycle in May this year as the economy recovered at a stronger pace. To date, BNM has hiked 75bps, which partly reversed the 125bps of rate cuts since the start of the pandemic in Jan 2020.”
“In the latest monetary policy statement (MPS), BNM continues to expect the domestic economy to expand, supported by private sector spending amid the transition to endemicity, positive labour market conditions, resumption of tourism activities and investments. However, BNM cautioned that external demand is expected to moderate amid softer global growth. BNM expects inflation to peak in 3Q22 before moderating thereafter amid abating base effects and easing global commodity prices.”
“BNM highlighted that there is no ‘pre-set course’ and the monetary policy committee (MPC) will continue to assess developments and their impact on domestic inflation and growth. BNM also reiterated that any adjustments will be done in a ‘measured and gradual’ manner. We think BNM may have signalled a temporary pause for rate hikes pending forward-looking growth and inflation dynamics. As such, we maintain our OPR target at 2.50% by year-end, and 3.00% by mid-2023. The next and final monetary policy meeting for the year is on 2-3 Nov.”
Liz Truss won the Conservative Party leadership race to become the next British Prime Minister.
"I will deal with long-term issues on energy supply," Liz Truss said in her acceptance speech and noted that she will deal with the crisis in households' energy bills.
"I will govern as a conservative."
"I intend to deliver what we promised voters in 2019."
"I will deliver a bold plan to cut taxes and grow our economy."
"We will deliver a great victory for the conservative party in 2024."
The UK's FTSE 100 Index showed no immediate reaction to these comments and was last seen losing 0.6% on a daily basis. Meanwhile, the GBP/USD pair continues to fluctuate at around 1.1500 during the European trading hours.
Iran's Foreign Minister Hossein Amirabdollahian said on Wednesday that Tehran is carefully reviewing the EU-drafted text for the revival of the 2015 nuclear pact, as reported by Reuters.
"We need stronger guarantees from the other party to have a sustainable deal," Amirabdollahian added. "The (U.N.) agency should close its politically-motivated probes."
Crude oil prices showed no immediate reaction to these comments. As of writing, the barrel of West Texas Intermediate was trading at $89.10, where it was down 3.5% on a daily basis.
Wednesday's US economic docket highlights the release of Durable Goods Orders data for July. The US Census Bureau will publish the monthly report at 12:30 GMT and is expected to show that headline orders rose 0.6% during the reported month, marking a notable slowdown from the 2% increase recorded in June. Orders excluding transportation items, which tend to have a broader impact, are anticipated to grow by a modest 0.2% in July as compared to a 0.4% rise reported in the previous month.
Analysts at Wells Fargo offer a brief preview of the report and explain: “Demand for goods is slowing. That is as true for business spending as it is for personal consumption. For businesses, the growing concern the economy is about to tip into recession is weighing on activity, as well as higher borrowing costs and demand largely having been pulled forward throughout the pandemic.”
Ahead of the key data, the emergence of fresh US dollar buying drags the EUR/USD pair back closer to its lowest level since December 2002 touched the previous day. A stronger-than-expected domestic data will reinforce hawkish Fed expectations, which, in turn, should result in higher US Treasury bond yields and a stronger USD.
Conversely, a weaker report will further fuel concerns about a global economic downturn and weigh on investors' sentiment, offering some support to the greenback's safe-haven status. This, along with fears of a prolonged energy-supply crunch in the Eurozone, suggests that the path of least resistance for the EUR/USD pair is to the downside.
That said, any immediate market reaction is more likely to be short-lived as market participants might prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's appearance at the Jackson Hole symposium on Friday. Nevertheless, a big divergence from the expected readings might still provide some meaningful impetus to the EUR/USD pair.
Eren Sengezer, Editor at FXStreet, meanwhile, offered a brief technical outlook for the EUR/USD pair: “On the four-hour chart, the Relative Strength Index (RSI) indicator stays well below 40 after having moved out of the oversold territory on Tuesday. Additionally, EUR/USD is yet to make a four-hour close above the descending regression channel coming from August 12. Both of these technical developments suggest that the pair's latest recovery was a technical correction rather than a reversal..”
Eren also outlined important technical levels to trade the EUR/USD pair: “In case the pair starts using 0.9950 (static level, upper limit of the descending regression channel) as support, it could face interim resistance at 0.9975 (20-period SMA) before testing parity. On the downside, 0.9900 (static level, psychological level) aligns as first support before 0.9870 (former resistance area from October 2002) and 0.9800 (psychological level).”
The Turkish lira debilitates to fresh lows vs. the greenback and pushes USD/TRY past the 18.00 yardstick for the first time since December 2021.
USD/TRY leaves behind the key barrier at 18.00 after the Turkish central bank (CBRT) caught the markets off guard and reduced the One-Week Repo Rate by a full point to 13.00% at its meeting earlier on Thursday. the central bank also cut the Overnight Borrowing Rate and the Overnight Lending Rate by 100 bps to 11.50% and 14.50%, respectively.
Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 50 basis points to 1.75%.
"BOE will not comment on Conservative leadership candidates' plans."
"BOE has a very clear mandate of price stability."
"Consequences of Russia's actions in Ukraine have a serious economic impact."
"Political pressures have been very well managed since BOE independence."
"I have not abandoned the narrow path analogy for UK policy outlook."
"A number of central banks have a similar narrow path to tread."
"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."
Enrico Tanuwidjaja, Economist at UOB Group, comments on the latest inflation figures in Indonesia.
“July’s headline inflation jumped to 4.9% y/y, breaching Bank Indonesia (BI)’s 4% target upper bound for the second month in a row and currently at 7-year high, while core inflation rose to 2.9% y/y, a 28-month high, from June’s 2.6%.”
“Inflation in July continued to be driven by upward pressures from food services and restaurants and transport, in addition to housing, water, electricity and household fuel.”
“We revised our 2022 inflation forecast now to average 4% viz. 3.3% previously and for BI to hike rates now in Sep instead of in Jul.”
The EUR/USD is trading at 1.0220, after hitting a daily high at 1.0254, but later tumbled towards the daily low at 1.0145 on elevated US inflation data. In June, the Personal Consumption Expenditures (PCE) rose by 6.8% YoY, fueling expectations of additional Federal Reserve rate hikes, despite the market's pricing in only 80 bps of tightening.
From a daily chart perspective, the EUR/USD remains neutral-to-downward biased, helped by the 20-day EMA lying below the exchange rate at 1.0167. Nevertheless, the EUR/USD, unable to capitalize on an upbeat market mood, and broad US dollar weakness, keeps the shared currency exposed to further selling pressure. If EUR/USD buyers want to shift the bias to neutral, they must reclaim the May 13 low-turned-resistance at 1.0348. Once cleared, a challenge of the 50-day EMA at 1.0423 is on the cards. On the other hand, if EUR/USD sellers achieve a daily close below 1.0200, that would pave the road towards 1.0096.
📕 Comment on Gold on June 3, 2022:
- In yesterday's session, precious metal Gold went right with the analysis trend when it bounced up from 1844 to 1870 ($26) and closed the day session with a bullish candle around 1868. The strength of the tree. Yesterday's candle was the strongest in the past 9 sessions. Therefore, in my opinion, the possibility of Gold will continue to increase in today's session.
- Switch to the H4 time frame, the nearest support area for this precious metal is around 1863-1867. Here we can refer to buying with a safe target below 1874 and above 1880.
Easter Monday-induced thin market conditions are offering some extra zest to bulls, as Gold Price heads closer towards the $2,000 round level. The light trading seems to be exaggerating the moves in XAUUSD, as a 0.50% drop in the US stock futures reflects a risk-off market profile. Persistent Russian military actions in the Western Ukrainian city of Lviv and the Southern port city of Mariupol suggest that a peace agreement is nowhere in sight, fuelling anxiety. Meanwhile, the Ukraine crisis-led surging global inflation is prompting investors to seek refuge in the inflation-hedge Gold Price. Buyers ignore the notable strength in the US dollar alongside the Treasury yields, as a flight to safety makes the traditional store of value, gold, more appealing.
Also read: Gold Price Forecast: XAUUSD needs to crack this level to take on the $2,000 mark
Moreover, China’s covid lockdowns and a potential European Union (EU) embargo on Russian gas could likely intensify inflation and growth concerns. This was seen as another factor that boosted the metal's appeal as a hedge against rising costs. Investors will now focus on the speech from the St. Louis Fed President and FOMC member James Bullard, which will provide insights into the likely monetary policy action by the Fed. However, the mega event will be the speech from Fed Chair Jerome Powell due later this week.
“We are of the view that the Fed is broadly in-sync with the move toward the vicinity of neutral by the end of 2022, with Governor Brainard supporting that view recently. Chair Powell's remarks in an IMF panel on the global economy will get the focus of the attention,” analysts at TD Securities explained. “While the Fed is signalling its intent to reach neutrality by year-end, and to start an aggressive QT regime, outflows from gold markets have been scarce as participants are happy to retain some optionality against the Fed's stated plan amid growth concerns,” the analysts added.
The bulls are in control and taking on fresh highs. On a daily scale, XAU/USD has tested the breakout of its previous critical level at March 24 high $1,966.18 multiple times. The 20- and 50-Exponential Moving Averages (EMAs) are scaling higher, adding to the upside filters. The momentum oscillator Relative Strength Index (RSI) (14) has overstepped 60.00, which indicates a firmer bullish momentum going forward.
Comment on Gold on 05/04/2022:
Though the pair has waned from its earlier multi-week highs in the 1.1160s after selling pressure ahead of the 50-Day Moving Average near 1.1180 emerged, EUR/USD continues to trade with healthy on-the-day gains of about 0.4% in the 1.1130s. The US dollar continues to suffer from broad weakness versus the majority of its G10 counterparts, even as recent tailwinds in the global equity space subside amid less optimistic headlines regarding Russo-Ukraine peace talks, lifting EUR/USD. Another factor likely encouraging euro buying against the buck is recent hot inflation readings coming out of the Eurozone which, as ECB President Christine Lagarde this morning remarked, support the ECB’s recent shift towards ending QE in Q3 and signaling rate hikes in Q4.
Ahead of the release of preliminary national German Consumer Price Inflation metrics for March at 1300BST, regional state CPI data releases earlier in the session saw sizeable MoM and YoY gains. Meanwhile, the preliminary estimate of Spanish headline HICP inflation in March hit a staggering 9.8%, well above the 8.1% expected. Upcoming German inflation figures are expected to be hot and thus may not provoke a market reaction, and EUR/USD focus will quickly shift to US data scheduled for release shortly after. US private payroll company ADP releases its estimate of US employment change in March at 1315BST and, though ADP’s metric has been a poor predictor of the official NFP in recent months, traders will nonetheless take note.
Shortly after at 1330BST, the final estimate of US GDP growth in Q4 2021 will be released and there will be remarks from Fed’s Thomas Barkin, Raphael Bostic and Esther George, all of whom support the Fed’s recent hawkish shift. Fed hawkishness/strong economic data is arguably well priced into USD at this point, and further profit-taking on US dollar longs coupled with inflationary Eurozone data may well mean EUR/USD remains supported above 1.1100 and eyes a move towards 1.1200.
Russia and Ukraine on Thursday agreed on the need for humanitarian corridors to help civilians escape Moscow's eight-day invasion, the first clear progress in the talks, as the United States in addition to Western sanctions on more oligarchs.
Thousands of people are believed to have died or been injured in the biggest attack on a European country since the outbreak of World War Two, creating 1 million refugees, affecting the Russian economy and worrying concerns about broader conflict in the West for decades.
Russian forces continue to besiege and attack Ukrainian cities, including Mariupol, the main eastern port that is under heavy shelling, without electricity or water. Officials said they were unable to evacuate the injured.
After talks at an undisclosed location, Russia said "significant progress" had been made, but not the outcome Kyiv had hoped for.
The two sides agreed to conduct a third round of negotiations.
- In yesterday's session, precious metal Gold fell from 1947 to 1914 ($33), closing the day session with a bearish candle around 1927. The drop was not too strong and recovered in end of trading day. In my personal opinion, the increasing force of Gold is still dominant, so in today's session, the option will be to buy.
- On the H4 time frame, the nearest support area for this precious metal is around 1914-1919. Here we can establish a long position with a safe target around 1935-1940. Then there is a signal I will update later.
European Commission President Says Financial Sanctions Target 70% of Russian Banks!
Von Der Leyen said the steps agreed by EU leaders include financial sanctions, targeting 70% of Russian banks and key state-owned companies, including in the defense sector.
- Sanctions against Russia will increase Russia's borrowing costs and increase inflation
