UK PM Liz Truss's spokesman said in a statement on Friday, “we are working in preparation for a medium-term fiscal plan on October 31.”
He added that “the new PM will decide whether it will be delivered then.”
GBP/USD found some support on the above headlines, as it moved away from weekly lows at 1.1100, currently trading at 1.1130, still down 0.91% so far.
Gold has resisted higher real rates, strong dollar and fund outflows, but remains vulnerable, in the view of strategists at Société Générale.
“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.”
The Reserve Bank of Australia’s (RBA) surprise decision to slow the pace of tightening by delivering a smaller 25 bps hike weighed on the aussie. Economists at MUFG Bank expect the AUD/USD pair to challenge the 0.6000 level.
“We continue to believe that risks remain tilted to the downside for commodity currencies in the near-term.”
“The RBA’s policy shift has increased the likelihood that AUD/USD will fall towards the 0.6000 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.
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.
“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.
S&P 500 has resumed its downtrend. Analysts at Société Générale note that the technical outlook denotes prevalence in downward momentum.
“Monthly RSI is now close to the lower limit of its bullish territory (near 40 levels); this band has cushioned the declines since 2010. However, signals of a trend reversal are still not visible in price action.”
“Short-term resistance is located at 3860/3900, the 38.2% retracement from August. Failure to reclaim 3900 can lead to continuation in decline.”
“Next potential supports are at projections of 3500/3460 and February 2020 levels of 3393.”
Quek Ser Leang at UOB Group’s Global Economics & Markets Research suggests USD/CNH could retest 7.1000 once 7.0500 is cleared.
“In our last Chart of the Day update from 29 Aug 2022, when USD/CNH was trading at a much lower level of 6.9200, we titled our update ‘USD/CNH could continue to advance, likely at a rapid pace as there are hardly any resistance levels of note until 7.0000’. While our view of a ‘rapid pace of advance’ was not wrong, USD/CNH did not break 7.0000 as it soared to 6.9967 about a week later before pulling back to a low of 6.9100.”
“USD/CNH rebounded sharply from 6.9100 and yesterday (15 Sep 2022), it cracked 7.0000. The break of the ‘psychological level’ resulted in a swift and sharp surge and USD/CNH continues to accelerate higher today. The price actions are not surprising as the next resistance level of note is at 7.0500. Looking ahead, if 7.0500 is broken, the focus will shift to 7.1000. Within these couple of months, the 2019 and 2020 highs, both near 7.1960, are unlikely to come into view.”
On the downside, the rising trend-line support, currently at 6.9400, is a strong support level but only a breach of the 21-day exponential moving average (at the time of writing, the level is at 6.9260) would indicate the current strong upward pressure has eased.”
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.”
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 Federal Reserve is going to have to do more with interest rates but details depend on the flow of data in coming months," Atlanta Fed President Raphael Bostic said on Friday, as reported by Reuters.
"The country is not in recession, but the real question is whether current conditions are creating hardship, inflation needs to be addressed."
There is still more work to be done on bringing demand and supply into balance."
"Rate hikes could hurt job growth, but so far seems there is momentum for continued hiring."
"Possible to control inflation while limiting the number of families who have really bad outcomes."
"The US is a ways from a recession, though concerned that recession fears could become self-fulfilling."
These comments don't seem to be having a significant impact on the greenback's performance against its rivals. As of writing, the US Dollar Index was down 0.25% on the day at 105.92.
The GBP/USD pair attracted some dip-buying near the 1.1960 area on Monday and shot to a nearly three-week peak during the mid-European session. The pair was last seen trading around the 1.2065-1.2070 region, up over 0.50% for the day.
Friday's better-than-expected flash UK PMI prints reaffirmed market bets for a 50 bps rate hike by the Bank of England in August and continued acting as a tailwind for the British pound. On the other hand, a positive turnaround in the global risk sentiment - as depicted by a strong intraday rally in the equity markets - weighed on the safe-haven US dollar. In fact, the USD Index languished near its lowest level since July 5 touched on Friday, which, in turn, was seen as another factor that provided a goodish lift to the GBP/USD pair.
"It is with sadness that I am resigning as Housing Minister," Conservative MP for Pudsey Stuart Andrew announced via Twitter on Wednesday.
Meanwhile, Sajid Javid, former British Health Minister who quit in protest at Prime Minister Boris Johnson on Tuesday, told Parliament that it had become increasingly difficult to be in PM's team.
"It's not fair on conservative voters who expect better standards," Javid added. "At some point, we have to conclude that enough is enough. That point is now."
GBP/USD stays under heavy bearish pressure on Wednesday and was last seen trading at its weakest level since March 2020 at 1.1877, losing 0.67% on a daily basis.
📕 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.
Comment on Gold on 05/04/2022:After a tough start to the year, the AUD has rebounded convincingly to become one of the leaders in the G10. Economists at ANZ Bank expect the AUD/USD to move sideways in the near-term before staging a leg higher to the 0.75 level by year-end.
“The terms of trade improvement and a strong domestic economy are likely to keep the AUD well supported, though a challenging risk environment will keep rallies capped.”
“We believe the aussie will be mostly rangebound through the middle part of 2022 before a global growth recovery helps propel a move back to 0.75 by year-end.”
EURUSD closed the week at 1.16425. The pair reached the 1.1670 mark twice but declined both times from the strength of the current resistance level.
GBPUSD ended Friday at 1.37551. The pair traded modestly within a week, having risen 2.4% in the previous fortnight.
USDCAD closed the week at 1.23583, the same spot as the Friday ago. The oil stepped from its three-year high, giving the Canadian dollar space to consolidate.
BULLISH TRIGGERS
The U.S. dollar eased after Powell's comment, enabling EURUSD to advance near the 1.1650 level. However, the eurozone inflation expectations are at their highest levels in years. This puts additional pressure on the ECB and its monetary policy agenda meeting this week.
GBPUSD changed insignificantly. The British pound fluctuated due to the country's various economic releases but remained bullish by late Friday. Early in November, the BoE is expected to be the first major central bank to lift its interest rate.
BEARISH TRIGGERS
The USDCAD finished the week flat, slowing its monthly-long decline. The BoC interest rate decision meeting this week might propose another round of tapering. Two days later, Canada will release its GDP data. The central bank's choice of tight or dovish tone of voice, followed by the solid or weak data, will determine USDCAD behavior this week.
