Bailey speech: Bank rate may have to go up further

 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 75 basis points to 3%.

Key takeaways

"If we do not act forcefully now, it will be tougher later."

"Bank rate may have to go up further."

"We think bank rate will have to up by less than priced in markets."

"We are increasing bank rate because inflation is too high."

"Low and stable inflation is the bedrock of a stable economy."

About Andrew Bailey (via bankofengland.co.uk)

"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."

Malaysia: BNM could pause its hiking cycle in November – UOB

 Bank Negara Malaysia (BNM) could make an impasse in its tightening cycle at the November 3 event, suggests Lee Sue Ann, an Economist at UOB Group.

Key Quotes

“Given that inflation expectations are anchored to official targets and risks to the domestic growth outlook are tilting to the downside, we believe BNM will tread more cautiously”.

“We expect BNM to take an intermittent pause to assess the effect of its cumulative 75bps rate hikes to date, domestic policy outcomes, as well as higher external risks and weaker global outlook. As such, we expect the OPR to be left unchanged at 2.50% at the coming Nov meeting”.

UK PM Truss Spokesman: Working in preparation for a medium-term fiscal plan on October 31

 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.”

Market reaction

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 Price Forecast: XAU/USD to slide below the $1,620 support – ANZ

 Gold prices are likely to fall back to the previous low of $1,620 as bearish momentum is set to continue, economists at ANZ Bank report.

Bearish trend to continue

“Strong US job reports, and higher inflation led gold to resume its downtrend, and it is likely to fall below $1,600.”

“Immediate support lies at $1,620, the previous low. A break of this support should see prices touching the lower bound of the downward channel, which will be below $1,600.

“Immediate resistance is at $1,715, and an upward break of this level would see the next resistance point at $1,800, which will also mark a reversal of downtrend.”

USD Index Price Analysis: Extra gains could challenge the 2022 peak

 

• DXY meets some decent hurdle around the 113.60 area.
• Further north emerges the YTD high near 114.80.
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DXY’s multi-session strong advance has faltered around the 113.60 region on Wednesday.

If bulls push harder and the index surpasses 114.00, then the next target of note should turn up at the 2022 high at 114.78 (September 28) prior to the round level at 115.00.

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 7-month support line near 107.80.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 103.10.

AUD/USD to fall towards 0.60 after RBA’s dovish decision – MUFG

 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.

RBA policy update reinforces downside risks

“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 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.

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.

S&P 500 Index: Next potential supports at 3500/3460 – SocGen

 S&P 500 has resumed its downtrend. Analysts at Société Générale note that the technical outlook denotes prevalence in downward momentum.

Failure to reclaim 3900 can lead to continuation in decline

“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.”

AUD/USD descends to its lowest level since May 2020 amid blowout USD rally to 20-year top

 

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• AUD/USD drops to its lowest level since May 2020 amid broad-based USD strength.
• Bets for more aggressive Fed rate hikes, elevated US bond yields underpin the buck.
• The risk-off mood further benefits the USD and weighs on the risk-sensitive aussie.
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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.

USD/CNH: Next on the upside comes 7.0500 – UOB

 Quek Ser Leang at UOB Group’s Global Economics & Markets Research suggests USD/CNH could retest 7.1000 once 7.0500 is cleared.

Key Quotes

“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.”

EUR/GBP to extend its advance once key resistance at 0.8720 is reclaimed – SocGen

 EUR/GBP picks up bids to reverse Friday’s losses. Economists at Société Générale expect the pair to extend its race higher on a break past 0.8720.

Short-term support aligns at 0.8560

“EUR/GBP recently gave a break above the descending trend line drawn since 2020 denoting potential upside. This is also highlighted by weekly MACD which is now firmly anchored within positive territory and above its trigger.” 

“The pair is close to key graphical resistance of 0.8720. Once this is reclaimed, the up move is likely to extend towards projections of 0.8860 and perhaps even towards 0.8980/0.9010.” 

EUR/USD Price Analysis: Upside remains capped by 1.0100

 

• EUR/USD fades the initial bull run to 0.9985/90.
• The resumption of the selling pressure could retest the YTD low.

EUR/USD climbed to the proximity of 0.9990 earlier in the session, just to deflate afterwards and return to the 0.9930 region.

Against that, the inability of the pair to regain serious upside traction should keep the door to further retracement open in the near term. Extra losses face the immediate target at the 2022 low at 0.9877 (September 5) seconded by 0.9859 (December 2002 low) and then 0.9685 (October 2002 low).

The continuation of the downtrend remains in the pipeline, as the daily RSI around 36 still allows for some weakness prior to reach the oversold territory.

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0780.

UK: Liz Truss wins contest to become the next UK Prime Minister

 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.

Additional takeaways

"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."

Market reaction

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.

When is the Canadian monthly jobs report and how could it affect USD/CAD?

 

Canadian employment details overview

Statistics Canada is scheduled to publish the monthly employment details for July later this Friday at 12:30 GMT. The Canadian economy is anticipated to have added 20K jobs during the reported month, up sharply from the 43.2K decline reported in June. Meanwhile, the unemployment rate is expected to edge higher to 5.0% in July from the 4.9% previous.

Analysts at TD Securities (TDS) are more optimistic about the report and explain: “We look for job growth of 38k in July, driven by a partial rebound for trade services and natural resources after their sharp decline in June. Full-time hiring should lead the increase, while stronger labour force participation should keep unemployment stable at 4.9%. We also expect to see wage growth firm to 6.0% y/y in July, although AHE (Average Hourly Earnings) should slow on a m/m basis.”

Bailey speech: Will not comment on Conservative leadership candidates' plans

 

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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%.

Key takeaways

"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."

About Andrew Bailey (via bankofengland.co.uk)

"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."

Fed's Bostic: Fed is going to have to do more with interest rates

  "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.

Additional takeaways

"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."

Market reaction

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.

📕 Comment on Gold on June 3, 2022:

 

📕 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.

EUR/USD eyes 2020 lows at 1.0637 as USD regains poise

 

 The latest candle on the four-hour chart closed below 1.0700. The Relative Strength Index (RSI) indicator on the same chart stays near 40 and the descending line coming from April 21 stays intact, highlighting EUR/USD's bearish bias in the near term. 

It's worth noting that EUR/USD will touch its weakest level since April 2017 with a drop below 1.0635. Sellers might see such a move as a profit-taking opportunity and trigger a correction in the pair. In that case, 1.0700 (psychological level) aligns as the next recovery target before 1.0730 (static level) and 1.0760 (static level).

On the downside, a daily close below 1.0640 is likely to open the door for additional losses toward 1.0600 (psychological level) and 1.0570 (static level from March 2017).

Ukrainian Negotiator: Hard to say when next stage of direct peace talks will occur

 

Ukrainian Negotiator Mykhailo Podolyak told Reuters on Tuesday that events in Mariupol have made the negotiation process with Russia "even more complicated" and said that it is hard to say when the next direct peace talks will be possible. Russia is "seriously betting" on the second stage of its "special operation", he continued, adding that Russia aims to strengthen its negotiation position through its offensive in eastern Ukraine. 

Podolyak's remarks come after the unofficial start of the second phase of Russia's invasion of Ukraine began on Monday, with the country now focussing its attacking efforts in the east. Ukrainian officials on Monday said that Russian forces tried to break through their defenses along the Donetsk, Luhansk and Kharkiv fronts.