• WTI grinds higher after an upbeat start to November.
• Monthly resistance line, five-week-old horizontal region challenge buyers.
• Convergence of 200-SMA, ascending trend line from late September appears a tough nut to crack for bears.
• Oscillators suggest further upside momentum towards the previous monthly top.

WTI crude oil price remains sidelined around $88.10 during Wednesday’s sluggish Asian session, mildly bid after posting the biggest daily gain in a week.

In doing so, the black gold buyers prepare to battle with the broad resistance region between $88.50 and $89.30, comprising a one-month-old descending trend line and a horizontal area comprising levels marked since October 06.

Following that, the quote’s run-up to the previous monthly peak of $92.63 appears imminent. However, the RSI (14) approaches the overbought territory and might challenge the oil buyers around then.

If the energy benchmark remains firmer past $92.65, the odds of witnessing a rally towards August month’s high near $97.30 and then to the $100.00 psychological magnet can’t be ruled out.

Alternatively, pullback moves remain elusive unless the quote stays beyond the $84.70 level representing a convergence of the 200-SMA and a five-week-old ascending trend line.

In a case where WTI successfully breaks the $84.70 support confluence, October’s low of around $81.30 and the $80.00 round figure will gain the market’s attention.

WTI: Four-hour chart

Trend: Limited upside expected

• AUD/USD remains sidelined around short-term key supports amid sluggish markets.
• Indecision over Fed’s move in December restricts the Aussie pair’s immediate moves.
• Hopes of easy covid restrictions in China and the already-priced 75 bps rate hike from Fed favor bulls.
• Australia Building Permits, US ADP Employment Change are extra catalysts to watch for clear directions.

AUD/USD treads water around 0.6400 as traders turn cautious ahead of the key Federal Open Market Committee (FOMC) meeting on early Wednesday. In addition to the pre-Fed anxiety, the mixed concerns surrounding China and the US also challenge the Aussie pair traders amid a sluggish Asian session.

That said, the recent positive US data increased hopes of a hawkish Fed move and challenged the market’s previous notion that the policymakers will signal slower rate lifts from December. However, the growing fears of recession and higher price pressure seem to challenge the Fed hawks and the AUD/USD bears too.

That said, the US JOLTS Job Openings increased to 10.717M in September versus 10.0M forecast and upwardly revised 10.28M previous readings. Further, US ISM Manufacturing PMI increased to 50.2 in October versus 50.0 market forecasts and 50.9 prior. On the same line, final readings of the US S&P Global Manufacturing PMI for October rose past 49.9 initial forecasts to 50.4 but stayed below 52.0 readings for the previous month.

On the other hand, the Reserve Bank of Australia’s (RBA) readiness to offer more rate hikes, despite announcing the second 25 basis points (bps) of a lift to the benchmark rate the previous day, favor the AUD/USD buyers. “Rates have been increased by a large amount in a very short period of time,” Reserve Bank of Australia (RBA) Governor Philip Lowe said in his scheduled appearance on Tuesday. The policymaker also added that the board has judged it appropriate to raise rates at a slower pace.

Elsewhere, hopes of easing covid restrictions in China and recently firmer China Caixin Manufacturing PMI for October, despite posting the third print below 50.00, might have previously helped the AUD/USD buyers.

While portraying the mood, the yields remain inactive around 4.05%, following an upbeat start to November, whereas the S&P 500 Futures print mild gains even as Wall Street closed in the red.

That said, the AUD/USD pair traders should watch the risk catalysts and Australia’s Building Permits for September for fresh impulse amid the lackluster markets. Also important will be the October month US ADP Employment Change, as it is an early signal to Friday’s US Nonfarm Payrolls. However, major attention should be given to how well the Fed policymakers could convey a brake to the aggressive rate hikes.

Technical analysis

Tuesday’s daily candle joins the AUD/USD pair’s refrain from declining below the 10-DMA support near .6390 to keep buyers hopeful. However, a downward-sloping resistance line from early August, close to 0.6480 by the press time, challenges the quote’s upside momentum.

• The USD got bolstered by upbeat US economic data, erasing EURUSD's earlier gains.
• European Central Bank (ECB) officials expressed the need for higher rates, putting a lid on EUR losses.
• Short term, the EURUSD is downward biased, eyeing a break of 0.9800 to challenge 0.9700.

The Euro gave back some of its earlier gains vs. the US Dollar and finished the day almost flat, though registering a minimal loss of 0.04%. Goodish economic data out of the United States, and US Treasury yields recovering from the daily lows, below 4%, and the Federal Reserve November meeting, were some of several reasons that undermined the EUR. The EURUSD is trading at 0.9874, down by 0.02%.

Manufacturing activity in the United States expanded though at a slower level, underpinned the USD to the detriment of the EUR

On Tuesday, Wall Street finished with decent losses amidst data revealing that the United States economy remains at expansionary territory. The Institute for Supply Management (ISM) PMI for October showed that manufacturing activity remained resilient at 50.2, beating estimates of 50, but lower than the September report. Echoing some of the same results as the S&P Global Manufacturing PMI for the same period was a prelude for the ISM, rising to 50.4, exceeding estimates and the previous month's data.

The EURUSD tumbled on the S&P Global PMI headline, from around 0.9930s toward 0.9860s, and since the release of the ISM PMI, has hovered around the 0.9870s area.

In the meantime, the US labor market, widely mentioned by the Federal Reserve in its monetary policy statement, remains tight as the September JOLTS report, revealed by the US Labor Department, reported that job openings, augmented by 10.717 million, above the 10 million forecast, and smashed August’s 10.28 million.

European Central Bank (ECB) policymakers added that rates hikes would continue

Aside from this, European Central Bank (ECB) policymakers, led by its President Christine Lagarde, said that rates in the Euro area should peak at a level that “ensures” that inflation returns to the 2% target over the medium term. Lagarde’s added that “the destination is clear, and we haven’t reached it yet,” said in an interview.

Lagarde’s added that inflation remains too high throughout the Eurozone, following Monday’s report of inflation around 10.7%, and acknowledged that the likelihood of a recession has increased.

Late in the New York session, more ECB officials, led by Joachim Nagel and Pablo Hernandez de Cos, agreed that inflation is persistent and that the ECB still has “a long way to go.”

Traders get ready for the Federal Reserve (Fed)

Elsewhere, EURUSD traders prepared for the Fed’s November meeting. Analysts expect the US central bank to hike rates by 75 bps, which would be a fourth of a kind as the Federal funds rate (FFR) will hit the 3.75-4% range. Even though the decision is important, due to the financial narrative speculation for a Federal Reserve pivot, the highlight of the day will be Jerome Powell's press conference, which would shed some light regarding a deceleration for the pace of interest-rate hikes, or grab a page of the ECB’s President Lagarde’s book, and probably go to the “meeting-by-meeting” decisions.

EURUSD Price Analysis: Technical outlook

The EURUSD hourly chart confirms the pair as neutral-to-downward biased. Even though the EUR jumped toward the 20-hour Exponential Moving Average (EMA) at 0.9907, on a headline of the US President Biden endorsing a Fed pivot. However, later it was corrected as Biden endorsed the Fed tightening monetary policy in 2022, After the headline, the EURUSD reversed its uptrend and plunged toward its daily low at 0.9853.

The Relative Strength Index (RSI) at bearish territory portrays sellers remaining in charge. Hence, the EURUSD's first support would be 0.9853. Break below will expose the 0.9800 figure, followed by the October 21 daily low at 0.9704.

• Gold price pares the biggest daily gains in eight days inside a bullish chart pattern.
• Pre-Fed anxiety and firmer yields weigh on the XAU/USD prices.
• Gold bears can cheer Fed’s 75 bps rate hike in absence of signals favoring a slower lift to rates in December.

Gold price (XAU/USD) remains sidelined around $1,648, mildly offered, after witnessing an upbeat start to the week, as traders await the all-important Federal Open Market Committee (FOMC) verdict on Wednesday.

While the US dollar’s struggle offered a good November start to gold, after a seven-month downtrend, the market’s anxiety ahead of the key Fed meeting and the US dollar’s recent pick-up appears to challenge the bulls of late.

That said, the US Dollar Index (DXY) grinds near 111.50, following an initial slump to 110.70, as firmer US data and a recovery in the Treasury yields recalled the greenback buyers.

The US JOLTS Job Openings increased to 10.717M in September versus the 10.0M forecast and upwardly revised 10.28M previous readings. Further, US ISM Manufacturing PMI increased to 50.2 in October versus 50.0 market forecasts and 50.9 prior. On the same line, final readings of the US S&P Global Manufacturing PMI for October rose past 49.9 initial forecasts to 50.4 but stayed below 52.0 readings for the previous month.

In addition to the firmer US data, the increasing hawkish Fed bets also weigh on the XAU/USD prices due to the metal’s inverse relationship with the US dollar. Recently, the CME’s FedWatch Tool printed an 85% chance of the Fed’s 75 bps rate hike in today’s monetary policy meeting.

Against this backdrop, Wall Street closed in the red despite a firmer opening while the US Treasury yields are firmer around 4.05%, suggesting the risk-off mood, which in turn probed the XAU/USD bulls.

It’s worth noting, however, that the indecision over the policymakers’ verdict on the rate increases from December appears the key catalyst to watch for the metal traders as the 75 bps rate lift is already priced-in and makes no major difference. As a result, Fed Chair Powell’s press conference and the US central bank’s ‘dot-plot’ will be crucial to watch for fresh impulse.

Also read: Fed November Preview: Is it time for a dovish signal?

Technical analysis

Gold price portrays a one-week-old falling wedge bullish formation on the four-hour chart. The hopes of an upside move also take clues from the recently bullish MACD signals and firmer RSI (14).

However, the 100-EMA and the 200-EMA, respectively around $1,655 and $1,668, act as additional upside filters to watch for the XAU/USD bulls before aiming the theoretical target of $1,700.

Meanwhile, the stated wedge’s lower line, around $1,630 by the press time, restricts the metal’s immediate downside.

Following that, the lows marked in October and September, close to $1,617 and $1,615 in that order, will challenge the gold bears ahead of the 61.8% Fibonacci Expansion (FE) of October 04-26 moves, near $1,605, quickly followed by the $1,600 threshold.

Gold: Four-hour chart

Trend: Limited upside expected

• GBP/USD remains depressed inside a one-week-old bearish chart pattern.
• Downbeat MACD signals also keep sellers hopeful even if 50-SMA tests intraday bears.
• Convergence of 100-SMA, five-week-long ascending trend line appears a tough nut to crack for sellers.

GBP/USD fades the month-start optimism as it slides to 1.1480 during Wednesday’s Asian session while staying inside a one-week-long descending trend channel.

That said, the Cable pair’s latest losses also take clues from the bearish MACD signals and keep the sellers hopeful.

However, the 50-SMA level surrounding 1.1460 restricts the quote’s immediate downside ahead of the stated channel’s lower line, close to 1.1430 at the latest.

Even if the GBP/USD bears manage to conquer the 1.1430 support level, the 1.1335-30 support confluence comprising the 100-SMA and an upward-sloping trend line from late September will be a tough nut to crack for them. Following that, the monthly support line near 1.1200 will be the last defense for the pair buyers.

Alternatively, recovery moves need to defy the bearish chart pattern to please the bulls. In doing so, the quote needs to cross the 1.1575 hurdle.

Even so, October’s peak around 1.1645 will hold the gate for the GBP/USD pair’s run-up towards the September monthly high of 1.1738.

Overall, GBP/USD is likely to decline further but the road to the south appears bumpy.

GBP/USD: Four-hour chart

Trend: Limited downside expected

Bank of Canada (BoC) Governor Tiff Macklem said, per Reuters, “We expect our policy rate will need to rise further.” It’s worth noting that the policymaker spoke before the standing senate committee on banking, trade and the economy amid early Wednesday in Asia.

Additional comments

USD/CAD grinds higher

USD/CAD holds onto the previous day’s recovery above 1.3600 following the comments.

Also read: USD/CAD Price Analysis: Bulls meet a firm daily resistance

• NZD/USD fails to reverse pullback from six-week high, mildly offered of late.
• New Zealand’s Employment Change increased, Unemployment Rate stayed static in Q3.
• Market sentiment sours ahead of Fed, firmer US data recall DXY buyers.
• DXY bulls need more than Fed’s 75 bps rate hike to keep the reins.

NZD/USD prints mild losses around 0.5830, failing to reverse the late Tuesday’s pullback from a six-week high after an initial uptick post-New Zealand’s (NZ) third quarter (Q3) employment data released on early Wednesday. In addition to the mixed job numbers, the market’s anxiety ahead of the all-important Federal Open Market Committee (FOMC) meeting also challenges the Kiwi pair.

New Zealand's Q3 Unemployment Rate remained unchanged at 3.3% and the Employment Change rose to 1.3% versus 3.2% and 0.5% respective market forecasts. Following the data, Reserve Bank of New Zealand Deputy Governor Christian Hawkesby said, “We have a very hot labor market, need to ensure that demand cools.” While speaking at the RBNZ's Financial Stability Report (FSR), the policymaker also stated that (RBNZ) will consider tightening policy faster or slower at MPS while seeing the balance of risks on global economy to the downside.

Also read: New Zealand jobs data puts a marginal bid into NZD

Earlier in the day, GDT Price Index slumped to -3.9% versus 0.6% expected and -4.6% prior.

On the other hand, the US data relating to the October month activities and job openings came in firmer. That said, the US JOLTS Job Openings increased to 10.717M in September versus 10.0M forecast and upwardly revised 10.28M previous readings. Further, US ISM Manufacturing PMI increased to 50.2 in October versus 50.0 market forecasts and 50.9 prior. On the same line, final readings of the US S&P Global Manufacturing PMI for October rose past 49.9 initial forecasts to 50.4 but stayed below 52.0 readings for the previous month.

It should be noted, however, that hopes of easing covid restrictions in China and recently firmer China Caixin Manufacturing PMI for October, despite posting the third print below 50.00, might have previously helped the NZD/USD buyers.

Amid these plays, Wall Street closed in the red despite a firmer opening while the US Treasury yields are firmer around 4.05%, suggesting the risk-off mood, which in turn probed the NZD/USD bulls near the multi-day high.

Looking forward, comments from RBNZ Governor Adrian Orr could entertain NZD/USD traders ahead of the key Fed verdict. In that, the US central bank’s readiness for a 0.75% rate hike is already priced-in and hence won’t please the US dollar much. However, the important part will be how well the Fed policymakers could convey a brake to the aggressive rate hikes.

Technical analysis

A daily closing beyond the 50-DMA hurdle surrounding 0.5845 appears necessary for the NZD/USD buyers to keep the reins.

The New Zealand Employment Change that is released by Statistics New Zealand as a measure of the change in the number of employed people in New Zealand has put  a slight bid into the kiwi, with the headline data beating expectations:

New Zealand's Unemployment Rate remained unchanged at 3.3 % in the third quarter. Economists polled by Reuters had forecast an unemployment rate of 3.2 % and employment growth of 0.5 %.

• Unemployment rate 3.3 % (Reuters poll 3.2 %)
• Third quarter jobs growth +1.3 % QoQ (Reuters poll +0.5 %)
• Participation rate 71.7 % (Reuters poll 71.0 %)

    NZD/USD has risen from a low of 0.5835 to a session high of 0.5846.

Why it matters to traders?

Statistics New Zealand releases employment data on a quarterly basis. The statistics shed a light on New Zealand’s labour market, including unemployment and employment rates, demand for labour and changes in wages and salaries. These employment indicators tend to have an impact on the country’s inflation and the Reserve Bank of New Zealand’s (RBNZ) interest rate decision, eventually affecting the NZD. A better-than-expected print could turn out to be NZD bullish.

• The EUR/JPY remains intact, but the divergence between price action/RSI might open the door for a pullback.
• Also, the EUR/JPY daily chart shows price action meandering within a rising wedge, which suggests the Euro might weaken vs. the Japanes Yen.

The EUR/JPY extends to two-day of losses amidst a risk-off impulse as witnessed by Wall Street’s finishing with losses. Meanwhile, as the Asian Pacific session begins, the EUR/JPY is trading at 146.42, registering minuscule gains of 0.04%.

EUR/JPY Price Analysis: Technical outlook

While the EUR/JPY retreated from weekly highs around 147.75, as shown by the daily chart, the uptrend remains intact – for now. However, the emergence of a rising wedge, lays the ground for a pullback, at least to the 20-day Exponential Moving Average (EMA) at 145.21, ahead of critical support reached on October 24, following the Bank of Japan (BoJ) FX intervention at 143.72, shy of the 144.00 figure.

The Relative Strength Index (RSI) has reached a successive series of lower highs, contrarily to price action. So two technical indicators namely the rising wedge and divergence between the EUR/JPY price action and RSI, suggest that sellers are gathering momentum.

EUR/JPY Key Technical Levels

NZD/USD is NZD/USD is under pressure mid-week after reaching a high through 0.59 the figure. The US dollar was in recovery despite yesterday’s JOLTS data that suggested the US labour market has a way to go before it’s no longer adding significant inflation pressure, as analysts at ANZ Bank explained. 

The analysts argued that ''positioning ahead of the FOMC decision tomorrow is also at play, and suggests moves in the Kiwi following today’s NZ labour market data may be short-lived. But that’s not to say these data doesn’t have the potential to rattle a few cages when it comes to RBNZ expectations.''

''The hurdle for the labour market not to look inflationary is extremely high, but the hurdle to beat the RBNZ’s forecast (particularly for wage growth) isn’t what we’d call low. These data can be quite volatile though, so we’re not counting any chickens yet.''

NZD/USD technical analysis

As for the technical, the price is climbing a daily support line as follows:

The hourly picture shows the price balanced on a key hourly support structure:

A break here opens risk to the trendline while a break higher will leave the bulls in control ahead of the Fed with eyes on the 0.59 figure again.

• Silver price rallies more than 2.50% courtesy of a flat US Dollar and unchanged US Treasury yields.
• A risk-off impulse acted as a tailwind for XAG, albeit goodish US economic data underpinned the USD.
• XAG/USD traders brace for the November Federal Reserve’s meeting, eyeing Jerome Powell’s press conference, looking for a Fed pivot.

Silver price snaps two days of losses and climbs above the 20 and the 100-day Exponential Moving Averages (EMAs) amidst a flat US Dollar while falling US Treasury yields, particularly the 10-year rate, is almost unchanged at 4.046%. Hence the XAG/USD is trading at $19.60, up by 2.63%.

XAG/USD climbs steadily and holds to gains, despite goodish US data

Wall Street trimmed some of its earlier losses, though it closed in the red. US economic data reinforced the need for further Federal Reserve tightening as manufacturing activity continues to expand at the brink of entering recessionary territory, which could pressure Jerome Powell and Co. to decelerate their pace of interest-rate hikes.

The US Institute for Supply Management (ISM) Manufacturing PMI for October was better than expected at 50.2 but lower than September’s reading, while the price index showed that costs fell to more than a two-year low. Earlier, the S&P Global Manufacturing PMI for the same period was a prelude for the ISM’s one, at 50.4, above estimates and the previous month’s number.

Meanwhile, the JOLTS report, revealed by the US Labor Department, reported that job openings jumped by 10.717 million, above the 10 million estimates, and smashed August’s 10.28 million.

Once the reports crossed newswires, the white metal retreated from three-week highs of $20.02 to just above the 100-day EMA at $19.50, which was difficult support to hurdle.

That said, XAG/USD traders brace for the Federal Reserve Open Market Committee (FOMC) meeting. Most of the street’s analysts expect a 75 bps rate hike, but they would scrutinize each word of the Fed Chairman Jerome Powell to assess whether there’s a Fed pivot or the December’s meeting would be “live,” meaning that there would not be any forward guidance.

Before the Fed’s decision, the US calendar will reveal the ADP Employment Change report.

XAG/USD Price Analysis: Technical outlook

From a daily chart perspective, XAG/USD is neutral-to-downward biased unless silver buyers reclaim October’s high of $21.23. Break above the latter will expose essential resistance levels, like the 200-day EMA at $21.54, which, once cleared, could send XAG/USD rallying to June high at $21.92. On the other hand, XAG/USD's first support would be the 100-day EMA at $19.50, followed by the 20-day EMA at $19.28, ahead of the 50-day EMA at $19.10.

Reuters reported that the European Central Bank has a long way to go before it is done with interest rate hikes and it should also start reducing its oversized holding of government debt at the start of next year, Bundesbank President Joachim Nagel told a German newspaper.

"We should start shrinking our bond portfolio at the beginning of next year, for example by allowing existing bonds to expire in a market friendly way," Frankfurter Allgemeine Zeitung quoted Nagel as saying on Tuesday in an interview.

Nagel, asked about future rate hikes, also said: "There's still a long way to go.

"I am convinced that this is not the end of the rate hikes."

Meanwhile, the US dollar index which measures the greenback against six rivals, including the euro, was slightly lower at 111.49 and the euro traded flat at 0.9870. 

• AUD/USD bears stay on top as the price meets key support,
• The bears eye a break to test critical structure on the downside. 

AUD/USD is under pressure despite the expectation that the Federal Reserve will signal a slower pace of tightening at its upcoming meeting to assess the impact of its rate hikes on the economy. Nevertheless, investors widely expect the Fed this week to raise its benchmark overnight interest rate by 75 basis points (bps) to a range of 3.75% to 4.00%, the fourth such increase in a row. the following illustrates the technical picture in AUD/USD heading into the meeting. 

AUD/USD H1 chart

The price is accumulated on the backside of the trend and is vulnerable to a move higher should the support structure hold up over the course of the next day. On a break of the said support area, the bears will be back in control and will be looking for a fast move-in to test the next layer of support on the way to 0.63 the figure. 

AUD/USD daily chart

On the daily chart, the price has dropped heavily into the demand area and there are prospects of a downside continuation as we head into the Federal Reserve in the coming hours while on the backside of the daily trendline. 

• Gold finds support at $1,640 and remains positive on the day.
• Dollar's bullish reaction to US data has capped gold's recovery.
• Hopes of further Fed hawkishness have weighed on gold prices.

Gold futures reversal from session highs at $1,657 seen during the US morning trade has been contained at $1,640 before picking up to $1,650 area at the time of writing. On the daily chart, the precious metal remains 0.8% up, regaining lost ground after a three-day reversal.

US dollar’s rebound has capped gold’s recovery

The yellow metal went through a solid recovery during the Asian and European sessions, appreciating from $1,630 to session highs at $1,657, buoyed by the positive risk sentiment that sent the US dollar tumbling.

The market mood changed radically after the release of a series of bright US macroeconomic figures, that bolstered confidence in the US economic momentum, and cleared the path for further aggressive tightening by the Federal Reserve.

Manufacturing activity has been a positive surprise in October, with the US S&P and the ISM PMIs registering better than expected results. Beyond that, the JOLTS job openings have shown a solid increase in vacancies despite the Federal Reserve’s efforts to cool a historically tight labor market, which shows 1,9 jobs for every worker.

These figures have eased fears of an economic slowdown triggered by disappointing data released previously and refute the theory that the Federal Reserve might start to signal a slower monetary tightening in the months ahead.

Technical levels to watch

• Pound's reversal from the 1.1565 high finds support at 1.1450.
• Better than expected US data has boosted the USD.
• GBP/USD maintains its positive bias while above 1.1440 – UOB.

Sterling’s reversal from session highs at 1.1565 witnessed on Tuesday’s morning US session has found buyers at 1.1450, allowing the pair to return to levels near 1.1500. On the daily chart, the cable remains moderately bid, picking up after a 0.9% reversal on Monday.

Hopes of a hawkish Fed have crushed the pound

The positive market sentiment witnessed during the Asian and European sessions, which pushed the GBP to the mid-1. 1500 range, vanished during the North American session. A series of upbeat US macroeconomic indicators challenged the theory of a softer Fed tightening in the months ahead and sent the US dollar surging.

Manufacturing activity beat expectations in October, with the US S&P and the ISM PMI’s posting better than expected results, while the JOLTS job openings confirmed the tight US labor market conditions. These figures have eased concerns about the possibility of a softer economic scenario that would force the US central bank to adopt a more accommodative stance.

GBP/USD maintains a positive outlook while above 1.1440 – UOB

FX analysts at UOB see the pair biased higher in the near term, while above 1.1440: “We turned positive on GBP early last week. In our latest narrative from last Thursday (27 Oct, spot at 1.1630), we indicated that GBP is still strong and we noted that the next level to monitor is at 1.1760 (…) However, we continue to hold a positive GBP view for now and only a break of 1.1440 (no change in ‘strong support’ level from last Friday) would indicate that GBP is not advancing further."

Technical levels to watch

What you need to take care of on Wednesday, November 2:

Easing US Treasury yields have helped high-yielding assets to advance early on Tuesday, with the American dollar edging lower throughout the first half of the day. The yield on the 10-year Treasury note pulled down to 3.92%, and the USD tends to slide when it breaks below the 4% threshold. The latter recovered following Wall Street’s opening, providing support to the greenback, which reached fresh intraday highs across the FX board.

Further helping the mood to improve at the beginning of the day, market talks made the round about China looking to relax its zero-covid policy. The rumour backed Asian markets, despite no official word on the matter.

The dollar benefited from upbeat US data. The October ISM Manufacturing PMI came in better than expected, printing at 50.2. The employment sub-component, however, slid to 50, while that measuring prices paid contracted to 46.6, as manufacturers noted “a decline in the prices for oil, metals and other commodities used for production.” Also, the JOLTS report showed that the number of job openings increased to 10.7 million on the last business day of September, beating expectations.

The greenback changed course, and Wall Street turned red, while US Treasury yields settled near their intraday highs.

Major pairs finished the day little changed. The EUR/USD pair settled for a second consecutive day a handful of pips below the 0.9900 mark, while GBP/USD trades around 1.1470 at the end of the American session. AUD/USD trades just ahead of 0.6400 while USD/CAD seesaws around 1.3620. Finally, the USD/CHF hovers around parity, while USD/JPY trades around 148.20.

Spot gold holds on to intraday gains, now trading at $1,649 a troy ounce, while crude oil prices also advanced. WTI trades at $88.50 a barrel.

Market players gear up for the US Federal Reserve, as the US central bank will announce its monetary policy in the American afternoon. The central bank is widely anticipated to hike rates by 75 bps, sending the main rate to 3.75%-4%. Policymakers are also expected to pave the way for a slower pace of quantitative tightening from now on, although the latest employment-related figures raised doubts on whether the Fed has room for a couple more aggressive rate hikes.

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: The calm before the storm

• USD/CAD bears are looking to the daily trendline.
• Bulls attempt to break out of the channel.

USD/CAD was adding to its October gains while the price of oil climbed and hopes that central banks are nearing the end of their tightening cycles helped underpin investor sentiment. Additionally,  the Bank of Canada has already downshifted the pace of its tightening at an interest rate decision last week while the Fed is expected to hike interest rates by 75 basis points when its meeting concludes. Technically, the following illustrates the price breaking a key channel resistance:

USD/CAD H1 charts

USD/CAD daily chart

Meanwhile, however, there are scopes of a downside move into the broader trendline as the above chart illustrates. We have seen significant pull back already and resistance is serving a purpose, so far.

• WTI's rebound from $85.30  stalls below $89.00.
• Crude prices' recovery loses strength with the US dollar surging. 
• Bright US data dampen hopes of a Fed pivot in December.

The solid recovery in oil prices witnessed during Tuesday’s Asian And European sessions, has lost traction during the US session, weighed by a sudden USD rally. WTI futures have been capped at $89.40 after having bounced up from $85.30 lows on Monday.

The US dollar jumps on bright US data

A set of better-than-expected US macroeconomic figures released earlier on Tuesday have boosted confidence in the strength of the US economy, leaving clearing the path for the Fed to continue with its aggressive tightening path. This has sent the US dollar higher, thus weighing on crude prices.

US manufacturing activity has posted a positive surprise. The ISM PMI slowed down to 50.2 in October, better than the 50 reading expected and the S&P PMI confirmed the good news. October's 50.4 reading reveals that sector activity expanded, against the expectations of a moderate contraction, at 49.9.

Beyond that, the JOLTS job openings have shown an increase to 10.7 million vacancies in September, up from 10.2 million in August, instead of the decline to 10 million anticipated by the experts. These figures demonstrate the tight conditions of the US labor market, despite the Fed’s efforts to cool it off in order to curb inflation.

Previously, Oil prices had rallied more than 3% in a risk-on session amid growing speculation pointing out to a Fed pivot in December. The federal funds futures market had priced in a 57% chance of a 0.50% rate hike in December, which sent the USD tumbling across the board during the Asian and European sessions.

Technical levels to watch

• The GBP/JPY plunges from YTD highs above 172.00 as traders brace for the Federal Reserve’s monetary policy decision.
• From a technical perspective, the GBP/JPY remains upward biased, but a downward correction looms.
• Short term, the GBP/JPY Is neutral-to-downward biased eyeing a break below the 200-EMA at 169.47

The GBP/JPY retraces from YTD highs at 172.13 and tumbles for the second-straight day due to a risk-off impulse, but also traders booking profits in the GBP/USD ahead of the Federal Reserve’s policy decision on Wednesday. Hence, the GBP/JPY is trading at 170.09, below its opening price by 0.19%.

GBP/JPY Price Analysis: Technical outlook

From a daily chart perspective, the GBP/JPY remains upward biased, even though a rising wedge is forming, nearby meaning that GBP/JPY risks are skewed to the downside. If the bearish rising wedge is confirmed, a test of the 200-day Exponential Moving Average (EMA) is on the cards at around 161.58. Otherwise, the GBP/JPY would consolidate in the 169.00-172.00 range, awaiting a fresh catalyst.

The Relative Strength Index (RSI) at bullish territory further confirms the latter. Nevertheless, market sentiment deterioration or if the Bank of England’s  (BoE) monetary policy decision disappoints investors, the GBP/JPY might extend its losses below 170.00.

The GBP/JPY hourly chart depicts a neutral-to-bearish biased pair. The EMAs lie above the spot price, except for the 200-EMA at 169.47, the last piece of the domino keeping the GBP/JPY from sliding further. The RSI is at bearish territory, with a downward slope, warranting that sellers are in charge.

Hence, the GBP/JP First support would be the 200-EMA at 169.47, the S2 daily pivot at 169.15, and the 169.00 figure, the October 25 low at 167.83, and the October 24 daily low at 167.58.

GBP/JPY Key Technical Levels

• Euro's recovery attempt from 0.8570 stalls right above 0.8600
• The pair treads water ahead of the BoE's monetary policy decision.
• EUR/GBP is hovering above key support at 0.8570.

The euro has remained moving sideways against the British pound on Tuesday, as Monday’s rebound from 0.8570 lows remains limited below 0.8625. From a wider perspective, the pair remains trapped within a negative channel from late September highs above 0.9000.

Sideways consolidation ahead of the BoE’s meeting

The negative pressure on the euro witnessed last week seems to have eased, which allowed the pair to trim losses on Monday. The investors are more cautious, awaiting the outcome of the Bank of England’s monetary policy meeting, due on Thursday.

The Bank of England is widely expected to hike rates by 0.75%. The market, however, contemplates the possibility of some hints to less aggressive tightening in the months ahead, as the bleak economic prospects will force them to lift their feet off the pedal to avoid accelerating the economic downtrend.

On the political front, the market enthusiasm on the news of the appointment of Rishi Sunak as British Prime minister has ebbed. The pound has lost momentum, following a 5-day rally, with the focus shifting to the huge challenges ahead following a historical market turmoil amid a deteriorating economic outlook and with a divided Tory party.

EUR/GBP: Hovering above important support at 0.8570

From a technical point of view, the pair has found support at a key 0.8570 area (September 7 and October 17 and 28 lows). Below here next downside targets would be the downward trendline support, from mid-November lows, which meets the 200-day SMA at the 0.8500 area.

On the upside, the pair should extend past session highs at 0.8625 to target the 50-day SMA, at 0.8690 to aim for the October 21 high at 0.8780.

Technical levels to watch

• EUR/USD sits back into neutral territory as markets get set for the Fed.
• Traders are on look out for a pivot in the chair's tone.

EUR/USD is sitting tight in mas investors await the outcome of the Federal Reserve this week while investors fret over a potential slowdown in the pace of interest-rate hikes from December.

Analysts at TD Securities look for the FOMC to deliver another 75bp rate hike and say the decision will bring policy to a level at which the Committee might feel more comfortable in shifting to a steadier hiking pace. ''The exact timing, however, will highly depend on the CPI data before the Dec meeting. Powell might offer some hints in the post-meeting presser.' 

Looking forward, for December, the fed funds futures market has priced in a 57% probability of a 50-bps increase amid suggestions from Fed officials of potentially slowing down the tightening pace. That was down, however, from roughly a 70% chance last Friday. ''Any dovish tone in Powell's testimony could bull steepen the curve. The tactical market is decently priced for a flexible Fed but can still extend. Absent any clues from Powell risks a pain trade. That could be limited given the USD's tighter correlation with easing priced into the curve vs terminal, however.''

The US dollar index has rallied more than 15% this year as the Fed has hiked rates hard, crushing other currencies and heaping pressure on the global economy. Investors have therefore taken cheer from speeches and interviews by some Fed officials that have suggested the central bank could do smaller hikes after Wednesday's meeting.

Meanwhile, the Institute for Supply Management (ISM) purchasing managers' index (PMI) shed 0.7 point to land at 50.2, remaining in expansion territory by the skin of its teeth. The dip in new orders was shallower and employment was unchanged. Markets were also reminded that global inflation remains stubbornly high on Monday when data showed euro zone prices surged by the most on record in the year through October.

EUR/USD technical analysis

The price has carved out an M-formation within the symmetrical triangle which leaves bias to the downside so long as the neckline of the M-formation holds over the coming sessions:

• The NZD clings to gains as one of the G8 currencies posting gains vs. the USD.
• Data from the United States underpinned the US Dollar, as manufacturing activity is a tough nut to crack.
• New Zealand’s Building Permits surprisingly rose after August’s fall.

The NZD/USD rises in the North American session but remains off the daily highs above 0.5900, as a report showed that manufacturing activity in the US, albeit slowing, the economy is at expansion, a headwind for the NZD. Nevertheless, a possible review of China’s Covid-19 restrictions and an RBA rate hike kept the safe-haven USD in check. The NZD/USD is trading at 0.5839, above its opening price by almost 0.50%.

Sentiment remains negative, as shown by US equities trading with losses. As traders brace for the US Federal Reserve November monetary policy decision, a tranche of US economic data keeps the greenback climbing.

Data-wise, the Institute for Supply Management reported that the manufacturing PMI for October grew by 50.2, above 50 estimates and lower than September’s 50.9. Earlier, S&P Global issued the PMI for the US, which also expanded at a 50.4 pace, above calculations of 49.9, meaning that the US economy is about to hit a recession.

At the same time as the release of ISM data, the Department of Labor reported that job openings increased. September JOLTS data showed vacancies increased by 10.717M above 10M estimates, smashing August’s 10.28M.

Given that US data crushed the forecasts, expectations for further Fed tightening augmented demand for the US Dollar, in part by US Treasury yields, namely the 10-year, jumping above the 4% threshold.

The NZD/USD pair dwindled from 0.5880 and reached a daily low at 0.5828 before retracing and hovering around the R1 daily pivot at 0.5840.

It should be noted that Reuters reported that the White House economic advisos Bernstein said that Biden endorsed the Fed pivot, which was perceived as a dovish signal, sending the NZD/USD towards t0.5870. But later, it was corrected, and the economic advisor to the White House meant that Biden endorsed the Fed pivot to tighten policy, so the NZD/USD erased those gains.

Elsewhere, New Zealand data reported during the Asian session helped the NZD to strengthen against the USD. Building Permits for September rose by 3.8% MoM vs. a 1.6% contraction in August, reported Statistics New Zealand. Furthermore, under review China’s Covid-19 restriction policy and the Reserve Bank of Australia’s (RBA) 0.25% rate hike gave an additional leg-up to the NZD/USD, rallying from 0.58010 to 0.5909.

What to watch

The New Zealand economic calendar would be busy, revealing the Reserve Bank of New Zealand (RBNZD) Financial Stability Report. Additionally, Employment data for Q3, namely Employment Chance, Labor Costs Index, participation Rate, and an RBNZ Press Conference, would be catalysts that can underpin the New Zealand Dollar.

On the US front, the calendar will feature the ADP Employment Change, a prelude for Friday’s Nonfarm Payrolls, alongside the Federal Reserve monetary policy decision and Jerome Powell press conference.

NZD/USD Key Technical Levels

• The pound gives away gains and dives to session lows at 1.1450.
• Bright US data dampens hopes of a Fed pivot in December.
• GBP/USD: Breach of 1.1440 will negate the positive bias – UOB.

The pound has lost nearly 100 pips in a matter of minutes, following the release of a set of positive US macroeconomic indicators. The pair has dropped from levels near 1.1550, giving away all the ground taken during Tuesday’s Asian and European trading sessions, to hit lows at 1.1455.

US data gives leeway for more aggressive Fed tightening

A series of better-than-expected macroeconomic releases have boosted confidence in the momentum of US economy, easing concerns of a potential slowdown triggered by previous disappointing releases and clearing the path for the Federal Reserve to extend its aggressive tightening path beyond November. This has sent the greenback and US treasury bonds surging.

Business activity in the manufacturing sector has beaten expectations in October. The US S&P Global Manufacturing PMI improved to 50.4 in October, against market expectations of 49.9 and the ISM Manufacturing PMI confirmed the positive news, posting a 50.2 reading against the 50 anticipated by the market consensus.

Beyond that, the JOLTS job openings have displayed the strength of the US labor market, despite the Fed's efforts to cool it off. JOLTS job vacancies increased to 10.7 million in September, up from 10.2 million in August, and against market expectations of a decline to 10 M.

GBP/USD: A reversal below 1.1440 would negate the positive bias – UOB

FX analysts at UOB maintain a positive outlook on the pair as long as the 1.1440 level is not breached: “We continue to hold a positive GBP view for now and only a break of 1.1440 (no change in ‘strong support’ level from last Friday) would indicate that GBP is not advancing further. That said, as upward momentum has waned, the odds of GBP advancing to the major resistance at 1.1760 have diminished.”

Technical levels to watch

• The dollar bounces up from session lows near 0.9900, back above parity.
• Bright US macroeconomic data have boosted the greenback and US Treasury bonds.
• USD/CHF is nearing important resistance at the 1.0030 area.

The US dollar has retraced previous losses against the Swiss Franc on Tuesday’s US session, jumping from levels nearing 0.9900, back beyond 1.0000 on the back of a series of better-than-expected US macroeconomic figures.

Bright US data dampens hopes of a Fed pivot

US labor and manufacturing activity figures have beaten expectations earlier on Tuesday, improving investors’ confidence in the US economy’s health and giving leeway to the Federal Reserve to keep hiking rates aggressively for some time. This sentiment has triggered a knee-jerk reaction in the USD and US Treasury bonds, sending them surging from session lows.

US manufacturing activity data has posted a positive surprise, with a better-than-expected performance in October. The ISM PMI slowed down to 50.2, better than the 50 expected by the market, while the S&P PMI reported a 50.4 reading, which reveals that sector activity grew, when the market expected a moderate contraction, at 49.9 for the second consecutive month.

Beyond that, the JOLTS job openings have reported an increase to 10.7 million vacancies in September, up from 10.2 million in August, instead of the decline to 10 million anticipated by the expert. These figures are consistent with the image of a tight labor market, despite the Fed’s efforts to cool it off in order to curb inflation.

With all eyes on the Federal Reserve, which is widely expected to hike rates by 75 basis points on Wednesday. These figures have eroded the idea that the bank might be forced to slow down its monetary normalization path in December, as had been signaled in recent comments by some Fed officials.

USD/CHF: Approaching an important resistance at 1.0030

From a technical perspective, the pair has improved its near-term bias, returning above the 50 and 200-hour SMA at 0.9970/80 area, to attempt another assault to the 1.0030 level (October 24,25 highs). Above here, the next target would be the three-year high at 1.0145.

On the downside, the mentioned 200-hour SMA at the 0.0970 area is acting as support so far. Below here, the next potential targets are October 30 low at 0.9945 and October 27 high at 0.9920/25.

Technical levels to watch

• The Australian Dollar is on the defensive at the mercy of heightened US T-bond yields, despite RBA’s rate hike.
• The Federal Reserve has a green light to continue its aggressive cycle after US PMIs remained at expansionary territory.
• The US labor market remains tight, as shown by the JOLTS report.

The AUD/USD slid for the fourtñ-consecutive day, courtesy of broad US Dollar strength, after manufacturing activity in the United States flashed the economy’s resilience, albeit that the Reserve Bank of Australia (RBA) lifted rates by 25 bps, which bolstered the AUD ahead of the US session. At the time of writing, the AUD/USD is trading a 0.6387,

The USD got bolstered by data, weighing on the AUD

The market sentiment remains downbeat, as shown by US equities trading with losses. The ISM Manufacturing report for October was better than forecasts at 50.2 vs. 50 estimated, while a subcomponent that measures prices fell to more than a two-year low. Meanwhile, an earlier report was a prelude for ISM data, with S&P Global PMI Manufacturing Index for the same period slowed. Still, it was above estimates of 49.9, at 50.4, but below the September figure.

Also, the US Labor Department revealed September’s JOLTS data, which unexpectedly rose above estimates of 10M to 10.717M, topping August’s 10.28M.

The AUD/USD reacted to the downside, weighed by a jump in US T-bond yields, particularly the 10-year, reclaiming the 4% threshold. The pair dived from around 0.6437 to 0.6380.

Aside from this, in the Asian session, the Reserve Bank of Australia (RBA) lifted rates by 25 bps, as expected, leaving the cash rate at 2.85%. The RBA Governor Philip Lowe commented that the central bank was seeking to return inflation to the 3% target, which according to the central bank forecasts, would be achieved by 2024.

Given that quarterly inflation rose by 7.3%, the RBAs acknowledged that monetary policy operates with a lag, so the path of slowing from 50 to 25 would allow the RBA to assess consumer spending amidst an uncertain global economic outlook.

What to watch

Ahead in the week, the Australian economic calendar will feature the AI Group Manufacturing Index for October, alongside housing data and the RBA Chart Pack. On the US front, the docket will reveal the Mortgage Rate update, the ADP Employment Change, and the Federal Reserve policy decision.

AUD/USD Key Technical Levels

• The dollar pares losses and returns above 148.00.
• A set of positive US data refutes the theory of Fed easing.
• USD/JPY: Consolidating between 145.50 and 146.90 – UOB.

The greenback surged from session lows at 147.00 to pare losses from the Asian and European sessions and return to levels above 148.00. The release of a set of better-than-expected US macroeconomic indicators has boosted a hitherto weak US dollar.

US data refutes the theory of Fed easing

Macroeconomic figures from the US rattled FX markets on Tuesday, improving the sentiment about the US economic momentum and undermining the idea that the Federal Reserve might be forced to consider slowing down its monetary tightening path in December. This new scenario has sent the dollar and US treasury bond yields surging.

US manufacturing activity has beaten expectations in October, easing concerns about the possibility of a certain economic softening triggered by previous disappointing figures. The US ISM Manufacturing PMI has posted a 50.2 reading, against the 50 expected by the market, while the S&P PMI confirmed the upbeat news with the October reading improving to 50.4 and returning to figures consistent with expansion, against market expectations of a flat performance at 49.9.  

Furthermore, the JOLTS job openings have registered an increment to 10.7 million vacancies in September, up from 12.2 million in August, and against market expectations of a decline to 10 M. These figures show the tight conditions of theUS labor market, despite the Fed’s efforts to cool it off in order to curb inflation.

The US Federal Reserve’s monetary policy meeting, due on Wednesday remains the main attraction this week. The Fed is widely expected to hike rates by 75 basis points, but the market was increasingly confident that the bank would signal a softer hike in December, a theory that has come into question after today’s releases.

USD/JPY remains consolidating between 145.50 and 149.60 – UOB

From a wider perspective, FX analysts at UOB see the pair in a consolidative range between 145.50 and 149.60: “USD (…) dipped to 145.10 before rebounding strongly and the build-up in downward momentum faded quickly. USD appears to have moved into a consolidation phase and is likely to trade between 145.50 and 149.60 for the time being.”

Te3chnical levels to watch

Analysts from Rabobank see the risk of the EUR/GBP cross rising to the 0.90 area early in 2023. They point out that risks of a general election in the UK could rise if PM Sunak fails to gain support of most Tory MPs. 

Key Quotes: 

“In our view both the EUR and GBP will be battling demons in the months ahead. The EUR has had good news recently in the form of an easing in gas prices. Warm weather and mostly full gas storage stations have reduced the risk of blackouts in the Eurozone during the forthcoming winter.”

“A 75bp rate hike from the ECB in October has lent the EUR some protection, but by the central bank’s next meeting, Germany could be in recession. It is unclear whether hiking interest rates into a recession will be able to give the EUR much support.”

“The UK’s current account deficit has further exposed the GBP to the impact of the weak line up of fundamentals. Relief that the new PM and Chancellor understand both the necessity of working with the BoE to bring down inflation and the risk to the gilt market of unfunded tax cuts, has seen gilt yields and GBP settle back after recent volatility. However, the coming months will not be easy for PM Sunak.”

“If Sunak cannot muster the support of most Tory MPs, there is a risk that a general election may have to be called. Even if the party does unite, the government is set to announce tax hikes next month in the face of a recession and despite the cost of living crisis. Not only will this be difficult for the electorate to stomach but, in the absence of reforms aimed at encouraging investment and productivity growth, GBP’s recovery may already have run out of traction. We see risk of EUR/GBP climbing to the 0.90 area early next year.”

On Wednesday, the Federal Reserve will announce its decision on monetary policy. A 75 basis points rate hike is priced in. According to the Research Department at BBVA, all eyes on hints of a potential downshift in tightening pace.

Key Quotes: 

“Given that a super-sized hike is a done deal, the focus will be on hints on what will drive a slowdown in the pace of hikes. We think that Chair Powell will not be able to provide clear guidance about the most likely size of the December hike, not only because it will depend on upcoming data -two more monthly job market data and two more inflation readings-, but also considering that a wide consensus within the FOMC on the next steps seems still unlikely at this moment in which some Fed officials have just begun to coincide on the importance of assessing the effects of “cumulative tightening” on the economy and inflation.”

“We think that a shift to a slower pace of hikes and then the decision to end the tightening cycle will depend (more) on labor market data. With inflation set to remain quite high in the short term, and underlying inflation pointing to stickiness ahead, what will drive the Fed to slow the hiking cycle will be signals that the labor market is on a pace of rebalancing. Thus, the most important signal in Chair Powell’s remarks will be hints on what the Fed is looking for in the labor market to slow down the pace of tightening and then to stop.”
 

• The pound gives away gains and dives to session lows at 1.1450.
• Bright US data dampens hopes of a Fed pivot in December.
• GBP/USD: Breach of 1.1440 will negate the positive bias – UOB.

The pound has lost nearly 100 pips in a matter of minutes, following the release of a set of positive US macroeconomic indicators. The pair has dropped from levels near 1.1550, giving away all the ground taken during Tuesday’s Asian and European trading sessions, to hit lows at 1.1455.

US data gives leeway for more aggressive Fed tightening

A series of better-than-expected macroeconomic releases have boosted confidence in the momentum of US economy, easing concerns of a potential slowdown triggered by previous disappointing releases and clearing the path for the Federal Reserve to extend its aggressive tightening path beyond November. This has sent the greenback and US treasury bonds surging.

Business activity in the manufacturing sector has beaten expectations in October. The US S&P Global Manufacturing PMI improved to 50.4 in October, against market expectations of 49.9 and the ISM Manufacturing PMI confirmed the positive news, posting a 50.2 reading against the 50 anticipated by the market consensus.

Beyond that, the JOLTS job openings have displayed the strength of the US labor market, despite the Fed's efforts to cool it off. JOLTS job vacancies increased to 10.7 million in September, up from 12.2 million in August, and against market expectations of a decline to 10 M.

GBP/USD: A reversal below 1.1440 would negate the positive bias – UOB

FX analysts at UOB maintain a positive outlook on the pair as long as the 1.1440 level is not breached: “We continue to hold a positive GBP view for now and only a break of 1.1440 (no change in ‘strong support’ level from last Friday) would indicate that GBP is not advancing further. That said, as upward momentum has waned, the odds of GBP advancing to the major resistance at 1.1760 have diminished.”

Technical levels to watch

According to analysts from Rabobank, the AUD/USD pair could drop a little further in the near term, but they see Australian fundamentals strongly positioned, favoring a rebound later. They forecast AUD/USD at 0.64 in three months and at 0.65 in six months. 

Key Quotes: 

“In early October the RBA was the first major central bank to return to a more ‘normal’ 25bp rate hike. Although the Bank had signaled it was considering such a move, in view of the prevalence of high inflation levels, the decision was still a surprise to the market. The reason given by policy makers for reverting to a 25bp incremental move was “that the cash rate had been increased substantially in a short period of time and the full effect of that increase lay ahead.” It would appear very likely that policy makers were concerned about the impact on the affordability of mortgages from this year’s series of rate rises.”

“Given our expectation that USD strength is set to persist, we see risk of AUD/USD dipping back a little further in the near-term. However, in terms of relative growth prospects, terms of trade and current account position, Australian fundamentals are relatively strongly positioned.”

“We favour the AUD vs. both the EUR and the GBP and see scope for AUD/USD to move towards 0.65 early next year.”

• US Dollar gains momentum during the American session amid risk aversion.
• DXY reverses sharply, rises from 110.70 to 111.50.
• USD/CAD rebounds more than 120 pips from daily lows.

The USD/CAD rose sharply from the lowest level in two days around 1.3530 to 1.3658, reaching a fresh daily high. The bounce was triggered by a rally of the US Dollar across the board following the release of US economic data.

The greenback was falling but it reversed it course dramatically following the ISM Manufacturing PMI and the Jobs Opening reports. Both reports surpassed expectations. After the numbers, US stocks turned sharply to the downside, and US yields soared.

The Dow Jones is falling by 0.51% after a positive opening while the S&P 500 drops by 0.45%. The US 10-year yield rose from 3.92% to 4.07 while the 2-year climbed from 4.40% to 4.53%, hitting the highest since October 21.

The Canadian S&P Global Manufacturing dropped from 49.8 to 48.8, below the 49.2 of market consensus. Late on Tuesday, Bank of Canada Governor Tiff Macklem will deliver a speech.

Market participants are focused on the FOMC meeting that started on Tuesday. The Federal Reserve is expected to announce a 75 bps rate hike. “The decision will bring policy to a level at which the Committee might feel more comfortable in shifting to a steadier hiking pace. The exact timing, however, will highly depend on the CPI data before the Dec meeting. Powell might offer some hints in the post-meeting presser”, mentioned analysts at TD Securities.

Levels to watch

On the upside, above 1.3660, the next resistance stands at 1.3685 (Oct 31 high), followed by 1.3755. On the downside, support might be located at 1.3605/00 and then at 1.3580 and the 1.3500 zone. A daily close below 1.3500 would open the doors to more losses.

• Gold price clings to gains after upbeat US economic data, though off the highs around $1640s.
• US ISM and S&P Manufacturing PMIs, remained at expansionary territory, an excuse for further Fed tightening.
• Short term, XAU/USD bias is neutral-to-downward biased, and if it clears $1640, a fall towards $1620 is on the cards.

Gold price advances in the North American session due to a fall in US Treasury yields weakening the US Dollar, following the release of solid US data, namely factory activity. Further, a risk-on in the equities market, spurred by speculations that China is adjusting to exit its zero-tolerance Covid-19 stance, was cheered by investors. At the time of writing, XAU/USD is trading at $1647, up by 0.89%.

XAU/USD trimmed earlier losses on upbeat US data and heightened US Treasury yields

In the United States, economic data revealed by the Institute for Supply Management (ISM), alongside S&P Global, showed the economy’s resilience. Firstly the ISM Manufacturing Index came better than estimated at 50.2 vs. 50 forecasts, while a subcomponent that measures prices fell to more than a two-year low. Timothy Fiore, Chairman of the ISM Manufacturing Business Survey Committee, commented that October’s report reflects companies are getting ready for an adjustment for lower demand.

Earlier, the S&P Global PMI Manufacturing Index also dropped but remained at expansionary territory at 50.4, above estimates of 49.9, though it trailed September’s 52.

At the same time, the US Department of Labor reported that job openings in September surprisingly rose, as the JOLTS report showed an increase of close to 500K, to 10.717M from August’s 10.28M, and exceeding estimates of 10M.

Given that US data was positive, a Fed pivot narrative could lose some weight, as it justifies additional tightening, as shown by the CME Fed WatchTool, increasing from an 86 to 88 percent chance of hiking 75 bps. Regarding December’s decision, the odds are 50% chances of lifting rates by 50 or 75 bps.

Market’s reaction

The XAU/USD tumbled from around $1650 towards $1643, a $7 loss, while US Treasury bond yields jumped from their daily lows at 3.924% towards 4.075%, a headwind for the yellow metal. Therefore, some downward pressure could be expected ahead of Wednesday’s Federal Reserve monetary policy meeting.

XAU/USD Price Forecast: Technical outlook

The XAU/USD is neutral-to-downward biased in the near term, as shown by the one-hour chart, with prices sliding throughout the session below the 100 and 200-EMAs, which would be difficult hurdles to surpass, around the $1648/51 area. However, if buyers have the strength to clear the latter, a retest of the daily highs around $1656 is on the cards, ahead of the last week’s $1674.94 high. On the flip side, if XAU/USD breaks below the R1 daily pivot, it will expose the central pivot at $1636, followed by the S1 daily pivot at $1628, ahead of the S2 pivot level at $1623.

• EUR/USD gives away some gains and breaches 0.9900.
• The dollar rebounds following positive results from the docket.
• ISM Manufacturing surprised to the upside in October at 50.2.

EUR/USD abandons the area of daily highs around 0.9950 and makes an abrupt U-turn to revisit the sub-0.9900 zone in the wake of US data results on Tuesday.

EUR/USD: Upside capped around 0.9950

EUR/USD rapidly drops and revisits the area below 0.9900 on the back of an equally sudden rebound in the dollar, all in response to the better-than-expected prints from the US ISM Manufacturing for the month of October (50.2).

Indeed, the results do nothing but reinforce the view of a resilient US economy at a time when some Fed’s rate-setters have hinted at the potential start of a debate over the probability of slowing the pace of the subsequent rate hikes as soon as at the December meeting.

Additional releases in the US calendar saw Construction Spending unexpectedly expand 0.2% MoM in September, the final S&P Global Manufacturing PMI at 50.4 (also surpassing estimates) and the JOLTs Job Openings increase to 10.717M also in September.

What to look for around EUR

The initial optimism in the risk complex lifted EUR/USD to the 0.9950/55 band on Tuesday, just to deflate soon afterwards following auspicious results from the US calendar.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The resurgence of speculation around a potential Fed’s pivot seems to have removed some strength from the latter, however.

Furthermore, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.

Key events in the euro area this week: Germany Balance of Trade, Unemployment Change, Unemployment Rate, Final Manufacturing PMI, EMU Final Manufacturing PMI (Wednesday) – EMU Unemployment Rate (Thursday) – EMU/Germany Final Services PMI, ECB Lagarde (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EUR/USD levels to watch

So far, the pair is gaining 0.05% at 0.9882 and faces the next up barrier at 1.0093 (monthly high October 27) followed by 1.0197 (monthly high September 12) and finally 1.0368 (monthly high August 10). On the downside, a breach of 0.9871 (weekly low November 1) would target 0.9704 (weekly low October 21) en route to 0.9631 (monthly low October 13).

• US JOLTS Job Openings surpassed the market expectation in September.
• US Dollar Index edges higher toward 111.50 after the data.

The number of job openings increased to 10.7 million on the last business day of September, the US Bureau of Labor Statistics (BLS) reported in its Job Openings and Labor Turnover Summary (JOLTS) on Tuesday. This print came in higher than the market expectation of 10 million.

"The number of hires edged down to 6.1 million, while total separations decreased to 5.7 million," the publication further read. "Within separations, quits (4.1 million) changed little and layoffs and discharges (1.3 million) edged down."

Market reaction

The US Dollar Index, which touched a daily low of 110.79, gained traction after this report and was last seen losing 0.2% on the day at 111.35.

• US ISM Manufacturing PMI came in slightly above 50 in October.
• US Dollar Index recovered above 111.00 ith the initial reaction to the PMI data. 

The business activity continued to expand in the US manufacturing sector in October albeit at a softer pace than in September with the ISM Manufacturing PMI falling to 50.2 from 50.9. This reading came in slightly better than the market expectation of 50.

Further details of the publication revealed that the Employment Index improved to 50 from 48.7, the Prices Paid Index dropped to 46.6 from 51.7 and the New Orders Index edged higher to 49.2 from 47.1.

Commenting on the survey's findings, "panelists' companies continue to carefully manage hiring, month-over-month supplier delivery performance was the best since March 2009, and the Prices Index indicated decreasing prices for the first time since May 2020," said Timothy R. Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee.

"Like in September, mentions of large-scale layoffs were absent from panelists' comments, indicating companies are confident of near-term demand," Fiore further elaborated. "As a result, managing medium-term head counts and supply chain inventories remain primary goals."

Market reaction

With the initial reaction, the US Dollar Index managed to erase a small portion of its daily losses and was last seen losing 0.35% on the day at 111.18.

• Silver rallies to over a three-week high on Tuesday and taps the $20.00 psychological mark.
• The momentum confirms a bullish break through the 100 DMA/50% Fibo. confluence hurdle.
• Sustained weakness below the $19.00 mark is needed to negate the near-term positive outlook.

Silver catches aggressive bids on Tuesday and rallies to over a three-week high during the early North American session. The white metal is currently trading just below the $20.00 psychological mark, with bulls now awaiting sustained strength beyond the 61.8% Fibonacci retracement level of the recent fall from the October monthly swing high.

Looking at the broader picture, the strong intraday move-up confirms a fresh bullish breakout through the $19.55-$19.65 confluence hurdle. The said area comprises 50% Fibo. level and the 100-day SMA, which should now act as a strong near-term base and a key pivotal point to determine the next leg of a directional move for the XAG/USD.

Given that technical indicators on the daily chart have just started gaining positive traction, some follow-through buying will reaffirm the constructive set-up and pave the way for additional gains. The XAG/USD might then accelerate the momentum towards an intermediate resistance near the $20.50 zone en route to the $21.00 round-figure mark.

On the flip side, the $19.65-$19.55 resistance breakpoint is likely to protect the immediate downside. Any further decline might continue to attract some buyers near the $19.00-$18.90 support, marking the 23.6% Fibo. level. A convincing break below the latter will shift the bias in favour of bearish traders and make the XAG/USD vulnerable.

The subsequent downfall could get extended and drag spot prices towards the next relevant support near the $18.30-$18.25 region. This is closely followed by the $18.00 round-figure mark, which if broken decisively will expose the YTD low, around the $17.55 zone touched in September.

Silver daily chart

Key levels to watch

• S&P Global Manufacturing PMI fell toward 50 in October.
• US Dollar Index stays deep in negative territory below 111.00.

The S&P Global Manufacturing PMI declined to 50.4 in October from 52 in September. This reading came in better than the initial estimate and the market expectation of 49.9.

Assessing the survey's findings, "October PMI data signalled a subdued start to the final quarter of 2022, as US manufacturers recorded a renewed and solid drop in new orders," said Siân Jones, Senior Economist at S&P Global Market Intelligence.

"Domestic and foreign demand weakened due to greater hesitancy among clients as prices rose further and amid dollar strength," Jones added. "As such, efforts to clear backlogs of work, rather than new order inflows, drove the latest upturn in production."

Market reaction 

The greenback failed to help the dollar gather strength against its rivals. As of writing, the US Dollar Index was down 0.6% on the day at 110.88.

• EUR/USD reverses the recent weakness and regains 0.9900 and above.
• Next on the upside comes the parity level ahead of 1.0093.

EUR/USD manages to rebound from the 0.9870 region and reclaims the area above the 0.9900 yardstick on Tuesday.

The continuation of the rebound should initially target the parity level. Once cleared, then the pair could dispute the October high at 1.0093 (October 27) ahead of the September peak at 1.0197 (September 12).

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0488.

EUR/USD daily chart

• S&P Global Manufacturing PMI continued to decline in October.
• USD/CAD trades deep in negative territory at around mid-1.3500s.

The business activity in the Canadian manufacturing sector continued to contract at an accelerating pace in October with the S&P Global Manufacturing PMI declining to 48.8 from 49.8 in September. This reading came in weaker than the market expectation of 49.2.

Commenting on the data, "October PMI data for Canada alluded to a weaker manufacturing performance as output and new orders fell concurrently and for the fourth month in a row," said Shreeya Patel, Economist at S&P Global Market Intelligence. "The rates of decline also quickened from those seen in September and were among the strongest in the survey's 12-year history."

Market reaction

The USD/CAD pair edged slightly higher from daily lows with the initial reaction and was last seen losing 0.48% on the day at 1.3560.

US ISM Manufacturing PMI overview

The Institute of Supply Management (ISM) will release its latest manufacturing business survey result, also known as the ISM Manufacturing PMI for October at 14:00 GMT this Tuesday. The index is anticipated to show the slowest growth in the manufacturing sector since 2020 and fall to the neutral 50.0 mark, separating expansion and contraction. The data will provide a fresh update on the state of the US economy amid rising borrowing costs and the potential easing of inflationary pressures.

How could it affect EUR/USD?

Ahead of the key release, the US dollar meets with a fresh supply amid speculations that the Fed will slow the pace of rate hikes by the end of this year amid the worsening outlook for the US economy. A weaker-than-expected ISM Manufacturing PMI will add to worries and continue weighing on the greenback, which should allow the EUR/USD pair to capitalize on its intraday positive move.

Conversely, a stronger print is unlikely to impress the USD bulls amid a generally positive risk tone and hopes for a less hawkish Fed. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the upside. The immediate market reaction, however, is more likely to remain limited ahead of the highly-anticipated FOMC monetary policy decision on Wednesday.

Valeria Bednarik, Chief Analyst at FXStreet, offers a brief technical overview and outlines important technical levels to trade the major: “The EUR/USD pair trades near a daily high of 0.9947 and is mildly bullish, according to the daily chart. The Momentum indicator resumed its advance near overbought readings, while the RSI indicator bounced from around its midline, still within neutral levels. At the same time, the pair develops above a directionless 20 SMA, currently at 0.9840, while a bearish 100 SMA provides dynamic resistance at around 1.0070.”

“The bullish potential seems limited in the near term, and according to the 4-hour chart. The pair is advancing above converging 100 and 200 SMAs, which currently hover around 0.9835. The 20 SMA, in the meantime, heads firmly lower a few pips above the current level. Finally, technical indicators advance with uneven strength but remain below their midlines. Bulls may have better chances if the pair runs past 0.9965, Monday’s high and the immediate resistance level. The 0.9830/40 price zone provides support in case the dollar resumes its advance,” Valeria adds further.

Key Notes

  •  EUR/USD Forecast: Pausing dollar bulls help the pair to bounce

  •  EURUSD Forecast: Bulls wake up as US Dollar loses strength amid risk flows

  •  EUR/USD looks firm and regains the 0.9900 mark and above ahead of US data

About the US ISM manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Index shows business conditions in the US manufacturing sector. It is a significant indicator of the overall economic condition in the US. A result above 50 is seen as positive (or bullish) for the USD, whereas a result below 50 is seen as negative (or bearish).

• DXY comes under pressure soon after hitting daily highs near 111.60.
• Next on the upside still emerges the 114.00 region.

DXY reverses three consecutive daily advances and slips back below the 110.00 mark on turnaround Tuesday.

Despite the ongoing corrective downside, the near-term bullish stance in the dollar remains unchanged and with the immediate target at the 114.00 area ahead of the 2022 high at 114.78 (September 28).

The near-term upside bias is expected to hold while above the 8-month support line near 108.60. The proximity of the 100-day SMA also reinforces this area of contention.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 104.22.

DXY daily chart

Senior Economist at UOB Group Alvin Liew comments on the latest BoJ event.

Key Takeaways

“The Bank of Japan (BOJ), as widely expected, kept its policy measures unchanged at its 27/28 Oct Monetary Policy Meeting (MPM). The decision was unanimous and the BOJ kept to its preference for easing, reiterating its pledge that it ‘will not hesitate to take additional easing measures if necessary, and also it expects short- and long-term policy interest rates to remain at their present or lower levels’.”

“The revisions in the latest Oct 2022 Outlook for economic activity and prices (The Bank’s View) was unsurprising too, as there were broad expectations that the BOJ will further lift inflation forecasts and trim near term GDP. The BOJ now projects core CPI inflation (which excludes fresh food) will rise to 2.9% in FY2022 (from previous estimate of 2.3% in Jul MPM) and thereafter ease to 1.6% in FY2023 and FY2024. BOJ projections for GDP growth are for a downward trend, 2% for FY2022 to 1.9% in FY2023 to 1.5% in FY2024.”

“BOJ Outlook – The view of no change to BOJ’s ultra-loose monetary policy was further cemented during the post-MPM press conference when Governor Kuroda clearly spelt out that exit from easy policy or rate hikes are not imminent. Kuroda made his stance abundantly clear that the BOJ is not following other central banks to normalize monetary policy anytime soon. So, in the meantime, we should continue to expect the BOJ to keep its current easy monetary policy intact and maintain its massive stimulus for the rest of 2022 and 1Q 2023, at least until “the man who can’t be moved” exits the BOJ on 8 Apr 2023.”

• GBP/USD regains strong positive traction on Tuesday amid broad-based USD weakness.
• Hopes for a less hawkish Fed and sliding US bond yields weigh heavily on the greenback.
• Traders might refrain from placing aggressive bets ahead of the Fed and the BoE this week.

The GBP/USD pair attracts fresh buying near the 1.1460 area on Tuesday and reverses a major part of the previous day's downfall. The steady intraday ascent lifts spot prices back above the mid-1.1500s during the mid-European session and is sponsored by broad-based US dollar weakness.

The upside potential, however, seems limited amid the increasing likelihood that both the Federal Reserve and the Bank of England will hike their borrowing rates by 75 bps this week. Apart from this, the post-decision rhetoric will be closely scrutinized for fresh clues about the pace of the rate-hiking cycle, which will help determine the next leg of a directional move for the GBP/USD pair.

In the meantime, speculations that the Fed will soften its hawkish stance amid signs of a slowdown in the US economy continue to weigh on the USD. In fact, the current market pricing indicates over a 50% chance that the US central bank will hike rates by 50 bps at the December meeting. This leads to a further decline in the US Treasury bond yields and undermines the greenback.

Apart from this, a goodish recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - is seen exerting additional downward pressure on the safe-haven buck. That said, traders might refrain from placing aggressive bets and prefer to move to the sidelines ahead of the central bank event risks - the Fed on Wednesday and the BoE on Thursday.

Hence, it will be prudent to wait for strong follow-through buying before positioning for any further appreciating move. Market participants now look forward to the release of the US ISM Manufacturing PMI. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the GBP/USD pair.

Technical levels to watch

Germany’s Economy Minister Robert Habeck said on Tuesday that they will implement the gas price cap as closely as possible to the expert commission's proposal, as reported by Reuters.

"The European Union's aid requirements make one-to-one implementation impossible on individual points," Habeck further noted and added that the energy aid should be taxed for individuals with an annual income from around 75,000 euros.

Market reaction

Germany's DAX 30 Index showed no immediate reaction to these comments and it was last seen rising 1.3% on the day at 13,430 points.

• EUR/JPY comes under pressure and challenges 146.00.
• The cross could attempt some consolidation in the short term.

EUR/JPY fades two consecutive daily gains and flirts with the 146.00 neighbourhood on Tuesday.

Looking at the current price action, the cross could attempt some near-term consolidation ahead of a potential resumption of the uptrend. Against that, the immediate up barrier remains at the 2022 high at 148.40 (October 21) prior to the December 2014 top at 149.78 (December 8).

In the short term the upside momentum is expected to persist while above the October lows near 141.00.

In the longer run, while above the key 200-day SMA at 137.45, the constructive outlook is expected to remain unchanged.

EUR/JPY daily chart

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”.

• A combination of factors lifts NZD/USD to a six-week high on Tuesday.
• Bets for a less hawkish Fed and sliding US bond yields weigh on the USD.
• A positive risk tone provides an additional lift to the risk-sensitive kiwi.

The NZD/USD pair builds on the previous day's bounce from the 0.5775 region and gains strong follow-through traction for the second successive day on Tuesday. This also marks the fifth day of a positive move in the previous six and lifts spot prices to the 0.5900 neighbourhood, or the highest level since September 21.

The US dollar stalls its recent bounce from over a one-week low touched last week and snaps a three-day winning streak, which, in turn, provides a goodish lift to the NZD/USD pair. Speculations that the Fed will soften its hawkish stance amid signs of a slowdown in the US economy led to a further decline in the US Treasury bond yields. This, along with a generally positive tone around the equity markets, is seen undermining the safe-haven buck and benefitting the risk-sensitive kiwi.

The better-than-expected Chinese Caixin Manufacturing PMI, which improved to 49.2 in October from 48.1 previous, boosted investors' confidence and led to a goodish recovery in the global risk sentiment. Investors, however, remain concerned about the economic headwinds stemming from China's strict zero-COVID policy amid the resurgence of new cases in Shanghai and Wuhan. Apart from this, the protracted Russia-Ukraine war should keep a lid on any further optimistic moves in the markets.

Furthermore, firming expectations that the Fed will hike interest rates by 75 bps at the end of a two-day policy meeting on Wednesday should act as a tailwind for the US bond yields and the greenback. This, in turn, warrants some caution for aggressive bullish traders and positioning for any further appreciating move for the NZD/USD pair. Traders now look to the release of the US ISM Manufacturing PMI for some impetus later during the early North American session.

Technical levels to watch

Economist at UOB Group Lee Sue Ann comments on the upcoming interest rate decision by the Fed.

Key Quotes

“The latest US inflation print for Sep does not change our Fed view, as we maintain our expectations for the FFTR to be hiked by another 75bps rate in Nov to the range of 3.75-4.00%”.

“We expect the Fed to end the year with a 50bps hike in Dec but admittedly the market sentiment on the Fed’s pivot has been wavering given the inflation and growth developments.”

• EUR/USD regains the smile and advances beyond 0.9900.
• The dollar appears offered ahead of key US data results.
• US ISM Manufacturing will be the salient event later on Tuesday.

The single currency manages to set aside Monday’s strong pullback and motivates EUR/USD to pick up pace and reclaim the region above the 0.9900 hurdle on Tuesday.

EUR/USD focused on USD dynamics

EUR/USD partially reverses the deep rejection from last week’s tops near 1.0100 and embarks on a corrective upside north of 0.9900 the figure amidst the renewed offered stance in the dollar and declining US and German yields.

On the latter, the German 10-year bund yields fade two daily gains in a row and challenge the key 2.00% level following the bearish move in their US peers.

Nothing worth mentioning data wise in the euro area, whereas the always-relevant ISM Manufacturing will be in the centre of the debate across the pond seconded by final figures of the S&P Global Manufacturing PMI, JOLTs Job Openings and Construction Spending.

What to look for around EUR

EUR/USD manages to attract some dip buyers and spark a corrective bounce to the region beyond the 0.9900 barrier on Tuesday, all accompanied by the selling mood hitting the dollar.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The resurgence of speculation around a potential Fed’s pivot seems to have removed some strength from the latter, however.

Furthermore, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.

Key events in the euro area this week: Germany Balance of Trade, Unemployment Change, Unemployment Rate, Final Manufacturing PMI, EMU Final Manufacturing PMI (Wednesday) – EMU Unemployment Rate (Thursday) – EMU/Germany Final Services PMI, ECB Lagarde (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EUR/USD levels to watch

So far, the pair is gaining 0.53% at 0.9929 and faces the next up barrier at 1.0093 (monthly high October 27) followed by 1.0197 (monthly high September 12) and finally 1.0368 (monthly high August 10). On the downside, a breach of 0.9871 (weekly low November 1) would target 0.9704 (weekly low October 21) en route to 0.9631 (monthly low October 13).

• Gold gains strong positive traction on Tuesday amid the emergence of fresh USD selling.
• Expectations for a less hawkish Fed, sliding US bond yields continue to weigh on the buck.
• A positive risk tone might cap gains for the metal amid bets for additional Fed rate hikes.

Gold attracts some buyers near the $1,630 area and stages a goodish intraday recovery move from over a one-week low touched earlier this Tuesday. The upward trajectory extends through the first half of the European session and lifts the XAU/USD to a fresh daily high, around the $1,650 level in the last hour.

The US dollar meets with a fresh supply and stalls its recent strong rebound from over a one-month low, which, in turn, is seen offering support to the dollar-denominated commodity. Speculations that the Fed will signal a less aggressive rate-hiking cycle at the end of its November policy meeting on Wednesday continue to act as a headwind for the greenback.

The repricing of the Fed's policy tightening path leads to a further decline in the US Treasury bond yields. In fact, the benchmark 10-year Treasury note slides back below the 4.0% threshold, which further undermines the buck and provides an additional lift to the non-yielding gold. That said, a combination of factors warrants some caution for bullish traders.

The US central bank is still expected to deliver another supersized 75 bps rate increase for the fourth successive time in as many meetings. Moreover, the fed funds futures point to over a 50% chance of a 50 bps rate hike in December. This, along with a recovery in the global risk sentiment, should keep a lid on any meaningful gains for gold, at least for now.

The fundamental backdrop favours bearish traders and suggests that any subsequent move up runs the risk of fizzling out rather quickly near the $1,670-$1,672 supply zone. This, in turn, makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move. Traders now look to the US ISM Manufacturing PMI for a fresh impetus.

Technical levels to watch

• GBP/USD starts November on the right footing amid USD weakness, risk flows.
• Fed and BOE are set to hike policy rates by 75 bps each this week.
• Cable is likely to extend range play between 100 and 50DMAs.

GBP/USD is consolidating the rebound above 1.1500 so far this Tuesday, kicking off November on the right footing. Investors brace for the critical Fed and BOE rate hike decisions, with both the central banks set to announce 75 bps rate increases later this week.

Ahead of the central banks’ bonanza, investors are breathing a sigh of relief, thanks to the FX market repositioning and the rally in Chinese stocks. The risk-on market environment is boding well for the higher-yielding pound sterling at the expense of the safe-haven US dollar.

Attention turns towards the US ISM Manufacturing PMI release, although not much reaction is expected on the data release unless the figure disappoints expectations by a wide margin. Meanwhile, the UK S&P Global Final Manufacturing PMI improved to 46.2 in October vs. 45.8 expected and the first reading of 45.8.

GBP/USD: Daily chart

From a short-term technical perspective, GBP/USD is biding time to yield a sustained break above the mildly bearish 100-Daily Moving Average (DMA) at 1.1723.

The case for an upside break appears compelling, as the 14-day Relative Strength Index (RSI) remains firmer above the midline. The next upswing could materialize on the Fed or BOE policy outcome.

Until then, the pair is likely to maintain its consolidative mode between the 100DMA barrier on the upside while the descending 50DMA at 1.1369 will continue guarding the downside.

In case, the tide turns against bulls, then a breach of the 50DMA support will expose the bullish 21DMA cap at 1.1316.

Meanwhile, acceptance above the 100DMA will kickstart a fresh uptrend towards the 1.1800 round level.  

GBP/USD: Additional technical levels

• USD/JPY comes under some selling pressure on Tuesday amid broad-based USD weakness.
• Expectations that the Fed will soften its hawkish stance act as a headwind for the greenback.
• The Fed-BoJ policy divergence should limit losses for the pair ahead of the FOMC meeting.

The USD/JPY pair meets with a fresh supply on Tuesday and drops to mid-147.00s, or a fresh daily low during the first half of the European session. The pair, for now, seems to have stalled its recovery from the 145.00 psychological mark, or a nearly three-week low touched last Thursday and is pressured by a combination of factors.

The Japanese yen draws some support from speculations that authorities might step in again to soften any further steep fall in the domestic currency. It is worth mentioning that Japan spent a record ¥6.3499 trillion over two consecutive trading days of unannounced currency interventions in October. This, along with the emergence of some selling around the US dollar, is exerting downward pressure on the USD/JPY pair.

In fact, the USD Index, which measures the greenback's performance against a basket of six currencies, fails to capitalize on its recent bounce from over a one-month low amid the prospects for a less hawkish Fed. Market participants now expect the US central bank to soften its hawkish stance amid signs of a slowdown in the US economy. This is reinforced by the ongoing slide in the US Treasury bond yields and weighs on the buck.

The Fed, however, remains on track to deliver another supersized 75 bps rate hike - its fourth such increase in a row - at the end of a two-day policy meeting on Wednesday. In contrast, the Bank of Japan held interest rates at record lows last Friday and reiterated that it will continue to guide the 10-year bond yield at 0%. This marks a big divergence between the two central banks and should offer some support to the USD/JPY pair.

Furthermore, traders might also be reluctant to place aggressive directional bets and prefer to move to the sidelines ahead of the key central bank event risk. In the meantime, Tuesday's US economic docket, highlighting the release of the ISM Manufacturing PMI, will be looked upon for short-term opportunities around the USD/JPY pair.

Technical levels to watch

USD/CNH remains side-lined within the 7.2200-7.3500 range for the time being, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “Our expectation for USD to ‘consolidate and trade within a range’ last Friday was incorrect as it rose to a high of 7.2840. USD traded on a firm note in early Asian trade today and could edge higher. However, upward momentum is not strong and any advance is unlikely to break 7.3100 (there is another resistance at 7.2980) Support is at 7.2720, followed by 7.2620.”

Next 1-3 weeks: “In our latest narrative from last Thursday (27 Oct, spot at 7.1870), we indicated that the pullback in USD has room to extend to 7.1500, possibly 7.1300. USD then dropped to 7.1662 before rebounding strongly. The build-up in downward pressure faded quickly and USD is unlikely to pullback further. From here, USD could trade between 7.2200 and 7.3500 for a while.”

• The index gives away part of the recent gains and drops below 111.00.
• The Fed starts its 2-day meeting later on Tuesday.
• ISM Manufacturing, Final Manufacturing PMI next of note in the docket.

The greenback, when measured by the USD Index (DXY), runs into some tough resistance near 111.60 on turnaround Tuesday.

USD Index looks to data

The index returns to the negative territory and leaves behind the 3-session positive streak on Tuesday on the back of some recovery in the risk-associated universe and diminishing US yields.

On the latter, yields lose momentum across the curve and fade part of the auspicious start of the week, as the Fed’s 2-day gathering kicks in later in the NA session.

It is worth recalling that the Federal Reserve is widely expected to hike the Fed Funds Target Range (FFTR) by 75 bps to 3.75%-4.00% on Wednesday.

In the US data space, the ISM Manufacturing will take centre stage seconded by the final prints of the S&P Global Manufacturing PMI and Construction Spending figures.

What to look for around USD

The dollar’s rally meets an initial hurdle around 111.60 in the first half of the week so far.

In the meantime, the firmer 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 continues to prop up the underlying positive tone in the index.

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

Key events in the US this week: Final Manufacturing PMI, Construction Spending, ISM Manufacturing (Tuesday) – MBA Mortgage Applications, ADP Employment Change, FOMC Interest Rate Decision, Chief Powell press conference (Wednesday) – Balance of Trade, Initial Jobless Claims, Final Services PMI, ISM Non-Manufacturing (Thursday) – Nonfarm Payrolls, Unemployment Rate (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 of a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is retreating 0.46% at 111.06 and the breakdown of 109.53 (monthly low October 27) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13). On the upside, the next hurdle comes at 113.88 (monthly high October 13) seconded by 114.76 (2022 high September 28) and then 115.32 (May 2002 high).

USD/JPY is now seen trading between 145.50 and 149.60 in the next few weeks, according to UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “The strong rise in USD to a high of 147.87 last Friday came as a surprise (we were expecting sideway-trading). USD extended its advance in early Asian trade and is likely to rise further. However, a break of the strong resistance at 148.80 is unlikely (minor resistance is at 148.40). On the downside, a breach of 147.35 (minor support is at 147.70) would indicate that the current upward pressure has dissipated.”

Next 1-3 weeks: “Our latest narrative was from last Thursday (27 Oct, spot at 146.05) where downward momentum is building tentatively and that USD could edge lower. USD subsequently dipped to 145.10 before rebounding strongly and the build-up in downward momentum faded quickly. USD appears to have moved into a consolidation phase and is likely to trade between 145.50 and 149.60 for the time being.”

• AUD/USD is paring back gains as RBA Lowe fails to impress.
• The dovish RBA rate hike did little to deter AUD bulls amid China-led risk flows.
• All eyes now remain on the US ISM, Australian housing data and the Fed decision.

AUD/USD is consolidating the latest leg higher above 0.6400, as the rally faltered at 0.6450 following the dovish remarks from the Reserve Bank of Australia (RBA) Governor Philip Lowe. The central bank chief said that the “board has judged it appropriate to raise rates at a slower pace,” adding that “We are taking into account pressure of higher rates, inflation on household budgets.”

Earlier this Tuesday, the central bank hiked the policy rate by 25 bps from 2.60% to 2.85%, as widely expected while revising down its growth projections for 2022 and the next two years. The aussie briefly reversed towards 0.6400 on the RBA announcements but eventually caught a fresh bid wave, as the US dollar lost further ground amid a risk rally on Chinese indices.

Chinese tech stocks rallied and led the broader indices sharply higher after unconfirmed reports began to float on social media that policymakers were making preparations to gradually exit the stringent covid-Zero policy. The risk-sensitive aussie rallied in tandem with China markets while also capitalizing on the upbeat Caixin Manufacturing PMI, which arrived at 49.2 in October vs. 49.0 expected.

Meanwhile, markets are resorting to re-positioning on their US dollar longs ahead of the all-important Fed rate hike decision due on Wednesday. The resultant dollar weakness is helping the pair stay afloat comfortably above 0.6400, despite the renewed downtick.

Later in the day, investors will look forward to the US ISM Manufacturing PMI and the price paid component for fresh dollar trades while the sentiment on Wall Street will also play a pivotal role. Also, of note remains the Australian Building Permits data due for release on Wednesday for fresh trading incentives. However, the main event risk this week remains the Fed verdict.

AUD/USD: Technical levels to consider

• USD/CHF snaps a three-day winning streak to over a one-week high amid modest USD weakness.
• Expectations for another 75 bps Fed rate hike should limit the USD losses and lend some support.
• A positive risk tone could undermine the safe-haven CHF and warrants caution for bearish traders.

The USD/CHF pair comes under some selling pressure on Tuesday and snaps a three-day winning streak to over a one-week high touched the previous day. The pair maintains its offered tone through the early part of the European session and is currently flirting with the daily low, around mid-0.9900s.

The US dollar struggles to capitalize on its gains recorded over the past three trading sessions amid speculations that the Fed will soften its hawkish stance amid signs of a slowdown in the US economy. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, stalls its recent bounce from over a one-month low. This, in turn, is seen as a key factor exerting downward pressure on the USD/CHF pair.

The downside for the greenback, however, seems limited amid firming expectations for another supersized 75 bps Fed rate hike at the end of a two-day policy meeting on Wednesday. Apart from this, a goodish recovery in the global risk sentiment seems to undermine the safe-haven Swiss franc. The combination of the aforementioned factors should lend some support to the USD/CHF pair, warranting some caution before placing fresh bearish bets.

Market participants now look forward to the US economic docket, highlighting the release of the ISM Manufacturing PMI later during the early North American session. The data might influence the USD, which, along with the broader risk sentiment, should provide some impetus. The focus, however, will remain on the highly-anticipated FOMC policy decision, which will help determine the near-term trajectory for the buck and the USD/CHF pair.

Technical levels to watch

“Board has judged it appropriate to raise rates at a slower pace,” Reserve Bank of Australia (RBA) Governor Philip Lowe said in his scheduled appearance on Tuesday.

Additional quotes

Market reaction

AUD/USD pauses its advance on Lowe’s remarks, as investors assess the RBA’s next policy move. The pair was last seen trading at 0.6438, still up 0.63% on a daily basis.

CME Group’s flash data for natural gas futures markets noted open interest rose for the 5^th consecutive session on Monday, this time by more than 2K contracts. Volume, in the meantime, reversed three daily drops in a row and went sharply by nearly 128K contracts.

Natural Gas now targets the 200-day SMA

Monday’s strong advance in prices of natural gas was accompanied by increasing open interest and volume, allowing the commodity to extend the bounce in the very near term and with the immediate hurdle at the 200-day SMA, today at $6.750 per MMBtu.

• A combination of factors prompts aggressive selling around USD/CAD on Tuesday.
• Rising oil prices underpin the loonie and exert pressure amid a modest USD downtick.
• The downside seems limited amid recession fears and ahead of the FOMC meeting.

The USD/CAD pair comes under heavy selling pressure on Tuesday and extends the overnight late pullback from the 1.3685 region, or a multi-day high. The downward trajectory drags spot prices to a fresh daily low, around mid-1.3500s during the early European session and is sponsored by a combination of factors.

Crude oil prices regain positive traction after OPEC said that demand will be higher than initially expected in the medium to long term. This, in turn, underpins the commodity-linked loonie and exerts some downward pressure on the USD/CAD pair amid the emergence of some selling around the US dollar.

The global risk sentiment gets a boost following the release of Chinese Caixin Manufacturing PMI, which improved to 49.2 in October from 48.1 previous. The upbeat market mood, along with speculations that the Fed will soften its hawkish stance amid signs of a slowdown in the US economy, is seen weighing on the safe-haven greenback.

Investors, however, remain concerned about the fuel demand outlook in the wake of China's strict zero-COVID policy amid the resurgence of cases in Shanghai and Wuhan. This could act as a headwind for the black liquid. Apart from this, the protracted Russia-Ukraine war might also contribute to keeping a lid on any optimism in the markets.

Furthermore, expectations that the Fed will deliver another supersized 75 bps rate hike at the end of a two-day policy meeting on Wednesday should limit the downside for the buck. This, in turn, supports prospects for the emergence of some dip-buying around the USD/CAD pair and warrants some caution for aggressive bearish traders.

Market participants now look forward to the US economic docket, highlighting the release of the ISM Manufacturing PMI later during the early North American session. This, along with the broader risk sentiment, will influence the USD. Traders will further take cues from oil price dynamics to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch

In the opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, further gains in NZD/USD are likely once 0.5880 is cleared in the near term.

Key Quotes

24-hour view: “NZD traded within a range of 0.5785/0.5873 last Friday, close to our expected consolidation range of 0.5780/0.5875. Momentum indicators are mostly neutral and we continue to expect NZD to consolidate, likely within a range of 0.5775/0.5855.”

Next 1-3 weeks: “Our update from last Thursday (27 Oct, spot at 0.5835) still stands. As highlighted, NZD could rise but it has to close above 0.5880 before further sustained advance is likely. Overall, only a break of 0.5740 (no change in ‘strong support’ level from last Friday) would indicate that NZD is not ready to move above 0.5880.”

Considering advanced prints from CME Group for crude oil futures markets, traders extended the uptrend for yet another session on Monday, this time by just 937 contracts. In the same line, volume resumed the upside and went up by around 19.1K contracts.

WTI: Immediately to the downside comes $82.10

Prices of the barrel of WTI retreated for the second session in a row on Monday. The negative price action was on the back of increasing open interest and volume and opens the door to the continuation of the downside in the very near term. That said, the next support emerges at the weekly low at $82.10 per barrel (October 18).

The positive outlook for GBP/USD remains unchanged in the short-term horizon, noted UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted last Friday that ‘the price movement is likely part of a consolidation’ and we expected GBP to ‘trade within a range of 1.1485/1.1625’. Our view of consolidation was not wrong even though GBP traded within a narrower range than expected (1.1504/1.1622). The underlying tone has firmed somewhat and the bias for today is on the upside. However, a sustained rise above 1.1645 is unlikely (next resistance is at 1.1700). On the downside, a breach of 1.1525 (minor support is at 1.1560) would indicate that the current mild upward pressure has eased.”

Next 1-3 weeks: “We turned positive on GBP early last week. In our latest narrative from last Thursday (27 Oct, spot at 1.1630), we indicated that GBP is still strong and we noted that the next level to monitor is at 1.1760. Since then, GBP has not been able to make much headway on the upside. However, we continue to hold a positive GBP view for now and only a break of 1.1440 (no change in ‘strong support’ level from last Friday) would indicate that GBP is not advancing further. That said, as upward momentum has waned, the odds of GBP advancing to the major resistance at 1.1760 have diminished.”

Open interest in gold futures markets shrank for the first time after five consecutive daily builds on Monday, this time by around 3.1K contracts according to preliminary readings from CME Group. Volume followed suit and dropped by more than 74K contracts, extended the ongoing choppiness.

Gold appears supported around $1,615

Gold prices dropped for the third session in a row at the beginning of the week. The negative performance was amidst shrinking open interest and volume and removes strength from further decline in the very near term. In the meantime, the 2022 low around $1,615 per ounce troy continues to hold the downside for the time being.

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang suggest further upside in EUR/USD now appears diminished.

Key Quotes

24-hour view: “Last Friday, we held the view that EUR ‘is likely to consolidate and trade between 0.9925 and 1.0050’. While EUR consolidated as expected, it traded within a narrower range than expected (0.9925/0.9997) before closing largely unchanged at 0.9963 (+0.01%). The price actions still appear to be part of a consolidation and we expect EUR to trade sideways between 0.9920 and 1.0020 today.”

Next 1-3 weeks: “Our update from last Friday (28 Oct, spot at 0.9970) still stands. As highlighted, the sharp pullback last Thursday has resulted in a quick loss in momentum and the chance of further EUR strength has diminished. However, only a break of 0.9880 (no change in ‘strong support’ level) would indicate that the EUR strength that started early last week has come to an end.”

• EUR/USD regains positive traction on Tuesday amid the emergence of some USD selling.
• The technical set-up favours bullish traders and supports prospects for additional gains.
• A sustained break below mid-0.9800s is needed to negate the near-term positive bias.

The EUR/USD pair attracts some dip-buying near the 0.9870 area on Tuesday and reverses a part of the previous day's slide to a multi-day low. The pair maintains its bid tone through the early European session and is currently placed near the daily high, around the 0.9925-0.9930 region.

A goodish recovery in the global risk sentiment prompts some selling around the safe-haven US dollar, which, in turn, is seen offering some support to the EUR/USD pair. That said, worries about a deeper global economic downturn should limit deeper losses for the buck. Investors might also prefer to move to the sidelines ahead of the crucial FOMC policy decision on Wednesday.

From a technical perspective, the post-ECB rejection slide from the 100-day SMA stalls near the confluence resistance breakpoint comprising a four-month-old descending trend-line and the 50-day SMA. The said resistance-turned-support, currently around the 0.9880-0.9870 region, should now act as a pivotal point and determine the next leg of a directional move for the EUR/USD pair.

Meanwhile, oscillators on the daily chart are holding in the positive territory and support prospects for a further appreciating move. Hence, a subsequent strength back towards testing the overnight swing high, around the 0.9965 region, remains a distinct possibility. The momentum could get extended and allow the EUR/USD pair to aim back to reclaim the parity mark.

On the flip side, the 0.9880-0.9870 region might continue to protect the immediate downside ahead of the mid-0.9800s. A convincing break below will shift the bias in favour of bearish traders and make the EUR/USD pair vulnerable. The downward trajectory might then drag spot prices below the 0.9800 round figure, towards the next relevant support near the 0.9770 area and the 0.9700 mark.

EUR/USD daily chart

Key levels to watch

• Silver price extends bounce off 50-DMA to renew intraday high.
• Bulls jostle with 100-DMA, descending trend line from early October.
• Firmer oscillators favor bulls but daily closing beyond $19.55 appears necessary to test previous monthly peak.
• Two-month-old ascending support line acts as additional downside filter.

Silver price (XAG/USD) takes the bids to refresh intraday high near $19.60 heading into Tuesday’s European session.

In doing so, the bright metal not only justifies the previous day’s rebound from the 50-DMA but also crosses the 100-DMA and a one-month-long resistance line to please XAG/USD buyers hopeful.

That said, firmer RSI (14) and bullish MACD signals also strengthen the odds favoring the commodity’s further upside.

However, a daily closing beyond the 100-DMA hurdle surrounding $19.55 becomes a pre-requisite for the XAG/USD bulls to take control.

Also likely to challenge the silver buyers is the previous weekly top near $19.80, a break of which won’t hesitate to challenge the October month’s peak of $21.24. During the run-up, the $20.00 psychological magnet may act as an extra resistance to watch for the bulls.

On the contrary, a daily closing below the aforementioned resistance line, close to $19.40 by the press time, could reverse the short-term bullish bias.

Even so, the XAG/USD sellers will wait for a clear downside break of the 50-DMA, close to $19.10, to take entries. Following that, an upward-sloping support line from early September, around $18.45 at the latest, appears the last defense of the silver bulls.

Silver: Daily chart

Trend: Bullish

FX option expiries for Nov 1 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9800 1.6b
• 0.9860 558m
• 0.9900 312m
• 0.9950 1.97b
• 0.9970 274m
• 1.0000 1.17b

- USD/JPY: USD amounts                     

• 145.50 350m
• 146.50 450m

- USD/CHF: USD amounts        

• 0.9800 600m
• 0.9825 390m

- EUR/CHF: EUR amounts

• 0.9825 666m

- AUD/USD: AUD amounts  

• 0.6350 217m
• 0.6450 451m

- USD/CAD: USD amounts       

• 1.3600 921m

Here is what you need to know on Tuesday, November 1:

The dollar is having a difficult time finding demand on Tuesday with market participants reassessing their positions ahead of Wednesday's all-important Fed policy announcements. The US Dollar Index trades in negative territory near 111.00 in the early European morning and US stock index futures gain between 0.4% and 0.6%, pointing to an improving market mood. Finally, the benchmark 10-year US Treasury bond yield continues to fluctuate above 4%. The US economic docket will feature the ISM's Manufacturing PMI survey for October and JOLTS Job Openings data for September. 

During the Asian trading hours, the Caixin Manufacturing PMI data for China improved to 49.2 in October from 48.1 in September and this reading came in slightly above the market expectation of 49. Following Monday's uninspiring performance, the Shanghai Composite Index gathered bullish momentum and remains on track to post nearly 2% of daily gains. 

Following its November policy meeting, the Reserve Bank of Australia (RBA) announced early Tuesday that it hiked its policy rate by 25 basis points (bps) to 2.85% from 2.6% as expected. The RBA noted in the policy statement that the board expect to increase rates further over the period ahead but acknowledged that higher interest rates and higher inflation were putting pressure on the budgets of many households. Despite the relatively small rate increase, AUD/USD benefited from risk flows and was last seen trading near 0.6450, where it was up 0.7% on the day. 

RBA: Higher interest rates and higher inflation are putting pressure on the budgets of many households.

EUR/USD failed to capitalize on hot inflation data from the euro area on Monday but managed to turn north early Tuesday amid broad-based selling pressure surrounding the greenback. At the time of press, the pair was up 0.5% on the day at 0.9935.

Following Monday's sharp decline, GBP/USD staged a rebound and climbed toward 1.1550. In a report published late Monday, the Financial Times said that British Prime Minister Rishi Sunak was set to sign off on raising taxes across the board.

After having gained nearly 100 pips on the first trading day of the week, USD/JPY reversed its course and was last seen losing 0.6% on a daily basis below 148.00. Japanese Finance Minister Shunichi Suzuki reiterated on Tuesday that they are closely watching currency market moves with a high sense of urgency and that they would respond appropriately to excessive fluctuations.

Gold lost more than 0.5% on Monday but erased all of those losses early Tuesday. XAU/USD is currently trading in positive territory above $1,640.

Bitcoin registered modest losses on Monday but managed to close comfortably above $20,000. BTC/USD is struggling to gather bullish momentum but clings to modest daily gains near $20,600 early Tuesday. Ethereum is up more than 1% so far as it looks to stretch higher while holding above $1,500.

• NZD/USD takes the bids to refresh intraday high, bracing for the biggest daily gains in a week.
• Upbeat New Zealand Building Permits, softer yields direct buyers towards monthly resistance line.
• US ISM, S&P Global PMIs precede speech from RBNZ’s Orr, New Zealand Q3 jobs report to entertain pair traders.
• Hawkish hopes from RBNZ lure bulls amid mixed concerns over the Fed.

NZD/USD bulls attack the 50-DMA resistance for the first time since late August as it cheers the US dollar pullback during early Tuesday. In doing so, the Kiwi pair grinds higher around 0.5865 while bracing for the biggest daily gains in a week.

That said, the US Dollar Index (DXY) slides to 111.05 during the first loss-making day in four while the benchmark 10-year Treasury yields fade two-day uptrend by making rounds to 4.05% of late.

In addition to the broad US dollar weakness, strong data from New Zealand (NZ) and hawkish hopes from the Reserve Bank of New Zealand (RBNZ) also support the NZD/USD pair’s recent upside moves. Earlier in the day, New Zealand’s seasonally adjusted Building Permits for September jumped by 3.8% versus -1.2% expected and -1.6% prior. Additionally, China’s Caixin Manufacturing PMI, 49.2 in October versus 49.0 expected and 48.1 prior, also favored the Kiwi pair’s run-up.

Firmer sentiment in China, amid hopes of more stimulus, also strengthen the NZD/USD prices during a sluggish day heading into the key data/events.

“The safe-haven greenback got some support from overnight losses on Wall Street, but a rise in US stock futures and firmness in Asian stocks, led by China, scuppered that demand on Tuesday. Lower long-term US Treasury yields also removed a crutch for dollar strength,” stated Reuters.

Moving on, quarterly employment numbers and comments from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr will be crucial for the pair’s direction. Should the strong fundamentals surrounding New Zealand joins hawkish comments from RBNZ and firmer NZ jobs report, the pair has a further upside to track.

It should be noted, however, that the Fed’s hawkish commentary and hesitance to discuss slow rate hikes starting from December might bolster the US dollar and weigh on the quote. Furthermore, the scheduled prints of the US ISM Manufacturing PMI and S&P Global PMIs for October might also entertain traders.

Technical analysis

NZD/USD pokes the 50-DMA hurdle for the first time since August but the recently firmer RSI and bullish MACD signals favor the buyers to cross the immediate moving average resistance near 0.5855. However, an upward-sloping trend line from October 06, close to 0.5880 at the latest, appears a tough nut to crack for the pair buyers.

Alternatively, pullback remains elusive unless breaking the 0.5700-5695 support confluence including the 21-DMA and a three-week-old rising trend line.

• AUD/USD pares the first daily gains in four but defends the bullish chart breakout.
• 100-HMA challenges rising wedge confirmation amid firmer RSI.
• Sustained trading above 200-HMA favors bulls to aim for October’s peak.

AUD/USD steps back from intraday high to 0.6415, after snapping a three-day downtrend, ahead of Tuesday’s European session. In doing so, the Aussie pair eases from the 100-HMA as the Aussie pair traders recollect the Reserve Bank of Australia’s (RBA) dovish rate hikes.

Also read: RBA: Higher interest rates and higher inflation are putting pressure on the budgets of many households

However, the quote still defends the early Asian session’s falling wedge breakout amid a firmer RSI (14), which in turn favors buyers. On the same line could be the pair’s successful trading above the 200-HMA.

That said, the 100-HMA level surrounding 0.6440 restricts the quote’s immediate upside ahead of the previous weekly top near 0.6525.

It should be noted, though, that multiple levels marked during late September and early October highlight 0.6540-50 as the short-term key hurdle to the north.

Meanwhile, the AUD/USD pair’s further weakness could aim for the resistance-turned-support line from the wedge, around 0.6395.

Following that, the 200-HMA and the stated wedge’s bottom line, close to 0.6375 and 0.6350, could challenge the AUD/USD bears.

In a case where the Aussie pair remains bearish past 0.6350, the odds of witnessing a south-run towards October’s low near 0.6170 can’t be ruled out.

AUD/USD: Hourly chart

Trend: Further upside expected

• GBP/USD is eying more upside above 1.1517 as the market mood has turned cheerful.
• The DXY has refreshed the day’s low at 111.28 despite soaring hawkish Fed bets.
• A collective effort of tight monetary policy and fiscal will weigh on price growth in the UK.

The GBP/USD pair is aiming to extend its recovery above the immediate hurdle of 1.1517 after a sheer rebound from 1.1460 in the early European session. The cable has been underpinned as the risk-on impulse has rebounded firmly. As uncertainty ahead of Federal Reserve (Fed) policy is fading away, investors are parking their funds in risk-sensitive assets.

S&P500 futures have recovered majorly after a bearish Monday. The 10-year US Treasury yields have dropped to 4.02%. Meanwhile, the US dollar index (DXY) is looking to extend its losses below the intraday low at 111.28.

Pound bulls are gearing up as odds of a 75 basis point (bps) rate hike by the Bank of England (BOE) has escalated. In order to tame the double-digit figure inflation, BOE Governor Andrew Bailey has no other option than to tighten policy with a bigger rate hike. The extent of the 75 bps rate will be the largest in the current rate escalating cycle.

UK’s novel leadership is putting blood and sweat to curb the debt crisis. In an article written by Financial Times on Monday, Treasury insiders said that UK PM Rishi Sunak and Chancellor Jeremy Hunt had agreed that “those with the broadest shoulders should be asked to bear the greatest burden”, and everybody’s taxes would go up.

They further added that the administration believes that the fiscal hole in the economy led by helicopter money injected into the economy to fight against Covid-19 and to support households against energy bills is needed to be filled. And, spending cuts seldom cannot fulfill the fiscal hole.

On the US front, the Fed is expected to continue its 75 bps rate hike spell for the fourth time and will push rates to 3.75-4%, a step further in achieving the agenda of price stability.  On Tuesday, investors’ focus will remain on ISM Manufacturing PMI data, which is seen lower at 50.0 vs. the prior release of 50.9.

• Gold price bounces off five-week-old support line amid pullback in DXY, yields.
• Mixed concerns over Fed, sluggish session allow XAU/USD traders to brace for FOMC.
• Upbeat performance of Chinese equities adds strength to the recovery moves.
• US data, risk catalysts could entertain traders but bears stay hopeful.

Gold price (XAU/USD) grinds higher around $1,640 while snapping a two-day downtrend heading into Tuesday’s European session. In doing so, the yellow metal cheers the US dollar pullback, as well as sluggish Treasury yields, as traders brace for today’s US PMIs for October and Wednesday’s all-important Federal Open Market Committee (FOMC) meeting.

That said, the US Dollar Index (DXY) slides to 111.25 during the first loss-making day in four while the benchmark 10-year Treasury yields fade two-day uptrend by making rounds to 4.05% of late.

Recently softer US data and growing fears of recession recently raised concerns over how the Fed might announce the downshift to smaller hikes. “The safe-haven greenback got some support from overnight losses on Wall Street, but a rise in US stock futures and firmness in Asian stocks, led by China, scuppered that demand on Tuesday. Lower long-term US Treasury yields also removed a crutch for dollar strength,” stated Reuters.

Elsewhere, reports suggesting an increase in gold demand also underpin the XAU/USD run-up. “A report by the World Gold Council (WGC) showed the global gold demand in the third quarter rose 28% from the same period in 2021, bolstered by record buying by central banks, although there was a notable contraction in investment demand,” stated Reuters.

Given the market’s month-start consolidation, the gold price may witness further recovery. However, the moves should take clues from the October month’s ISM Manufacturing PMI and S&P Global Manufacturing PMI for the US ahead of the Fed’s meeting.

Technical analysis

A five-week-old symmetrical triangle restricts short-term XAU/USD moves between $1,632 and $1662.

Given the quote’s latest rebound from the stated triangle’s support, backed by a steady RSI (14), the gold price may witness further advances toward the 10-DMA hurdle near $1,647.

It should be noted that the 21-DMA level surrounding $1,665 acts as an additional upside filter.

Meanwhile, a downside break of $1,632 could direct gold bears toward the yearly low near $1,614 before the 61.8% Fibonacci Expansion (FE) of the metal’s August-October moves, near $1,609, as well as the $1,600 round figure, could challenge the XAU/USD bears.

Gold: Daily chart

Trend: Limited upside expected

Speaking on the interest rates outlook on Tuesday, European Central Bank (ECB) President Christine Lagarde said that they “haven't reached the destination on rates yet.”

Additional comments

Market reaction

Mixed comments from ECB Chief fail to move the needle around the Euro, leaving EUR/USD hovering above 0.9900. The pair was last seen trading at 0.9905, adding 0.26% on the day.

• USD/JPY bounces off intraday low during the first daily fall in three.
• 10-DMA restricts immediate declines amid sluggish yields.
• BOJ’s stealth intervention, mixed concerns over Fed triggered earlier pullback.
• US ISM, S&P Global Manufacturing PMIs will precede FOMC to direct traders, bulls are likely to keep the reins.

USD/JPY pares intraday losses, the first in three days, around 148.40-45 during early Tuesday morning in Europe.

The yen pair dropped notably during the initial Asian session amid headlines from Japan, as well as due to the US dollar’s retreat and sluggish Treasury bond yields. However, the cautious mood ahead of the key US PMI and Wednesday’s all-important Federal Open Market Committee (FOMC) challenges the bears of late.

“Japan's currency interventions have been stealth operations in order to maximize the effects of its forays into the market, Finance Minister Shunichi Suzuki said on Tuesday, after the government spent a record $43 billion supporting the yen last month,” reported Reuters. The news also mentioned that Japanese officials remain tight-lipped on exactly when they intervened in the market in October. Full details of their actions will not be available until quarterly intervention data is published. The July-September data is expected to be released early this month.

It’s worth noting that the recently softer US data pushed US dollar traders to weigh on Fed’s announcements, given the already priced-in 75 bps rate hike. Also keeping the quote’s upside intact could halt the US Treasury yields’ run-up and mixed comments from US President Joe Biden and Russian leader Vladimir Putin. That said, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively.

“US President Joe Biden on Monday called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate, as he battles high pump prices with elections coming in a week,” said Reuters. On the other hand, Russia’s Putin said he can set up a gas hub in Turkey ‘quite quickly’ and was sure gas contracts will be signed. The Russian leader also added that there will be many in Europe who want to do so.

Against this backdrop, the US 10-year Treasury yields remain sluggish near 4.05% but the equity futures print mild gains amid hopes of easing energy prices, as well as inflation.

Moving on, headlines surrounding the Bank of Japan (BOJ) and the US Federal Reserve’s (Fed) next moves will be important for the USD/JPY pair traders to watch for fresh directions. Also important will the October month’s ISM Manufacturing PMI and S&P Global Manufacturing PMI for the US. It should be noted, however, that the yen pair is likely to remain firmer amid the wide divergence between the monetary policies of the Fed and the BOJ.

Also read: Federal Reserve Preview: Dollar buying opportunity? Why Powell is unlikely to cement a pivot

Technical analysis

A clear bounce off the 10-DMA support surrounding 148.00 defends USD/JPY bulls.

• Chinese equities are enjoying significant gains after upbeat Caixin Manufacturing PMI data.
• The market mood has turned cheerful which has weighed on the DXY.
• Oil prices have picked bids despite the soaring fears of a slowdown in overall demand.

Markets in the Asian domain have extended their recovery on Tuesday amid positive cues from global markets. More traction in risk-perceived assets has trimmed the US dollar index (DXY) appeal. The DXY has slipped to near 111.30 as investors have shrugged off uncertainty ahead of the interest rate decision by the Federal Reserve (Fed).

At the press time, Japan’s Nikkei225 added 0.10%, ChinaA50 soared 2.60%, Hang Seng jumped 2.37%, and Nifty50 gained 0.74%.

Chinese equities are having a ball after the release of the upbeat Caixin Manufacturing PMI data. The economic data landed higher at 49.2 vs. the projections of 49.0 and the prior release of 48.1. The PMI data has remained solid despite the continuation of the no-tolerance approach to Covid-19 by the Chinese administration. Also, the official manufacturing data from the China National Bureau of Statistics (NBS) was weaker than projections.

Outside Asia, Reserve Bank of Australia (RBA) Governor Philip Lowe hiked its Official Cash Rate (OCR) by 25 basis points (bps) for the second time to 2.85%. Australian central bank policymakers have adopted a less hawkish approach, keeping in mind that economic prospects could not be sacrificed entirely in achieving price stability.

On the oil front, oil prices have rebounded firmly after sensing buying interest around $85.00. Black gold has witnessed demand despite a fresh rate hike cycle by western central banks. This week, the Bank of England (BOE) and the Fed will announce their monetary policies. As per the projections, the central banks will announce a rate hike of 75 bps. This may trigger fears of a slowdown in overall demand and may also dampen the demand for oil.

• USD/IDR remains firmer around the highest levels since April 2020, marked the previous day.
• Indonesia Inflation, S&P Global PMI for October ease below market forecasts.
• US dollar’s struggle to extend previous run-up amid mixed feeling over Fed limits immediate upside.

USD/IDR grinds higher around $15,650 after Indonesia inflation and activity numbers failed to lure bears during early Tuesday. In doing so, the Indonesia rupiah (IDR) struggles to portray the US dollar’s latest pullback while taking rounds to the highest levels since April 2020.

Indonesia’s headline inflation eased to 5.77% YoY versus 5.99% market forecasts and 5.95 prior. That said, the nation’s S&P Global PMI for the said month also eased to 51.8 from 53.47 in September.

Following the data release, Reuters stated that Indonesia's inflation rate eased in October but remained above the central bank's target range for five straight months, statistics bureau data showed on Tuesday, against market expectations for a slight acceleration.

On the other hand, the recently softer US data pushed the US dollar traders to weigh on Fed’s announcements, given the already priced-in 75 bps rate hike. Also keeping the quote’s upside intact could halt the US Treasury yields’ run-up and mixed comments from US President Joe Biden and Russian leader Vladimir Putin.

On Monday, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively. “US President Joe Biden on Monday called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate, as he battles high pump prices with elections coming in a week,” said Reuters. On the other hand, Russia’s Putin said he can set up a gas hub in Turkey ‘quite quickly’ and was sure gas contracts will be signed. The Russian leader also added that there will be many in Europe who want to do so.

Elsewhere, the risk-on mood in the Asia-Pacific region failed to impress the USD/IDR bears.

The reason could be linked to the previous day’s comments from Bank Indonesia (BI) Deputy Governor Dody Budi Waluyo who warned that the central bank sees persistent risks from high global energy and food prices, particularly with European countries set for higher demand during winter reported Reuters.

Looking forward, the US ISM Manufacturing PMI, likely to ease to 50.0 versus 50.9 prior, will direct immediate market moves. Following that, the US S&P Global Manufacturing PMI for the stated month, expected to confirm the initial forecast of 49.9 figure, will join the JOLTS Jobs Openings for September, forecast 10M versus 10.053M prior, to also entertain USD/IDR traders.

Technical analysis

Although a weekly resistance line restricts immediate USD/IDR upside to around $15,685, a two-month-old bullish channel favors the pair buyers unless the quote stays beyond $15,500.

• USD/INR is heading towards 83.00 despite a steep fall in the DXY.
• Goldman Sachs sees the terminal rate at 5% beyond the Fed’s projected rate of 4.8%.
• RBI policymakers will also discuss the inflation report for the first time in the monetary policy framework.

The USD/INR pair is hovering around 82.80 after a sheer upside and is aiming to reclaim the round-level resistance of 83.00. The asset is scaling higher despite a steep fall in the US dollar index (DXY) as risk-off faded.

A rebound in the positive market sentiment has supported S&P500 futures. The 500-stock basket has managed to recover half of its Monday gains. Alpha generated by US government bonds has trimmed despite rising bets for a fourth consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed). The 10-year US Treasury yields have dropped to 4.03%.

Apart from the Fed’s interest rate hike, guidance on policy tightening will also be crucial. A rate hike by 75 bps will push interest rates to 3.75-4%, which will inch current interest rates near the terminal rate projected near 4.80%.

A report from Goldman Sachs cites that the US central bank could go beyond its desired terminal rate of 4.75% to 5%. The road to a 5% terminal rate will go through the phases of 75 basis points (bps) this week, 50 bps in December, and 25 bps in February and March, the report added.

On the Indian rupee front, investors are awaiting the interest rate decision by the Reserve Bank of India (RBI), which is due on Thursday. The RBI policy will be keenly watched as the inflation report will also be discussed for the first time since the implementation of the monetary policy framework in 2016.

It is worth noting that RBI Governor Shaktikanta Das has failed in keeping the inflation rate near the desired rate of 4% consecutively for three quarters.

• EUR/USD struggles to defend the bounce off one-week low amid sluggish trading.
• Risk profile remains blurred as yields stay inactive, stock futures pare daily gains ahead of the key data/events.
• Mixed expectations from Fed policymakers previously triggered cautious optimism.
• US ISM, S&P Global PMIs eyed ahead of Wednesday’s FOMC, Friday’s US NFP.

EUR/USD prints mild gains around 0.9900, defending the bounce off 0.9830 support confluence, amid cautious optimism in the market during early Tuesday.

The major currency pair’s latest rebound could also be linked to the recently softer US data that pushed US dollar traders to weigh on Fed’s announcements, given the already priced-in 75 bps rate hike. Also keeping the quote’s upside intact could halt in the US Treasury yields’ run-up and mixed comments from US President Joe Biden and Russian leader Vladimir Putin.

On Monday, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively.

“US President Joe Biden on Monday called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate, as he battles high pump prices with elections coming in a week,” said Reuters. On the other hand, Russia’s Putin said he can set up a gas hub in Turkey ‘quite quickly’ and was sure gas contracts will be signed. The Russian leader also added that there will be many in Europe who want to do so.

While portraying the mood, the US 10-year Treasury yields remain sluggish near 4.05% but the equity futures print mild gains amid hopes of easing energy prices, as well as inflation.

“The safe-haven greenback got some support from overnight losses on Wall Street, but a rise in U.S. stock futures and firmness in Asian stocks, led by China, scuppered that demand on Tuesday. Lower long-term U.S. Treasury yields also removed a crutch for dollar strength,” stated Reuters. The news also adds that the Fed is widely expected to raise its benchmark overnight interest rate by 75 bps on Wednesday, its fourth such increase in a row. But for the December meeting, Fed funds futures are split on the odds of a 75- or 50-bps increase.

Looking forward, a light calendar in Europe may allow EUR/USD to remain firmer before the US ISM Manufacturing PMI for October, expected to ease to 50.0 versus 50.9 prior. Also important will be the US S&P Global Manufacturing PMI for the stated month, expected to confirm the initial forecast of 49.9 figures, as well as the JOLTS Jobs Openings for September, forecast 10M versus 10.053M prior.

Above all, the Fed’s verdict and how it deals with the neutral rate will be crucial for the EUR/USD traders to watch for clear directions.

Technical analysis

Failure to cross the 0.9880-90 hurdle comprising the previous resistance line from March 31 and the 50-DMA, directs EUR/USD towards a convergence of the 21-DMA and monthly ascending trend line, around 0.9830.

Australia's Treasurer Jim Chalmers said on Tuesday, “inflation is the number one challenge in our economy.”

His comment comes after the Reserve Bank of Australia (RBA) hiked the policy rate by 25 bps to 2.85% at its November meeting this Tuesday, as widely expected. The central bank revised down its GDP forecasts for this year and the next two years.

Market reaction

AUD/USD is holding gains above 0.6400 following the RBA rate hike decision and the above comments. The pair was last seen trading at 0.6417, adding 0.33% on the day.

• AUD/USD has slipped sharply to near 0.6420 for the second consecutive 25 bps rate hike
• An upbeat Caixin Manufacturing PMI data also supported the antipodean.
• The DXY has slipped to 111.30 as investors shrugged off uncertainty ahead of Fed policy.

The AUD/USD has witnessed a steep fall to near 0.6420 pair as the Reserve Bank of Australia (RBA) has hiked its Official Cash Rate (OCR) by 25 basis points (bps) for the second time. The decision has remained in line with the projections and the Official Cash Rate (OCR) has increased to 2.85%. RBA Governor Philip Lower has preferred a less-hawkish policy approach to sustain economic prospects in accordance with the primary objective of brining price stability.

This week, the Australian Bureau of Statistics reported the inflation rate for the third quarter at 7.3%, higher than the consensus of 7.0% and the prior release of 6.1%. Responses were mixed from economists on rate projections in between the continuation of a 25 bps rate hike as reported in October or a return to a 50 bps rate hike structure.

In early Tokyo, aussie bulls were also strengthened by the release of upbeat Caixin Manufacturing PMI data. The economic data landed higher at 49.2 vs. the projections of 49.0 and the prior release of 48.1. It is worth noting that Australia is a leading trading partner of China and rising manufacturing activities in the dragon economy support antipodean.

Meanwhile, the US dollar index (DXY) has witnessed a steep fall to near 111.30 as uncertainty ahead of the Federal Reserve (Fed)’s monetary policy has been shrugged off. S&P500 futures have rebounded in the Tokyo session after a bearish Monday. The 500-stock basket has recovered half of its Monday’s losses and is eyeing more gains ahead. Also, the 10-year US Treasury yields have dropped to 4.03%.

As per the projections, Fed chair Jerome Powell will hike the interest rates by 75 bps for the fourth time as inflationary pressures haven’t shown evidence of exhaustion yet.

Following are the key headlines from the November RBA monetary policy statement, via Reuters, as presented by Governor Phillip Lowe.

• AUD/USD drops to 0.6420 as RBA hikes interest rate by 25 bps for the second time

About RBA rate decision

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

• AUD/NZD retreats from intraday high after RBA’s Interest Rate announcement.
• RBA announced a 0.25% rate hike while matching market forecasts.
• Strong NZ Building Permits previously dragged the quote to fresh multi-day low.
• RBA Governor’s speech, NZ jobs report and RBNZ’s Orr will be important to defend the buyers.

AUD/NZD fails to extend the early Asian session rebound from a multi-day low as it drops back to 1.1000 after the Reserve Bank of Australia’s (RBA) monetary policy decision on Tuesday.

RBA matches the broad expectations while easing the rate hike trajectory with the 25 basis points (bps) of a lift to the benchmark interest rate, to 2.85% at the latest.

Also read: RBA announces another 25 bps OCR rate hike in November

Earlier in the day, New Zealand’s seasonally adjusted Building Permits for September jumped by 3.8% versus -1.2% expected and -1.6% prior. The same should have drowned the AUD/NZD pair to the lowest levels since July 15 before the risk-on mood triggered the cross-currency pair’s recovery.

That said, the market sentiment improves during early Tuesday as the US Treasury yields remain sluggish. The same allows the US equity futures to print mild gains amid hopes of easing energy prices, as well as inflation.

The reason for the cautious optimism could be linked to the downbeat US data and comments from US President Joe Biden and Russian leader Vladimir Putin.

On Monday, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively.

“US President Joe Biden on Monday called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate, as he battles high pump prices with elections coming in a week,” said Reuters. On the other hand, Russia’s Putin said he can set up a gas hub in Turkey ‘quite quickly’ and was sure gas contracts will be signed. The Russian leader also added that there will be many in Europe who want to do so.

Looking forward, a speech from RBA Governor Philip Lowe will act as an immediate catalyst for the AUD/NZD traders to watch. Following that, New Zealand’s quarterly employment numbers and comments from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr will be crucial for the pair’s direction. Should the strong fundamentals surrounding New Zealand joins hawkish comments from RBNZ and firmer NZ jobs report, the pair has a further downside to track.

Technical analysis

Although the 200-DMA defends AUD/NZD bears around 1.1005, the pair’s recovery remains elusive unless staying comfortably beyond the support-turned-resistance line stretched from November 2021, around 1.1170 by the press time.

At its November 1 monetary policy meeting, the Reserve Bank of Australia (RBA) increases its official cash rate (OCR) by another 25 basis points (bps) from 2.60% to 2.85%, as widely expected.

Tuesday’s rate hike decision marked the second straight quarter percentage point increase by the RBA.

According to the latest Reuters poll, nearly 90% of respondents expected the RBA to hike its benchmark cash rate by 25 bps to 2.85%.

AUD/USD reaction

In an immediate reaction to the RBA decision, the AUD/USD pair remained little changed. At the time of writing, the aussie is up 0.53% on the day, trading at 0.6435.

About RBA rate decision

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

• Gold price is coming up for air as the US dollar falls with Treasury yields.
• Risk-on flows and position readjustment lead the way ahead of the Fed.
•  XAU/USD faces a wall of healthy resistance levels around the $1,650 level.

Gold price is seeing a tepid bounce, as the Fed meeting gets underway. Bulls are coming up for the last dance, snapping a three-day decline, as the upbeat market mood and position readjustments in the US dollar lend support to the bright metal. The US Treasury yields are back in the red zone, with the benchmark 10-year rates heading back towards the 4.0% level. Investors brace for the key central bank rate hike decision this week, with the Fed expected to announce a 75 bps rate hike while the BOE is set to hike by 75 bps as well, despite the looming fiscal plan and recession risks. Any recovery attempts in the non-interest-bearing gold price are likely to be sold into aggressive global tightening bets, as central banks struggle to tame raging inflation. A raft of top-tier US economic releases will be also closely followed for fresh hints on the health of the world’s largest economy, which will influence the Fed’s policy decision in the coming months.

Also read: Federal Reserve Preview: Dollar buying opportunity? Why Powell is unlikely to cement a pivot

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price is defending the immediate support at $1,638, the previous week’s low.

A sustained break below the latter will put a bunch of support levels around $1,635 under threat. That price zone is the convergence of the Fibonacci 23.6% one-day, SMA5 four-hour and the previous high four-hour.

The previous day’s low at $1,632 will challenge bullish commitments, opening the downside towards $1,628, where the pivot point one-day S1 coincides with the pivot point one-week S1.

The last line of defense for XAU buyers is seen at the pivot point one-day S2 at $1,723.

Alternatively, strong resistance is aligned at the confluence of the Fibonacci 61.8% one-day and SMA10 four-hour at $1,641, above which the powerful hurdle of $1,645 will be probed. At that point, the pivot point one-day R1 and Fibonacci 23.6% one-month merge.   

more to come ...

• AUD/JPY prints three-day uptrend, justifies upside break of seven-day resistance.
• Six-week-old descending trend line, 38.2% Fibonacci retracement level lures buyers.
• Upbeat oscillators join trend line breakout to favor buyers.
• Bears need validation from 100-DMA, ascending trend line from October 13 restricts adds to the downside filters.

AUD/JPY takes the bids to renew the weekly high near 95.40 during the three-day winning streak on Tuesday. In doing so, the cross-currency pair justifies the upside break of a one-week-old descending resistance line.

Also keeping the pair buyers hopeful are the bullish MACD signals and the firmer RSI (14), not overbought.

It should be noted, however, that a convergence of the six-week-old descending trend line and 38.2% Fibonacci retracement level of August-September upside, near 95.50, appears a tough nut to crack for the AUD/JPY buyers.

Following that, October’s peak of 95.75 and the late September swing high near 96.55 could test the bulls before directing them to the yearly high marked on September 13 around 98.60.

On the flip side, a pullback move remains elusive unless the quote stays beyond the previous resistance line from October 21, close to 95.05 at the latest.

Even if the AUD/JPY bears manage to conquer the 95.05 immediate support, as well as break f the 95.00 round figure, an upward-sloping trend line from October 13 and the 100-DMA, respectively near 94.75 and 94.20, will challenge the sellers before giving them control.

AUD/JPY: Daily chart

Trend: Further upside expected

The yuan may endure short-term depreciation pressure as the Federal Reserve continues to hike rates, while China's weak exports, Covid disruptions and real estate downturn also weigh on the currency, Yicai.com reported, citing analysts and strategists from Nomura.

Key quotes

“Nomura maintained its forecast for yuan to weaken to 7.5 against the U.S. dollar by the end of November, rather than forecasting additional weakness as he suspects the People's Bank of China may intervene.”

“Though the State Administration of Foreign Exchange is unlikely to use FX reserves to intervene, state-owned commercial banks may enter the market to support the yuan with their large foreign exchange holdings estimated to total USD629 billion.”

• USD/CNH rebounds from 7.3300 despite an upbeat Caixin Manufacturing PMI

After announcing consecutive six rate increases in the last meetings, the Reserve Bank of Australia (RBA) is up for another hawkish monetary policy outcome during the scheduled Interest Rate Decision around 03:30 AM GMT on Tuesday.

The RBA is, however, expected to slow down on the rate hike trajectory by lifting the benchmark interest rate by 25 basis points (bps) to 2.85%, mainly to fight inflation and match the tune with other major central banks. However, the odds of surprising markets with 0.50% interest rate lifts aren’t out of the table and hence the AUD/USD traders are on the edge ahead of the meeting announcements.

Ahead of the event Westpac said,

On the other hand, FXStreet’s Valeria Bednarik says,

How could the RBA decision affect AUD/USD?

AUD/USD picks up bids to renew intraday high around 0.6420 amid the market’s cautious optimism during early Tuesday. The quote’s recent recovery also takes clues from the firmer China’s Caixin Manufacturing PMI for October that improved to 49.2 versus 49.0 expected and 48.1 prior. Also keeping the buyers hopeful are the chatters that the RBA will opt for more rate hikes in the future, even if the size of the lift might deteriorate.

As per the latest Aussie data, inflation jumped to a multi-year high but the economic fears also grew amid China’s covid woes and global supply crunch. The housing market problem also challenges the RBA hawks and adds strength to the bearish bias surrounding the AUD/USD.

That said, a 0.25% rate hike appears already priced in and may offer a knee-jerk reaction, which in turn highlights the pace of bond purchase as the key catalyst. Should the policymakers appear cautious and ease on bond purchases, or surprise the markets by suggesting neutral rates, the bears may concentrate more on the US dollar strength and rush towards the yearly low. On the contrary, an intact bond purchase and hawkish rate statement and/or 0.50% rate hike could tease the AUD/USD bulls.

Technically, AUD/USD rebounds from a 10-DMA support, around 0.6380 at the latest. Also supporting the quote’s recovery are the bullish MACD signals and the steady RSI. However, the upside room appears limited as a descending resistance line from mid-August, close to 0.6490, could challenge the bulls. Following that, the previous week’s peak of 0.6522 and 38.2% Fibonacci retracement level of August-October declines, near 0.6540, will be crucial to cross for the AUD/USD pair buyers to keep the reins.

Alternatively, a downside break of the 10-DMA support near 0.6380 isn’t a sure signal for the bear’s return as a convergence of the 21-DMA and a two-week-long support line, close to 0.6355, will be a tough nut to crack for the AUD/USD sellers before retaking the control.

Key quotes

AUD/USD Forecast: Bears maintain the pressure ahead of the RBA’s decision

AUD/USD Price Analysis: Bounces off 10-DMA to welcome buyers near 0.6400 ahead of RBA

Reserve Bank of Australia Preview: Lowe and co have a tough decision to make

About the RBA interest rate decision

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view of the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

Japanese Finance Minister Shunichi Suzuki said on Tuesday, the country’s FX interventions have been stealth operations in order to maximize the effects of its forays into the market.

Additional comments

“Will continue diplomatic efforts with overseas authorities on exchange-rate policy.”

"There are times when we announce intervention right after we do it and there are times when we don't."

"We are doing this to maximize effects to smoothen sharp currency fluctuations."

"We cannot tolerate excessive currency moves by speculative trading.”

"We are closely watching currency market moves with a high sense of urgency and we'll respond appropriately to excessive fluctuations."

"Intervention had certain effects.”

On Monday, Suzuki said that Japan spent JPY6.3499 trillion ($42.7 billion) on currency intervention in October to prop up the yen.

Market reaction

At the press time, USD/JPY is bouncing off daily lows at 148.24, trading at 148.40, still down 0.20% on the day.

• USD/CNH has witnessed a V-shape reversal at around 7.3300.
• Caixin Manufacturing PMI has landed higher at 49.2 vs. the expectations of 49.0.
• The Fed is set to hike rates by 75 bps as inflationary pressures have not slowed down yet.

The USD/CNH pair has displayed a V-shape reversal after dropping to near 7.3300 in the Tokyo session. The asset has witnessed recovery despite the release of upbeat Caixin Manufacturing PMI data. The economic data has landed higher at 49.2 vs. the projections of 49.0 and the prior release of 48.1.

Earlier, China’s official Manufacturing PMI landed lower at 49.2 vs. the projections of 50.0 and the prior release of 50.1, reported by the National Bureau of Statistics (NBS). Also, the Non-Manufacturing PMI had been recorded significantly lower at 48.7 against the expectations of 51.9 and the former release of 50.6.

Meanwhile, the US dollar index (DXY) has slipped sharply in Tokyo as the risk-on impulse has rebounded firmly. The DXY has dropped sharply to near 111.36. The S&P500 futures have rebound strongly after a bearish Monday amid overall optimism in the quarterly result season.

The returns on US government bonds have fallen despite accelerating hawkish Federal Reserve (Fed) bets. The 10-year US Treasury yields have dropped to 4.04%, 0.90%, below its previous close, at the time of writing.

This week, the major trigger will be the interest rate decision by the Fed. The US central bank is expected to hike the interest rates by 75 basis points (bps) for the fourth time as the inflationary pressures have not displayed signs of exhaustion yet. However, consumer spending has trimmed in the third quarter to 1.4% from the prior expansion of 2.0%, which may weigh on the inflation rate.

“The Bank of Japan (BOJ) must maintain an easy policy to support the economy, which is in midst of recovering from the pandemic's impact,” central bank Governor Haruhiko Kuroda said on Tuesday.

Additional quotes

• GBP/USD picks up bids to refresh intraday high, pares the biggest daily loss in a month.
• Bullish MACD signals, steady RSI favor the pair’s rebound from five-week-long ascending trend line.
• Bears need validation from 1.1315-10 to retake control.

GBP/USD renews intraday top near 1.1500 while bouncing off short-term key support during early Tuesday, after posting the biggest daily loss in a month the previous day.

The cable pair’s recovery from an upward-sloping trend line from late September also takes clues from the bullish MACD signals and the firmer RSI (14) to keep buyers hopeful.

However, the 61.8% Fibonacci retracement of the GBP/USD pair’s August-September downside, around 1.1545, challenges the quote’s immediate upside.

Following that, a seven-week-old descending resistance line near 1.1630 appears as the last defense of the GBP/USD bulls, a break of which could direct them to September’s peak around 1.1740.

Alternatively, a downside break of the adjacent support line, close to 1.1460 at the latest, isn’t an open invitation to the pair sellers. That said, a convergence of the 21-DMA, 50% Fibonacci retracement level and an ascending trend line from September 26 constitute a tough nut to crack for the pair sellers around 1.1315-10.

During the GBP/USD weakness past 1.1310, October’s low near 1.0925 will gain major attention.

GBP/USD: Daily chart

Trend: Further downside expected

China's Caixin Manufacturing PMI for October arrived at 49.2 vs. 49.0 expected and 48.1 previous, showing that the country’s manufacturing sector activity is showing some signs of improvement amid covid containment.

Although levels of both production and new business fell during October, rates of decline eased.

Wang Zhe, Senior Economist at Caixin Insight Group said, “from the previous month to 49.2, but remained in contractionary territory. This marked the third consecutive month of contraction in manufacturing activities, still weighed down by Covid-19 outbreaks and consequent tightening of prevention and containment measures.”

“Supply and demand in manufacturing contracted in tandem amid persistent Covid outbreaks,” Wang added.

AUD/USD holds above 0.6400

The upbeat print of the Chinese Manufacturing PMI fails to move the needle for the aussie dollar, as AUD/USD keeps its range at around 0.6420, up 0.34% on the day, at the time of writing.

• EUR/GBP is marching towards 0.8640 as higher headline HICP has accelerated hawkish ECB bets.
• A 75 bps rate hike by the BOE would be the highest in the current cycle.
• The synergy of higher tax and spending cuts is needed to combat the debt crisis.

The EUR/GBP pair is looking to extend its recovery above the immediate hurdle of 0.8625 in the Tokyo session. The cross rebounded firmly on Monday after defending the critical support of 0.8574. The asset is being favored by long investors as UK’s novel leadership-infused optimism has faded away.

The appointment of Rishi Sunak as UK Prime Minister, the fifth leader in the past six years, brought short-term stability to UK bonds markets. The synergy of UK PM Rishi Sunak and Chancellor Jeremy Hunt is responsible for curtailing the debt mess in a highly-inflated environment.

To bring down the pile of debt, the administration is focusing on tightening the fiscal policy measures through spending cuts and levying higher tax obligations on the general public.

In an article written by Financial Times on Monday, Treasury insiders said that Sunak and Chancellor Jeremy Hunt had agreed that “those with the broadest shoulders should be asked to bear the greatest burden”, and everybody’s taxes would go up. They further added that the administration believes that the fiscal hole in the economy led by minting money to fight against Covid-19 and to support households against energy bills is needed to be filled. And, spending cuts seldom cannot fulfill the fiscal hole.

On the monetary policy front, Bank of England (BOE) Governor Andrew Bailey is set to tighten policy further to bring down the inflationary pressures. Analysts at Rabobank have come forward with a 75 basis point (bps) rate hike projection. This would be the largest rate hike in the current cycle.

Meanwhile, Euro investors are projecting more rate hike measures from the European Central Bank (ECB) as the headline Harmonized Index of Consumer Prices (HICP) has soared to 10.7% vs. the projections of 10.2%. Price pressures have climbed to the rooftop and more rate hikes are needed to contain the inflation mess.

• USD/JPY drops hard and BoJ intervention is suspected but not confirmed.
• USD/JPY bears have eyes on the upper quarter of the 147 area and then the 146.50s. 

USD/JPY has moved the forex space again in a sizeable drop in recent trade. The pair fell from a high of 148.82 to a low of 148.26 with the bulk of the happening in the last 15-min candle. 

there has been a series of 'out-of-nowhere'' moves in the yen in recent weeks as the currency falls to intolerable levels for the Bank of Japan and the Ministry of finance. The verbal and physical intervention has occurred on numerous occasions with moves as great as 500 pips, which dwarfs today's price action tenfold: 

Nevertheless, there has been an offer int he greenback and shock waves felt throughout forex. 

Earlier today, Japan's Finance Minister, Shun'ichi Suzuki, stated that they will respond appropriately to sharp FX moves and that they are closely watching FX moves with a high sense of urgency. He did not comment on levels, however.
    
With regards to intervention, he explained that it has yielded certain effects and they cannot tolerate excess FX volatility in speculative trading.

Japan's recent currency intervention has yielded "certain effects", Suzuki said after the government spent a record amount supporting the yen last month.

Meanwhile, the yen fell to 148.80 vs. the greenback at the start of this week and was under pressure following a dovish Bank of Japan kept ultra-low interest rates, bucking the trend among other major central banks. The move may well have promoted the MoF once again but there has not been any confirmation. 

USD/JPY technical analysis

The price has broken a key level of structure in this move which could equate to further downside for the day ahead, with eyes on the upper quarter of the 147 area. Below there, the bears will be focussed on the lower quarter that guards room all the way through to a test of the broader trendline and the 146.50s. 

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.2081 vs. the last close of  7.3050 which was the weakest since January 24 2008.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

• USD/CAD takes offers to renew intraday low during the first loss-making day in four.
• Confirmation of bearish chart pattern, U-turn from 200-HMA hurdle favor sellers.
• Bulls have a bumpy road unless crossing 1.3700 hurdle.

USD/CAD prints the first intraday loss in three as sellers attack 1.3600 early Tuesday.

In doing so, the Loonie pair justifies the previous day’s confirmation of a short-term rising bearish chart pattern, as well as the failure to cross the 200-HMA. Also adding strength to the quote’s downside bias are the bearish MACD signals.

However, the 50-HMA tests the USD/CAD bears around the 1.3600 threshold of late, a break of which could direct the quote towards the theoretical target surrounding 1.3430.

Though, multiple levels surrounding the 1.3500 round figure could challenge the pair’s downside before the 1.3430 level.

It should be noted that the recovery moves need a sustained break of the three-day-old rising wedge’s support line, now resistance around 1.3630, to lure short-term USD/CAD buyers.

Following that, the 200-HMA could test the pair’s further upside near 1.3660.

If the USD/CAD prices remain firmer past the 200-HMA, the aforementioned wedge’s upper line near 1.3700 will be crucial for the bulls to keep the reins.

Overall, USD/CAD has confirmed a bearish chart pattern and is likely to decline further, at least for the short term.

USD/CAD: Hourly chart

Trend: Further downside expected

• NZD/USD is trapped within a familiar 100 pip range following a series of higher highs.
• The bears look for a break of 0.5780 to open risks towards 0.5750. 

NZD/USD bulls have been climbing the ranks at the start of this week and ate homing in on a test of the upper 0.58s for the days ahead. The following illustrates the price behaviours across the daily and hourly time frames as follows:  

NZD/USD daily chart

The bird is perched on top of a key daily structure as shown in the chart above with prospects of a move higher towards the presumed resistance area as marked by the red channel. However, the bulls will need to maintain control here, as per the hourly structure drawn below around 0.5790, or face pressures potentially all the way back to the 0.5750s:

NZD/USD H1 chart

The price has been consolidating over the past few days within a familiar 100 pip range and is threatening to break below key support. Of the bulls do commit, a break of 0.5835 could be significant in opening prospects back towards the highs of near 0.5770.

• Market sentiment dwindles as RBA begins the key central bankers’ play scheduled for the week.
• Yields fade recent recovery amid mixed data, comments from US/Russia.
• Hawkish Fed bets, covid/geopolitical woes keep DXY buyers hopeful.
• US ISM PMI can entertain traders ahead of FOMC, NFP.

Risk profile remains blurred, despite being mildly positive, as the Reserve Bank of Australia (RBA) kick-starts the central bankers’ week on Tuesday. Other than the event-linked anxiety, the mixed concerns in the market and a light calendar before the RBA also allow the bears to take a breather before the bumper catalysts.

US 10-year Treasury yields remain sidelined near 4.05% by the press time, after rising in the last two consecutive days. It’s worth noting that the bond yields snapped a 10-week uptrend with the previous week’s negative closing. Even so, the bond coupons ended October on a firmer footing while posting the third positive closing. It should be observed that Australia’s 10-year Treasury yields also fade the previous day’s bounce off a one-month low, down 0.05% around the 3.825% level.

Elsewhere, Wall Street printed the first daily loss in three but S&P 500 Futures print mild gains at the latest.

The downbeat US data and hopes of more easing in the oil prices, and inflation in turn, appeared to have favored the market’s latest risk-on mood. On the same line could be comments from US President Joe Biden and Russian leader Vladimir Putin.

On Monday, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively.

“US President Joe Biden on Monday called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate, as he battles high pump prices with elections coming in a week,” said Reuters. On the other hand, Russia’s Putin said he can set up a gas hub in Turkey ‘quite quickly’ and was sure gas contracts will be signed. The Russian leader also added that there will be many in Europe who want to do so.

Even so, the CME’s FedWatch Tool signals a nearly 90% chance of the Fed’s 75 basis points of a hike on Wednesday’s all-important Federal Open Market Committee (FOMC) meeting, which in turn challenges the markets’ cautious optimism.

Additionally, fresh covid-led lockdowns in China and Russia’s rejection to accept peace on the grain deal also seem to keep the bears hopeful.

Moving on, the US ISM Manufacturing PMI, likely to ease to 50.0 versus 50.9 prior, will direct immediate market moves. Following that, the US S&P Global Manufacturing PMI for the stated month, expected to confirm the initial forecast of 49.9 figure, will join the JOLTS Jobs Openings for September, forecast 10M versus 10.053M prior, to also entertain traders.

Also read: Forex Today: Dollar strengthens ahead of RBA, Fed and more

Japan's Finance Minister, Shun'ichi Suzuki, has stated that they will respond appropriately to sharp FX moves and that they are closely watching FX moves with a high sense of urgency. He did not comment on levels, however.
    
He said that fx intervention has yielded certain effects and they cannot tolerate excess FX volatility in speculative trading.

Japan's recent currency intervention has yielded "certain effects", Suzuki said after the government spent a record amount supporting the yen last month.

Meanwhile, the yen fell to 148.80 vs. the greenback at the start of this week and was under pressure following a dovish Bank of Japan kept ultra-low interest rates, bucking the trend among other major central banks.

BOJ Governor Haruhiko Kuroda said the central bank was nowhere near raising interest rates, with inflation in Japan likely to fall short of its 2% target for years to come.

USD/JPY H1 chart

• AUD/NZD has failed to sustain itself above 1.1000 ahead of RBA monetary policy.
• The historic rise in the Australian inflation rate has made RBA policymakers' job more tedious.
• A decline in NZ labor cost data could impact households’ sentiment.

The AUD/NZD pair has failed in holding itself above the psychological resistance of 1.1000 as investors have shifted their focus toward the monetary policy announcement by the Reserve Bank of Australia (RBA). The cross remained in a negative trajectory last week after the Australian Bureau of Statistics reported a historic surge in the quarterly inflation data.

A recent spike in the inflation rate has put RBA policymakers in dilemma whether to advocate for the continuation of the 25 basis points (bps) rate hike as announced in October or return to half-a-percent rate hike. The inflation rate in the third quarter rose to 7.3%, which has made the job of RBA Governor Philip Lowe more tedious as economic prospects can’t be ignored while handling the inflation mess.

Economists at ANZ Bank cited that “A 50 bps rise in November is possible, but we think the RBA will prefer to hike more frequently than shift back to 50 bps, given the reasoning behind the decision to go 25 bps in October.”

While analysts at Westpac carry a contrary view and see a rate hike of 50 bps. “The RBA will lift the cash rate by 50 bps, to 3.10%. This is a non-consensus view – most commentators anticipate a move of 25 bps. It is significant that Q3 inflation data was much higher than anticipated. The 1.8%qtr, 6.1%yr increase in trimmed mean inflation was a shock result. It demands a more urgent response from the RBA.

On the NZ front, Wednesday’s employment data will be of utmost importance. The Employment Change for the third quarter is seen at 0.5% vs. the prior release of 0%. While the jobless rate may trim to 3.2% vs. 3.3% released earlier. However, the catalyst that could impact the sentiment of households is the labor cost index, which is seen lower at 1% against the prior release of 1.3%.

Mounting inflation in the kiwi economy demands higher earnings for households to make payouts of inflation-adjusted goods and services. Lower expansion in earnings would be unable to offset higher expenses, which could weigh on kiwi bulls.

• AUD/USD picks up bids to pare short-term losses.
• Firmer oscillators back the recent bounce off nearby crucial DMAs, 13-day-old ascending trend line adds to the downside filter.
• Buyers need validation from a downward-sloping resistance line from mid-August.

AUD/USD bulls return to the table, after a three-day absence, as the Aussie pair prints the first daily gains around 0.6410 ahead of Tuesday’s monetary policy announcements from the Reserve Bank of Australia (RBA).

Also read: AUDUSD: The Aussie Dollar hovers around 0.6400 ahead of the RBA and the Fed decisions

In doing so, the AUD/USD prices rebound from a 10-DMA support, around 0.6380 at the latest. Also supporting the quote’s recovery are the bullish MACD signals and the steady RSI.

However, the upside room appears limited as a descending resistance line from mid-August, close to 0.6490, could challenge the bulls. Following that, the previous week’s peak of 0.6522 and 38.2% Fibonacci retracement level of August-October declines, near 0.6540, will be crucial to cross for the AUD/USD pair buyers to keep the reins.

Alternatively, a downside break of the 10-DMA support near 0.6380 isn’t a sure signal for the bear’s return as a convergence of the 21-DMA and a two-week-long support line, close to 0.6355, will be a tough nut to crack for the AUD/USD sellers before retaking the control.

Even if the quote breaks 0.6355 support, multiple supports around 0.6350, 0.6280 and 0.6230 could challenge the pair’s further downside.

AUD/USD: Daily chart

Trend: Limited recovery expected

• Gold price remains pressured around one-week low, prints four-day downtrend.
• US dollar struggles to extend three-day winning streak amid sluggish yields, mixed sentiment.
• Technical breakdown, hawkish Fed bets keep XAU/USD bears hopeful.

Gold price (XAU/USD) remains depressed for the fourth consecutive day, mildly offered near $1,632 by the press time, as the metal bears struggle for fresh clues during Tuesday’s sluggish start.

The metal’s inaction could be linked to sluggish US Treasury yields amid the market’s indecision ahead of the key central bank announcements, as well as the US employment data. That said, US 10-year Treasury yields remain sidelined near 4.05% by the press time, after rising in the last two consecutive days. It’s worth noting that the bond yields snapped a 10-week uptrend with the previous week’s negative closing. Even so, the bond coupons ended October on a firmer footing while posting the third positive closing.

Furthermore, the downbeat US data and hopes of more easing in the oil prices, and inflation in turn, appeared to have also challenged the XAU/USD bears. On Monday, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively.

Further, comments from US President Joe Biden and Russian leader Vladimir Putin appeared to have also eased the market’s fears and seemed to have probed the gold sellers of late. "US President Joe Biden on Monday called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate, as he battles high pump prices with elections coming in a week,” said Reuters. On the other hand, Russia’s Putin said he can set up a gas hub in Turkey ‘quite quickly’ and was sure gas contracts will be signed. The Russian leader also added that there will be many in Europe who want to do so.

Amid these plays, Wall Street printed the first daily loss in three but S&P 500 Futures print mild gains at the latest. It should, however, be noted that the CME’s FedWatch Tool signals a nearly 90% chance of the Fed’s 75 basis points of a hike on Wednesday’s all-important Federal Open Market Committee (FOMC) meeting, which in turn keeps the US Dollar buyers hopeful.

Looking forward, the US ISM Manufacturing PMI, likely to ease to 50.0 versus 50.9 prior, will direct immediate XAU/USD moves. Following that, the US S&P Global Manufacturing PMI for the stated month, expected to confirm the initial forecast of 49.9 figure, will join the JOLTS Jobs Openings for September, forecast 10M versus 10.053M prior, to also entertain the commodity trader.

Technical analysis

A clear downside break of a one-week-old horizontal support, now resistance around $1,638-39, joins bearish MACD signals to direct the gold price towards an upward-sloping support line from the late September, around $1,620 by the press time.

In a case where the XAU/USD drops below $1,620, the latest swing low and the yearly bottom, respectively near $1,617 and $1,614, could entertain the bears before directing them to the 61.8% Fibonacci Expansion (FE) of October 04-26 moves, near $1,605.

Alternatively, an upside break of the $1,620 support-turned-resistance could trigger the yellow metal’s further advances targeting the 100-EMA and 200-EMA, close to $1,655 and $1,670 in that order.

It should be noted, however, that the gold buyers remain cautious unless crossing the late October swing high, around $1,675.

Gold: Four-hour chart

Trend: Further downside expected

• USD/JPY is advancing towards 149.00 as the fed is sent to deliver a 75 bps rate hike.
• Goldman Sachs sees Fed’s interest rate at 5% amid soaring price pressures.
• A downbeat US ISM Manufacturing PMI could weigh pressure on the DXY.

The USD/JPY pair has rebounded firmly from around 148.60 and is marching towards the round-level resistance of 149.00 as investors are pouring their funds into safe-haven assets to dodge volatility. The asset has refreshed its day’s high at 148.80 and is expected to continue acceleration amid an overall negative trend in market sentiment.

S&P500 witnessed a steep fall on Monday as investors sensed panic attacks amid anxiety ahead of monetary policy by the Federal Reserve (Fed). The US dollar index (DXY) displayed a vertical rally toward a high of 111.50.

The extent of the rate hike by the Fed is crucial as the central bank has to tap policy tightening measures to combat mounting inflationary pressures. A report from Goldman Sachs cites that the US central bank could go beyond its desired terminal rate of 4.75% to 5%. The road to a 5% terminal rate will go through the phases of 75 basis points (bps) this week, 50 bps in December, and 25 bps in February and March, the report added.

Also, the chances for a fourth consecutive 75 bps rate have soared to 89.2%, as per the CME FedWatch tool. This has also supported US government bonds return to rebound to near 4.06%

Apart from that, US ISM Manufacturing PMI will remain in the spotlight. The economic data is seen lower at 50.0 vs. the prior release of 50.9. Also, the ISM New Orders Index will be the crucial catalyst that displays forward demand and is seen significantly higher at 49.1 against the former figure of 47.1.

On the Tokyo front, upbeat Retail Sales data has failed to strengthen yen against the greenback. The monthly and annual Retail Trade have accelerated to 1.1% and 4.5% vs. the projections of 0.6% and 4.1% respectively. The Larger Retail Sales have soared to 4.1% against the estimates of 3.6%.

• EUR/USD bulls eye a run through a key 61.8% Fibo while bears eye a break of structure. 
• 0.9860 is a key hurdle for the bears that is yet to give out. 

EUR/USD has been attempting to break to the upside but failures have seen the pair stuck within familiar ranges in a short squeeze towards 1.0090. The US dollar has been a performer at the start of the week but is yet to seriously dent the structure of the market while above 0.9860 support vs. the euro. The following illustrates the prospects of a breakout one way or the other in the build-up to the Federal Reserve this week. 

EUR/USD daily charts

The price has carved out an M-formation within the symmetrical triangle which leaves bias to the downside so long as the neckline of the M-formation holds over the coming sessions:

A break above the 61.8% Fibonacci, on the other hand, could be a sign of strength from the bulls and would leave the prospects of an upside breakout back on the cards. A target of 1.0090 and then 1.0190 would be a compelling feature should these levels also give out. On the downside, bears will be in control o a break of the 0.9540s. 

• US Dollar Index seesaws near one-week high, snaps three-day uptrend.
• Cautious mood ahead of the key data/events probe yields even as Fed wagers keep bond bears hopeful.
• Softer US data, comments from Biden, Putin appeared to have probed DXY bulls of late.
• Second-tier US statistics could entertain buyers but FOMC, NFP are the key.

US Dollar Index (DXY) fades the upside momentum near 111.50 during early Tuesday, following a three-day run-up. In doing so, the greenback’s gauge versus the six major currencies traces sluggish US Treasury yields amid the market’s indecision ahead of the key central bank announcements, as well as the US employment data.

US 10-year Treasury yields remain sidelined near 4.05% by the press time, after rising in the last two consecutive days. It’s worth noting that the bond yields snapped a 10-week uptrend with the previous week’s negative closing. Even so, the bond coupons ended October on a firmer footing while posting the third positive closing.

That said, the downbeat US data and hopes of more easing in the oil prices, and inflation in turn, appeared to have exerted downside pressure on the US dollar.

On Monday, the US Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for October came in at 45.2 and -19.4 versus 47.0 and -15.0 expected respectively.

Comments from US President Joe Biden and Russian leader Vladimir Put appeared to have also eased the market’s fears and seemed to have probed the DXY bulls of late.

“US President Joe Biden on Monday called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate, as he battles high pump prices with elections coming in a week,” said Reuters. On the other hand, Russia’s Putin said he can set up a gas hub in Turkey ‘quite quickly’ and was sure gas contracts will be signed. The Russian leader also added that there will be many in Europe who want to do so.

Amid these plays, Wall Street printed the first daily loss in three but S&P 500 Futures print mild gains at the latest. It should, however, be noted that the CME’s FedWatch Tool signals a nearly 90% chance of the Fed’s 75 basis points of a hike on Wednesday’s all-important Federal Open Market Committee (FOMC) meeting, which in turn keeps the US Dollar buyers hopeful.

It should be noted that the US ISM Manufacturing PMI, likely to ease to 50.0 versus 50.9 prior, will direct immediate DXY moves. Following that, the US S&P Global Manufacturing PMI for the stated month, expected to confirm the initial forecast of 49.9 figure, will join the JOLTS Jobs Openings for September, forecast 10M versus 10.053M prior, to also entertain the pair traders.

Technical analysis

US Dollar Index remains off the buyer’s radar unless breaking a convergence of the previous support line from early August and a one-month-old descending resistance line, around 112.10-15 by the press time.