• USDJPY is attempting to run higher but the Bank of Japan headwinds and Nonfarm Payrolls loom.
• The US dollar has remained in the driving seat following the Fed. 

USDJPY has been creeping in on the US session and London highs, trading between 147.97 and 148.29 on Friday so far. The pair sticks to the front side of the micro trendline as illustrated below with no signs of a break in structure, so far, ahead of the key event of the day that will come in the US session. 

There is always the threat of the Bank of Japan, BoJ, and Ministry of Finance, MoF, although, the Nonfarm Payrolls is a fixed schedule that traders are looking ahead to ahead of next week's inflation data. The recent volatility, stemming from the US Federal Reserve event on Wednesday has been a driver for forex over the recent sessions where the US dollar strengthened after the Fed's hawkish comments. Global equities fell while US Treasury yields rose on Thursday as a consequence while investors weighed the hawkish commentary with the prospects of further interest rate hikes targeted at reining in inflation. This would usually be bullish for the prior safe-haven yen, but the divergence between the Fed and BoJ has stripped the currency of such allure.

Powell said during a press conference that the "ultimate level" of interest rates is likely higher than previously estimated, and the central bank still has "some ways to go." This sent markets off a cliff, seeing the likes of the S&P 500 drop almost 100 points and the Dow by more than 500 points as rattled investors ran for cover while the two-year note climbed toward 5%. The yield on the benchmark 10-year note rose to 4.22%.

Meanwhile, the yen remains in demand vs the crosses and this could keep the threat of immediate intervention at bay. Japanese officials may decide to wait for the forthcoming data events as a guide to how strong the US dollar might get over the course of the weeks leading into the next Fed meeting in December. 

USDJPY technical analysis

The price is headed into what would be expected to be a firm resistance area. The structure to the downside is located at 147.97, 147.61 and 147.28. While above these levels and on the front side of the micro trendline, the bias remains to the upside, however, with 149.71 eyed.

• EURGBP is looking to surpass the immediate hurdle of 0.8740 amid a recession in the UK.
• A severe slowdown in the UK economy has left less room for more rate hikes.
• The odds of a hawkish ECB have risen after ECB President cited that inflation is way too high.

The EURGBP pair is displaying signs of exhaustion in the upside momentum after a juggernaut rally to near 0.8740 in the early Asian session. The shared currency bulls had a ball on Thursday after the Bank of England (BOE) announced a rate hike by 75 basis points (bps).

It seems that the ‘Buy the Rumor Sell the News’ indicator was triggered on Thursday after BOE Governor Andrew Bailey announced a historic jump in interest rates. Pound bulls were severely punished after UK interest rates surged by 75 basis points (bps) for the first time since 1989 to 3.0%.

The extent of the rate hike was in line with the estimates. Also, UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt’s plan of squeezing liquidity from the market by tweaking fiscal policy are supportive of the BOE’s agenda of bringing price stability.

What is hurting the pound bulls is the least room for more hikes as economic prospects are extremely dark. The BOE has confirmed that the UK is already in recession and the situation will remain potentially two years longer than observed during the subprime crisis.

Goldman Sachs’ Chief European Economist Sven Jari Stehn wrote in his latest research note that the UK economic recession is likely to be deeper than previously forecast. “The country is likely to have a four-quarter cumulative fall in the gross domestic product (GDP) of 1.6%.” The investment banking firm has also lowered UK’s growth projections to 1.4% from -1.0% for 2023 on an annual basis.

On the Eurozone front, the hawkish commentary from European Central Bank (ECB) President Christine Lagarde has infused fresh blood into the shared currency bulls. On Thursday, ECB President cited that that inflation is way too high, ''we have to take action,'' She further added that the ECB will do whatever is needed and will use all instruments including balance sheet reduction.

US inflation expectations portrayed a strong downside move on Thursday as traders reassessed updates from the US Federal Reserve (Fed). The same seemed to have probed the US Treasury yields’ upside momentum of late, which in turn challenges the US Dollar Index (DXY) bulls ahead of the key Nonfarm Payrolls (NFP) data for October.

That said, the inflation precursors, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped to the lowest levels since October 19 and 13 in that order.

While noting the details, the longer-term inflation expectations dropped to the lowest level in three weeks whereas the 5-year benchmark slumped to the lowest levels in 12 days with the latest figures being 2.40% and 2.54% respectively.

The US Dollar Index (DXY) failed to justify the downbeat inflation expectations while refreshing the three-week high near 113.00, sidelined of late.

Moving on, the US employment report for October will be crucial for the market players to watch for fresh impulse. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior.

Also read: US October Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

• GBPUSD bears take a breather at three-week low after falling the most in 1.5 months.
• BOE’s 75 bps rate hike couldn’t lure bulls amid recession woes.
• Hawkish Fed, geopolitical/covid concerns also underpinned US dollar strength.
• US employment data for October appears crucial for immediate directions, bears are likely to keep the reins.

GBPUSD steadies around a three-week low near 1.1160 following the biggest daily slump in 1.5 months as traders prepare for the US employment data for October during early Friday. Also keeping the Cable pair sidelined is the lack of major data/events.

Bank of England (BOE) hiked the monetary policy rate by 75 bps to 3.0% while matching the market forecasts. The “Old Lady”, as the BOE is informally known, also increased the inflation projections while cutting down the Gross Domestic Product (GDP) predictions from September forecasts. The central bank policymakers also signaled the longest and the shallowest economic recession ahead.

Following the rate announcements and the economic forecasts, BOE Governor Andrew Bailey said, “Bank rate may have to go up further.” The policymaker also stated that they maybe have the largest upside risk in inflation forecasts in MPC history.

The dovish rate hike from BOE drowned the GBPUSD prices and directed the bears toward the lowest levels since October 21. The quote’s bearish moves gained extra support from the market’s risk-off mood and strong US Treasury yields.

It should be noted that the mixed US data couldn’t stop the major currency pair from declining further. That said, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior.

While portraying the mood, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007.

Moving on, GBPUSD may witness further grinding amid a lack of major data/events ahead of the US employment report for October. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. That said, the downbeat forecasts for the scheduled statistics signal a corrective bounce in case of a surprise. However, strong outcomes will allow bears to challenge the previous monthly low.

Also read: US October Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Technical analysis

A clear downside break of a one-month-old ascending trend line and the 50-DMA confluence keeps GBPUSD bears hopeful.

• The American Dollar remains in the driver’s seat, bolstered by the Federal Reserve Chair Jerome Powell.
• Positive US economic data underpinned the US Dollar, though justified the need for further tightening
• The Trade of Balance in Australia capped the AUD losses, though PMIs at recessionary territory weighed on the AUDUSD.
• AUDUSD Price Analysis: A fall below 0.6300 could exacerbate a fall towards 0.6209 ahead of testing the YTD low at 0.6169.

The Aussie Dollar is registering minimal gains as the Asian session kicks in, following a risk-off trading session as market participants assessed the Federal Reserve’s adjustments to its policy rate, saying that Jerome Powell and his colleagues would slow the size of rates increases but will revise up the Federal funds rate (FFR) projections for 2023. Additionally, the United States calendar revealed goodish economic data that weighed on the Australian Dollar. Hence the AUDUSD is trading at 0.6288 at the time of writing.

A dampened sentiment spurred by the Federal Reserve weighed on the AUD, bolstered the USD

Sentiment remains negative, as Wall Street’s ended with losses, while US equity futures prolong the ongoing week’s agony for the stock market. The Federal Reserve’s 75 bps rate hike and Fed Chair Jerome Powell’s hawkish press conference triggered risk aversion, a headwind for the AUD. Data from the US, like the ISM Non-Manufacturing PMI Index for October, confirmed a deceleration of the economy but persisted at expansionary territory at 54.4 vs. 55.5 estimates and 56.7, the previous month’s reading. At the same time, Factory Orders for September remained unchanged at 0.3% MoM, while the Jobless Claims for the week ending on October 28, rose by 217K, lower than the 220K estimated.

Given that economic data was positive for the United States economy, it’s not what the Federal Reserve is expecting, as it’s struggling to curb inflation at around 8% YoY levels, suggesting that the central bank would continue its tightening cycle until demand slows as expected.

The Balance of Trade in Australia registered a surplus, though weak PMIs and poor China data, headwinds for the AUD

Elsewhere, the economic calendar in Australia featured October’s S&P Global Services and Composite PMIs, which came lower than the previous reading, signaling that Australia´s economy is slowing faster than estimates. Also, the Balance of Trade printed a surplus of A$12.44 billion against A$8.85 billion foreseen, putting a lid on the AUDUSD fall on Thursday.

Additional factors, like China’s Caixin Services and Composite PMI, summed to a risk-off impulse, decreasing demand for the Aussie Dollar, as investors seeking safety turned to the US Dollar. The figures came at 48.4 and 48.3, respectively, illustrating that Covid-19 restrictions derailed the Chinese economy, weighing in its largest trading partner, Australia.

On Friday, the Australian economic calendar will feature Retail Sales and the RBA Statement of Monetary Policy (SoMP). On the US front, the US Nonfarm Payrolls report for October is awaited, alongside the Unemployment Rate.

AUDUSD Price Analysis: Technical outlook

After the Federal Reserve hiked rates on Wednesday, the AUDUSD remains downward biased, per the daily chart. The Fed day left a huge 140-pip candle, shy of testing the 50-day EMA, which pierced the 20-day EMA. But it retreated later in remarks by Federal Reserve Chair Jerome Powell, as the AUDUSD slid below the 20-day EMA as sellers gathered momentum.

That said, the AUDUSD is extending its losses and is eyeing the October 21 swing low at 0.6209, which, once cleared, could pave the way toward the YTD low at 0.6169. Nevertheless, if the AUDUSD reclaims 0.6300, it could climb towards the November 3 high at 0.6371, posing a real threat of challenging the psychological 0.6400.

• USDCHF is oscillating around a three-year high at 1.0148 amid a risk-off market mood.
• A better-than-projected US NFP could strengthen the DXY further.
• The DXY is looking to surpass the immediate hurdle of 113.00.

The USDCHF pair is displaying a lackluster performance from the late New York session after a juggernaut rally that pushed the asset to near three-year high at 1.0148. The asset has witnessed a stellar buying interest after overstepping the psychological hurdle of 1.0000.

The greenback bulls enjoyed bids from the market participants as the risk-off profile continued on Thursday. S&P500 faced sheer volatility and dropped more than 1% as hawkish Federal Reserve (Fed) guidance has forced economists to cut their corporate earnings guidance led by higher interest obligations.

Meanwhile, the US dollar index (DXY) is hovering around the 113.00 hurdle and may overstep the same amid a negative market mood. The 10-year US Treasury yields have climbed to 4.15 as the odds of continuation of a bigger rate hike are solid.

Going forward, the US employment data will be of utmost importance. As per the projections, the US Nonfarm Payrolls (NFP) data is seen at 200k, lower than the prior release of 263k. While the jobless rate could increase to 3.6%. It is worth noting that employment opportunities are rising in the US economy but at a declining rate for the past three months, which seems to be the result of accelerating interest rates by the US central bank.

Apart from the payroll additions, the Average Hourly Earnings data holds significant importance. The labor cost data is seen lower at 4.7% vs. the prior release of 5.0%. A decline in earnings could dent households’ sentiment as higher payouts won’t get offset by subdued earnings.

On the Swiss franc front, the headline Consumer Price Index (CPI) has dropped to 3.0% on an annual basis against the projections of 3.25 and the prior release of 3.3%. This may force the Swiss National Bank (SNB) not to turn extremely hawkish on monetary policy ahead.

• AUDJPY grinds lower towards 93.00, yields, RBA Monetary Policy Statement eyed
• AUDJPY seesaws around three-week low, eyes the first daily gain in four.
• Risk aversion and mixed Aussie data weigh on prices.
• Fears of Japan's intervention, dovish RBA statement keep sellers hopeful.
• Australia’s Q3 Retail Sales, the bond market’s performance eyed as well.

AUDJPY portrays the typical pre-event anxiety during early Friday morning in Asia. That said, bears take a breather the lowest levels since October 17, also probing the three-day downtrend, ahead of the key Reserve Bank of Australia (RBA) Monetary Policy Statement (MPS). Also important is the third quarter (Q3) detail of Australia’s Retail Sales, not to forget Japan’s return from holiday.

AUDJPY justified its risk-barometer status in the last few days amid the global central bankers’ rush towards higher rates, which in turn amplifies the recession fears. Recently, the US Federal Reserve (Fed) and the Bank of England (BOE) were among the same while comments from the European Central Bank (ECB) policymakers also raised such concerns.

Additionally, mixed data from Australia and China also exerted downside pressure on the AUDJPY prices of late. That said, China’s Caixin Services PMI for October dropped to the lowest level in five months while flashing 48.4 figure versus 49.3 prior. Further, Australia’s trade surplus increased to 12,444M in September versus 8,850M expected and 8,324M prior while the Exports rallied by 7.0%, compared to 2.6% prior. However, the growth of the Imports dropped to 0.4% versus 4.5% prior.

Earlier in the day, Australia’s AiG Performance of Construction Index for October eased to 43.3 versus 46.5 prior.

Elsewhere, the off in Japan, fears of Tokyo intervention and covid woes from China, not to forget the latest geopolitical tension emanating from North Korea, also weigh on the AUDJPY prices.

Against this backdrop, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007.

Looking forward, AUDJPY prices may witness further downside amid the market’s risk-off mood, as well as the likely dovish tone of the RBA’s MPS. However, Japan’s return from the holiday and any improvement in Aussie Q3 Retail Sales, expected at 0.4% QoQ versus 1.4% prior, might trigger the cross-currency pair’s corrective bounce.

Technical analysis

A daily closing below the 21-DMA, around 93.65 by the press time, directs AUDJPY towards the 200-DMA support level of 91.75.

A series of news regarding the oil sector has come out in early Asia which may have an impact on the price of oil in the coming sessions.

Firstly, the US Department of Energy said it sold 15 million barrels of oil from the Strategic Petroleum Reserve which has completed the last batch of the largest-ever release from the stockpile. therefore, US President Joe Biden will be expected to release more. Additionally, the Saudis have said they will lower oil prices for Asian customers next month. This news dropped at the same time that the G7 agreed to fix a price cap on Russian oil. 

Meanwhile, US oil declined on Thursday, with prices pressured by strength in the US dollar and concerns that aggressive rate hikes by Federal Reserve will lead to an economic recession. At the time of writing, WTI is trading at $87/95bbls. 

• EURUSD stays pressured around two-week low, braces for the first weekly loss in three.
• Clear break of five-week-old previous support line, bearish MACD signals favor sellers.
• A 1.5-month-long horizontal support can test bears before the yearly low.
• 21-DMA acts as an extra filter to the north, 61.8% FE can lure bears past 0.9535.

EURUSD remains on the back foot around the lowest levels in two weeks, pressured near 0.9745 during Friday’s Asian session.

In doing so, the major currency pair justifies the previous day’s upside break of an upward-sloping support line from late September, now resistance around 0.9775. Also increasing the strength of the bearish bias are the downbeat MACD signals and the RSI (14) conditions.

As a result, the EURUSD bears are all set to aim for the six-week-old horizontal support surrounding 0.9680 before targeting the yearly low near 0.9535.

If the pair bears keep the reins past 0.9535, the 61.8% Fibonacci Expansion (FE) of the quote’s moves between late June and October 26, around 0.9420, will gain the market’s attention.

Alternatively, an upside clearance of the support-turned-resistance line of 0.9775 is an open invitation to the EURUSD bulls as the 21-DMA level of 0.9828 guards the quote’s short-term recovery.

Even if the quote stays successfully beyond 0.9830, the EURUSD pair’s further upside remains doubtful as the 100-DMA and October’s peak, respectively around 1.0050 and 1.0095, could test the bulls before giving them control.

EURUSD: Daily chart

Trend: Bearish

• A declining highs structure has confirmed a bearish reversal in the asset.
• Negative risk traction has underpinned the greenback bulls.
• Stabilization below the 200-period EMA is supporting the downside bias.

The NZDUSD pair is displaying a rangebound structure in the early Tokyo session after facing barricades near the round-level resistance of 0.5800. The pullback move from Thursday’s low at 0.5741 could get concluded due to the risk-aversion theme.

The market profile is extremely negative post hawkish guidance from the Federal Reserve (Fed) and has forced economists to slash already weak economic projections and earnings guidance. Meanwhile, the US dollar index (DXY) is aiming to shift comfortably above the immediate hurdle of 113.00.

On an hourly scale, the commodity-linked currency has turned extremely weak as the asset has formed a lower-high lower-low structure, which indicates a bearish reversal. Stabilization below the 200-period Exponential Moving Average (EMA) at 0.5798 is supporting the downside bias.

The 20-period EMA at 0.5786 has slipped below the 200-EMA, which signals that the downside momentum has been triggered.

Also, the Relative Strength Index (RSI) (14) is struggling to break the 40.00 hurdle on the upside.

Going forward, a downside break of Thursday’s low at 0.5741 will drag the commodity-linked pair toward the round-level support at 0.5700, followed by October 24 low at 0.5657.

Alternatively, the kiwi bulls could regain strength if the asset oversteps October 31 high at 0.5836, which will drive the asset towards Tuesday’s high at 0.5903. A breach of the latter will expose the asset to recapture November’s high at 0.5944.

NZDUSD hourly chart 

• USDCAD steadies around two-week top, probes six-day uptrend.
• Firmer yields, risk aversion underpinned US dollar but mixed US data tests DXY bulls.
• Cautious mood ahead of the key statistics may restrict the pair’s immediate moves.
• Hawkish Fed, sour sentiment and firmer yields could favor bulls, NFP is the key.

USDCAD remains sidelined around 1.3745, after refreshing the fortnight high, as traders await crucial employment data from the US and Canada during early Friday. The Loonie pair rose for six consecutive days in the past before the latest inaction around the multi-day top. That said, the market’s rush for risk safety and softer prices of Canada’s key export, the Crude Oil, appeared to have favored the quote’s latest upside.

WTI crude oil prices dropped nearly 1.7% to $87.98 by the end of Thursday’s North American session, trading nearby by the press time, as fears of recession amplify as the major central banks keep fueling the benchmark rates. Also weighing on the black gold prices could be the covid woes from China and the latest headlines suggesting the Group of Seven (G7) has agreed to put a cap on Russian oil prices.

Elsewhere, the US Dollar Index (DXY) extended its post-Fed run-up towards refreshing the highest levels in two weeks. Increased risk aversion amid fears of higher rates and economic slowdown, as conveyed by policymakers from the Bank of England (BOE) and the European Central Bank (ECB), appears the key catalyst for the greenback’s latest run-up. On the same line could be the firmer yields. However, mixed US data seemed to have probed the DXY bulls ahead of the all-important US Nonfarm Payrolls (NFP).

US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior.

Amid these plays, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007.

Moving on, USDCAD traders may witness lackluster moves ahead of the key jobs report from the US and Canada. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. On the other hand, Canada’s Net Change in Employment may also ease to 10K versus 21.1K prior with the Unemployment Rate likely witnessing an uptick to 5.3% from 5.2% prior.

That said, the scheduled numbers may fail to impress USDCAD traders by matching the downbeat forecasts. However, the Fed’s hawkish performance versus the Bank of Canada’s (BOC) easy rate hike could keep the buyers hopeful, especially amid softer Oil prices.

Also read: Canadian October Jobs Preview: Labor market upturn in the doldrums

Technical analysis

A successful trading beyond the three-week-old resistance line, now support around 1.3650, keeps the USDCAD pair buyers hopeful of visiting the yearly high surrounding 1.3980.

• Gold price has faced hurdles while attempting to cross the immediate hurdle of $1,632.45.
• S&P500 continued facing sell-off as the risk aversion theme remained intact.
• The release of the US NFP data will provide some clarity for further Fed’s monetary policy action.

Gold price (XAUUSD) is facing barricades around the critical hurdle of $1,632.45 in the early Tokyo session. The precious metal has remained sideways around $1,630.00 after a rebound move post registering a fresh two-week low at $1,616.67 on Thursday. The gold prices are expected to continue auctioning into a rangebound structure as investors have shifted to focus on the US Nonfarm Payrolls (NFP) data.

Meanwhile, the risk profile has extended its sour performance as S&P500 witnessed a sell-off consecutively on Thursday. Also, the 10-year US Treasury yields accelerated to 4.15% after hawkish guidance from the Federal Reserve (Fed) enchanted risk aversion on market mood.

On Friday, the release of the US employment data will provide cues about Fed’s intentions toward December’s monetary policy. A higher-than-expected improvement in job additions data would delight Fed chair Jerome Powell to continue the current pace of hiking interest rates.

As per the projections, the US NFP is seen at 200k, lower than the prior release of 263k. While the jobless rate could increase to 3.6%.

Gold technical analysis

On an hourly scale, gold prices have resurfaced firmly after printing a fresh two-week low at $1616.67. The precious metal is auctioning above the 10-period Exponential Moving Average (EMA) at $1,626.50 and testing the upside break of the 20-EMA around $1,630.00.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range, which indicates that the gold bulls are not facing now downside momentum for now.

Gold hourly chart

• EURJPY fails to crack the confluence of resistance and the 20-DMA around 145.40.
• JPY buyers are gathering momentum, as shown by the RSI at bearish territory, aiming downward.

The EURJPY slides a minuscule 0.05% as the Asian Pacific session begins, courtesy of a risk-off impulse that weighed on the EUR, which registered losses of 0.45% vs. the JPY on Thursday. At the time of writing, the EURJPY is trading at 144.50.

EURJPY Price Analysis: Technical outlook

The EURJPY daily chart displays that Japanese Yen buyers are gathering momentum due to some reasons. First, since hitting the 2022 year high at 148.40, the cross-currency pair hoovered within a range for five days before tumbling to fresh weekly lows at 144.03. Second, the Relative Strength Index (RSI) crossed beneath the 50-midline with a bearish slope, suggesting a test of the 50-day Exponential Moving Average (EMA) at 143.12 is on the cards.

For that scenario to play out, the EURJPY's first support would be the 144.00 mark. Key support levels lie at the October 24 daily low at 143.72, followed by the previously mentioned 50-day EMA at 143.12. The break below will expose the psychological 143.00.

Contrarily, if EUR bulls reclaim 145,00, the EURJPY could climb towards 146.00, which, once cleared, could lay the ground towards the psychological 147.00, ahead of the YTD high hat 148.40.

EURJPY Key Technical Levels

• GBP/USD bears are now taking on a new layer of support.
• Bulls eye a correciton for the end of the week.

As per the prior analysis that was made after the Federal Reserve event on Wednesday and during high volatility, GBP/USD Price Analysis: Bears pounce on the bulls and drag them back to channel support, the price has followed the trajectory as forcasted.

GBP/USD prior analysis

It was stated that the price had dropped into the channel's support following Powell's pushback against rallying risk markets when pressed for commentary around the timings of a pivot. However, it was argued that on a break of support, there was a void of liquidity according to the rally that took place on October 25:

It as argued that the most likely trajectory from here would be for a correction prior to the next impulse to the downside, and thats what we got, woth a follow through to the next layer of support:

The price might be expected to correct at this juncture but the Nonfarm Payrolls will be the clicher in the start of the North American day on Friday:

• AUDUSD reached a new weekly low at around 0.6271 after hitting a weekly high at 0.6491.
• If the AUDUSD registers a daily close below 0.6300, it could exacerbate a fall towards 0.6209 ahead of testing the YTD low at 0.6169.

The AUDUSD plummets below the 0.6300 figure and beneath the 20-day Exponential Moving Average (EMA), extending its fall for six consecutive days after failing to crack the 50-day EMA at around 0.6548 since October 27. Hence, the AUDUSD tumbled and is trading at 0.6289, below its opening price by 0.86%, at the time of typing.

AUDUSD Price Analysis: Technical outlook

After the Federal Reserve hiked rates on Wednesday, the AUDUSD remains downward biased, per the daily chart. The Fed day left a huge 140-pip candle, shy of testing the 50-day EMA, which pierced the 20-day EMA. But it retreated later in remarks by Federal Reserve Chair Jerome Powell, as the AUDUSD slid below the 20-day EMA as sellers gathered momentum.

That said, the AUDUSD is extending its losses and is eyeing the October 21 swing low at 0.6209, which, once cleared, could pave the way toward the YTD low at 0.6169. Nevertheless, if the AUDUSD reclaims 0.6300, it could climb towards the November 3 high at 0.6371, posing a real threat of challenging the psychological 0.6400.

AUDUSD should be aware that the Relative Strength Index (RSI) is below the 50-midline with a bearish slope, suggesting the downtrend would likely continue in the near term.

AUDUSD Key Technical Levels

• EUR/USD bears are in control but the daily structure is intact still.
• The bulls could be about to move in from key support. 

EUR/USD dropped on the day to test a key support area between 0.9750 and the low of the day at 0.9730. The price is pressured om a stronger US dollar following the prior day's Federal Open Maret Committee meeting that ended with a blow-off in risk assets due to the comments from Fed Chair Jerome Powell. 

Treasury yields jumped on Thursday, with the two-year note climbing toward 5% due to Powell saying the "ultimate level" of the US central bank's policy rate would likely be higher than previously estimated. He said that after the Fed announced that they had raised that interest rates by 75 basis points, as expected, to push its target range to 3.75%-4.0%.

ECB/Fed divergence weighs

However, bond and equity markets have sold off on the hawkish stance, supporting the US dollar and remained under pressure on Thursday while traders are roughly evenly split between the odds of a 50 basis-point and 75 basis-point rate hike in December. The peak Fed funds rate is seen climbing to at least 5%, compared with a prior view of 4.50%-4.75% rise and that is fuelling a divergence between the Fed and the European Central Bank given the dovish rhetoric from the ECB's governor, Christine Lagarde.

Lagarde emphasised a data dependency and the meeting-by-meeting approach following the meeting that took place last week. There was no discussion about ending the QE reinvestment policy. Subsequently, Rates markets lowered the ECB's expectations for further rate hikes by around 25bp yesterday and are now pricing 57bp for the December meeting with a peak in the ECB deposit rate to around 2.6%.

 EUR/USD technical analysis

The analysis above was posted after the FOMC on Wednesday and it stated that the daily chart was pointing to a lower level as its tried to break the trendline. ''The M-pattern's last leg is relatively short compared to the front side of the formation so it could be expected to extend lower in the coming sessions on Thursday. However, 0.9700 could be a tough nut to crack.''

The price has extended the last leg of the M-formation and a correction is to be expected at this juncture into the neckline, or at least into the 38.2% Fibonacci level near 0.9830. also to note, the price is now on the backside of the trendline, outside of the symmetrical triangle but is yet to break the daily structure of 0.9703. 

• The pound has accelerated its reversal from week highs at 172.00.
• A breach of 165.00 would cancel the upside trend from late-September lows.

The Sterling depreciated across the board on Thursday, hammered by the dovish tone of BoE Bailey’s press release after November’s monetary policy decision. In this context, downward pressure on the GBPJPY has gathered pace, accelerating the reversal from 172.25 highs on Monday to test support at the 165.00 area.

A successful breach of the 165.00 level, (October 10 21, and 24 lows) would negate the upward trend from late=September lows and increase bearish pressure towards the 50 and 100 days SMAs, now at 164.00/15 area and, below there, probably 162.60 (October 11 high).

On the upside, the pair should break intra-day resistance at 166.00 and 167.15 to ease the near-term’s bearish pressure and aim toward session high at 168.20.

GBPJPY daily chart

Technical levels to watch

What you need to take care of on Friday, November 4:

The American Dollar extended its post-Fed rally and reached fresh weekly highs against most of its major rivals. Soaring government bond yields underpinned the greenback, as the yield on the 2-year Treasury note touched its highest level since 2007 at 2.74%.

The focus was on the Bank of England, which hiked its benchmark rate by 75 bps as anticipated. However, policymakers downwardly revised the growth forecast, anticipating the recession will continue well into the future. Policymakers now expect the UK economy to contract by 1% in 2024, compared to 0.25% in the previous meeting. Also,UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are said to be planning tax hikes for roughly £40billion over the next 5 years.  The GBPUSD pair ended the day with sharp losses at around 1.1160.

Dollar’s rally stalled after the release of mixed US data, with investors particularly eyeing a tepid ISM Services PMI, which fell to 54.4 in October, worse than anticipated. Wall Street trimmed most of its intraday losses, although the three major indexes closed in the red.

The EURUSD pair hovers around 0.9750 after falling to 0.9729. Commodity-linked currencies extended their slides against the American dollar, with AUDUSD now hovering around 0.6300 and USDCAD trading at around 1.3740.

Gold flirted with the year’s low before bouncing now at around $1,630 a troy ounce. Crude oil prices eased, with WTI changing hands at $88.20 a barrel.

 On Friday, the US will release the October Nonfarm Payrolls report, with the country expected to have added 200K new jobs in the month. The Unemployment Rate is foreseen to tick higher from the current 3.5% to 3.6%.

Bitcoin Price Prediction: These on-chain metrics suggest bears are underwater

Bank of England's Catherine Mann said there still is a lot of momentum in drivers of inflation and they will need to do more if inflation keeps rising.

Her comments come after the central bank today hiked interest rates by 75 bps in what was the biggest incremental hike since 1989.

However, the pound remains pressured on the day, falling to a low of 1.1153 and by some 2%.

''The trigger for the poor reaction for GBP was the guidance from the Bank that while 'further increases in Bank Rate may be required for a sustainable return of inflation to target,'' analysts at Rabobank explained. 

''The upshot is that today’s move has been perceived as a dovish hike by markets and once again GBP is reacting to the gloomy projections from the Bank rather than to the fact that the Bank rate is now higher- albeit to a level that was already priced in.''

• New Zealand's dollar picks up from session lows at 0.5740, returns to the 0.5780 area.
• The kiwi has lost nearly 1% following US Fed's monetary policy decision.
• NZDUSD should break 0.5880 before further appreciation is likely – UOB.

The New Zealand dollar has trimmed losses on Thursday’s US session, bouncing up from one-week lows at 0.5740 and returning to 0.5780 so far. The par, however, is 0.6% lower on the day and has lost nearly 1% following the US Federal Reserve’s monetary policy decision.

The dollar reigns after Fed’s decision

The greenback outperformed the rest of the majors on Thursday, boosted by the hawkish comments of the Federal Reserve’s president, Jerome Powell, at the press release held after the monetary policy decision was released.

The bank met expectations with a 0.75% hike, but Powell signaled to further monetary tightening and suggested that rates might peak at levels above the market expectations. These comments surprised the markets, which had anticipated the possibility of a dovish pivot, and sent the US dollar rallying.

US macroeconomic data dented US strength earlier today, with the ISM Services PMI deteriorating to 54.4 in October from 56.7 in September, beyond the 55.5 expected.

Furthermore, preliminary data anticipated that US non-farm productivity increased by 0.3%, well below the consensus of 0.6% in the third quarter, with unit labor costs slowing down to 3.5% from 8.9% in the previous quarter.

NZD/USD should close above 0.5880 before further advance is likely – UOB

FX analysts at UOB see the pair in a consolidative mood while below 0.5880: NZD could rise, but it has to close above 0.5880 before further sustained advance is likely. NZD did not close above 0.5880 and yesterday (02 Nov), it dropped to a low of 0.5815 before extending its decline in early Asian trade. Upward pressure has subsided and we expect NZD to trade between 0.5740 and 0.5900 for the time being.”

Technical levels to watch

• Silver price trims some of Wednesday's losses, despite high US Treasury yields.
• The XAGUSD daily chart depicts the precious metal as neutral-to-downward biased, with key resistance at $20.00.
• Short term, a break above $20.00 will open the door toward $21.00; otherwise, it would challenge $19.00.

Silver price recovered some ground on Thursday, even though the American Dollar is rising more than 0.70%, as shown by the US Dollar Index, underpinned by high US Treasury bond yields after the Federal Reserve raised rates by 75 bps. At the time of writing, the XAGUSD is trading at $19.50, above its opening price by 1.56%, after hitting a daily low of $18.84.

Silver Price Analysis (XAGUSD): Technical outlook

XAGUSD bias remains neutral-to-downward biased, even though it cleared the 50-day Exponential Moving Average (EMA) at $19.10 and is battling the 100-day EMA at $19.46. The Relative Strength Index (RSI) is in bullish territory suggesting the XAGUSD is headed upward, but a clear break above $20.00 is needed to shift the bias to neutral. On the flip side, if the XAGUSD closes below the 100-day EMA, a fall toward the 50-day EMA is on the cards, ahead of a $19.00 test.

The XAGUSD one-hour chart portrays a different picture, with the white metal bias as neutral-to-upwards. Nevertheless, it should be noted that XAGUSD price action shows a wide-trading range, spurred on a Fed day, turning the hourly EMAs almost flat, meaning that the XAGUSD is consolidating. Further confirmation was provided by the RSI being in bullish territory but nearly flat.

XAGUSD key resistance levels lie at $20.07, the November 2 high, followed by the October 7 daily high at $20.82, ahead of $21.00. On the flip side, the XAGUSD first support would be the 50-hour EMA at $19.45, followed by the confluence of the 100 and the 200-hour EMAs at $19.38, followed by the $19.00 figure.

Silver Key Technical Levels

The European Central Bank President Christine Lagarde said on Thursday that inflation is way too high, ''we have to take action,'' adding that the ECB will do whatever is needed and will use all instruments including balance sheet reduction. 

Earlier, she was quoted saying, "we have to be attentive to potential spillovers'' and, "we are not alike and we cannot progress either at the same pace (or) under the same diagnosis of our economies."

"But we are also influenced by the consequences, particularly through the financial markets, and to a lesser extent, through trade as well, because clearly the exchange rate matters and has to be taken into account in our inflation projections," Lagarde said.

More to come...

• Oil prices retreat from the $90.00 area to levels near $88.00.
• A strong US dollar, following Fed's decision is weighing on crude prices.
• WTI faces a key resistance area at $90.00.

WTI Oil might have peaked right above $90 this week, as crude prices pulled back on Thursday, to pare gains after a two-day recovery. The West Texas Intermediate has depreciated about 2%  so far today, weighed by the US dollar's strength.

The US dollar surges after Fed’s decision

A soaring greenback has been pushing crude prices lower after Wednesday’s US Federal Reserve monetary policy decision. The bank hiked rates by 0.75% as expected and confirmed its commitment to continue tightening borrowing costs.

Fed president, Jerome Powell surprised the market with a hawkish rhetoric at the press conference, where he refused the idea that the bank might have overtightened and suggested that interest rates may peak at levels above the market expectations. These remarks curbed investors' expectations of a dovish pivot in December and sent the US dollar surging across the board.

US macroeconomic data, however, have not been particularly dollar-supportive on Thursday, especially the ISM services PMI, which has shown a weaker-than-expected increase on the sector’s activity in October, triggering a moderate pullback on the USD.

WTI capped below trendline resistance near $90.00   

From a wider perspective, the WTI remains in its positive trend from late September lows, yet capped by the trendline resistance from early July highs, now at $90.00, which should give way to expose the 100-day SMA, at $91.50 before the October 10 high at 92.55.

On the downside, below session lows at $87.00, a successful move beyond the 50-day SMA and trendline support near $85.50 would negate the near-term bullish trend exposing the October 31 low at $84.70.

WTI daily chart

Technical levels to watch

• USDJPY rising into BoJ intervention territories. 
• The pair is in no man's land between 148.70 and 146.20, risks are balanced. 

USDJPY has been climbing on the day, rising 0.26% to a current 148.30 at the time of writing, travelling between 147.11 the low to 148.45 so far. Meanwhile, traders continue to watch for any further official intervention to shore up the battered Japanese currency. The overall picture for USDJPY is a mixed one from a daily perspective as the price trades between no man's land, 148.70 and 146.20:

USDJPY daily chart

As illustrated, the price is wedged into a coil between the said levels in the main with a current bias to the upside on a break of 148.70. However, as the following near-term charts will show, there is the threat of intervention from the Bank of Japan, BoJ.

USDJPY H1 charts

The price is climbing towards prior highs and this raises the prospects of intervention from the BoJ/Ministry of Finance, MoF. Therefore, given that the price is on the backside of the prior trend, there are prospects of a switch-up to the downside, as follows:

There has already been a break of structure, (BoS), so failures below the current resistance of 149.00 could see a significant drop below 147.00 to target 145.00.

• The British Pound tanks more than 200 pips weighed by BoE’s Governor Bailey, saying that rates would be lower than market expectations.
• The American Dollar continues to rise against most G8 currencies, bolstered by Fed commentary and US Services PMI.
• GBPUSD traders brace for the October US Nonfarm Payrolls report on Friday.

The GBPUSD continues to drop during Thursday’s North American session, following rate hikes by the Bank of England (BoE) and the Federal Reserve (Fed), lifting overnight rates by 75 bps. However, the interest rate differential favors the American Dollar to the detriment of the Pound Sterling. At the time of writing, the GBP/USD is trading at 1.1163, plunging to fresh two-week lows, down almost 2%.

The BoE Governor Bailey pushed back against peaking rates around 5%, and the GBPUSD sank

The BoE’s decision further than to help the British Pound weakened the currency, as the central bank pushed back against market expectations to hike the Bank Rate towards 5%. The BoE Governor Andrew Bailey said, “Further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets.” The central bank added that the UK economy entered a recession in the three months through September, with output falling an estimated 0.5%. The BoE expects a “long-lasting recession” will hit the UK, and the duration would depend on how high the BoE hike rates.

In addition, the lack of a fiscal plan, as the new Prime Minister (PM) Rishi Sunak delayed Chancellor’s James Hunt plan, as Sunak, a previous finance minister, wants to have some input regarding the UK’s new budget.

The US Dollar extends its gains propelled by upbeat US economic data

Elsewhere, the US Dollar remains underpinned by the Federal Reserve Chair Jerome Powell’s hawkish commentary, saying that rates would be higher than September’s forecast. Data-wise, the US economic calendar revealed that business activity in the services sector, as reported by the ISM, decelerated to 54.4 from 56.7 in September, suggesting the economy is cooling. Concerning the US labor market, the US Department of Labor reported Initial Jobless Claims for the week ending on October 28 were lower than expected and rose by 217K vs. 220K forecasts

GBPUSD Key Technical Levels

• The euro consolidates above 0.8710 after rallying from the 0.8600 area.
• The pound sells off after BoE's dovish hike.
• EURGBP expected to move lower in the long-term – Danske Bank.

The euro is taking a breather right below 0.8740 following a nearly 1.3%  rally against a vulnerable GBP on Thursday. The pair bounced up from session lows at 0.8600, to consolidate between 0.8710 and 0.8735 at the moment of writing.

BoE’s dovish hike sends the pound tumbling

The sterling has dropped across the board following the Bank of England’s dovish comments in the press conference that followed November’s monetary policy decision.

The Bank of England has hiked rates by 75 basis points, with two committee members voting for a softer hike. Beyond that, they signaled to a softer tightening pace over the next months, which has triggered a broad-based pound sell-off.

BoE President, Andrew Bailey has depicted a bleak economic outlook in the press release following the bank's decision, warning that the country might have already entered a recession that could last two years and cause a 2.9% economic contraction.

EURGBP expected to depreciate in the long-term – Danske Bank

FX analysts at Danske Bank see the pair picking up in the short term, to depreciating in the longer term: “We see a case for EURGBP to remain elevated in the near-term, but in the longer-term expect the cross to move lower as a global growth slowdown and the relative appeal of UK assets to investors are positive for GBP relative to EUR.

Technical levels to watch

In recent trade, the South Korean Defence Minister, Lee Jong-sup, has said it is ‘difficult to say’ when N.Korea will carry out a nuclear test. His comments follow 25 missiles of various kinds being fired on Wednesday by the North Koreans, including one that landed close to South Korea’s waters.

President Yoon Suk-yeol said it was effectively “a territorial invasion by a missile”. This was ''the first time since the 1945 division of the peninsula that North Korean weapons had landed so close to South Korea, 26km beyond the northern limit line'', The Guardian noted, warning of a world on the brink when referring to nuclear threats from Russia and an impasse in talks between the US and Iran. 

''It now seems likely that North Korea will test a nuclear bomb for the first time since 2017, prompting some to argue that it is time for the US to recognise that North Korea is a nuclear weapons state,'' The Guardian wrote. 

Former President Donald Trump is considering launching a third bid for the White House this month. This could be a significant feature in financial markets considering, for one, Trump's stance on China and his general protectionist playbook that roiled markets during his previous term that ended on January 6, 2021. One source familiar with Trump’s plans said he intends to announce his re-election campaign shortly after Tuesday’s election. 

A Trump run could mean a rematch of the 2020 Biden-Trump election. It is worth noting In a stark departure from a tradition whereby American presidents refrained from talking about the value of the American Dollar in order to avoid shaking up global markets, the 45th president of the United States regularly tweeted that he wanted the USD on the weaker side. 

• Gold price is at the mercy of further Federal Reserve tightening as the US Dollar extended its gains.
• The US ISM Services index remained at expansionary territory, but it’s decelerating.
• Gold Price Analysis: Remains downward biased, though a triple bottom pattern is forming in the daily chart.

Gold price stumbles following hawkish commentary of the Federal Reserve Chairman Jerome Powell, who said that the “ultimate level of rates would be higher than previously expected,” spurring a jump in US Treasury bond yields, which underpinned the greenback, to the detriment of Gold. Also, data from the United States flashed that business activity continues to expand while the labor market remains tight. At the time of writing, the XAUUSD is trading at $1626, down by more than half a percent.

Hawkish commentary by the Fed lifts the USD and weighs on Gold prices

Sentiment remains downbeat, as shown by US equities falling. The Institute for Supply Management (ISM) reported its Services PMI, which decelerated to 54.4 from 56.7 in September, and below estimates of 55.5. Even though the index remained in expansion territory, it’s decelerating, a signal sought by Fed officials. Earlier, the US Department of Labor reported Initial Jobless Claims for the week ending on October 28 were lower than expected and rose by 217K vs. 220K forecasts, even though the US economy continues to weaken, according to specific economic indicators.

Aside from this, market participants bought the greenback on Federal Reserve’s Chair Jerome Powell’s words, who added that the pace of rate hikes would be slower, starting as soon as December, while acknowledging that the window for a soft landing is possible, but it’s getting narrower.

Powell added that September’s Federal Reserve Open Market Committee (FOMC) projections for the Federal funds rate (FFR) “would be higher than previously expected.” XAUUSD tanked on those remarks, after hitting a fresh four-day high at $1669.28, to $1633.23. It should be noted that the yellow metal is extending its losses on the hangover of the FOMC’s decision.

On Friday, the US economic calendar will reveal employment figures, with the Nonfarm Payrolls  October’s report. Further data shown in the report is eyed, like the Unemployment Rate, and salaries, for signs that could flash signals of weakening in the labor market.

Gold Price Analysis: XAUUSD technical outlook

XAUUSD remains downward biased, as shown by the daily chart, though sellers were unable to crack the year-to-date low at $1614.67, opening the door for a formation of a triple bottom chart pattern. Nevertheless, to confirm the chart pattern, XAUUSD needs to clear $1729.35, which might open the door for a re-test of the 200-day Exponential Moving Average (EMA) at $1761.64.

• The aussie remains close to two-week lows at 0.6270.
• A hawkish Fed has given a fresh boost to the USD.
• Weak services PMI data has dented greenback's strength.

The aussie is suffering on Thursday against a stronger greenback, following the Fed’s hawkish message after Wednesday’s monetary policy decision. The pair attempted to bounce up from 2-week lows at 0.9270 earlier today, although it was unable to find acceptance above 0.9300.

Fed’s hawkish rhetoric has boosted the greenback

The US dollar is rallying across the board after, buoyed by the Federal Reserve President Powell’s comments reiterating the bank’s commitment to continue tightening borrowing costs until inflation returns to the 2% target.

As was widely expected, the Fed raised its benchmark rate by 0.75%, the fourth such increase in a row. Beyond that, Fed’s Powell denied suggestions that the bank might have overtightened and signaled that interest rates may peak at levels beyond market expectations, which sent the dollar and US Treasury bonds surging.

The greenback has gone through a slight pullback on the US trading session, following weaker-than-expected US services’ activity data, although it has pared losses shortly afterwards.

According to data released by the Institute for Supply Management, October’s Services PMI slowed down to 54.4, from 56.7 in September, beyond the consensus of 55.5, with the employment and new orders gauges posting sharper than expected declines. These figures have dented the USD strength.

Earlier today, preliminary figures anticipated that non-farm productivity expanded well below expectations in the third quarter: 0.3% against the consensus 0.6%, with unit labor costs slowing down to 3.5% from 8.9% in the previous quarter.

On the positive side, initial jobless claims increased by 217K in the week of October 20 against expectations of a 220K rise.

Technical levels to watch

On Thursday, the Bank of England raised interest rates by 75 basis points to 3%. Analysts at Rabobank expect a 50 bps rise in December and a 4.75% terminal rate.

Key Quotes: 

“There has been a global debate about the current pace of interest rate hikes, the peak at which central banks decide that enough has been done, and the pivot that at some point will follow. Yesterday, the Fed signalled it is looking for a slower pace, to a higher peak, for a longer period of time. The Bank of England is instead signalling it is accelerating the pace, to a lower peak, for a shorter period of time. We don’t fully buy into this and expect the central bank to raise rates by 50 bps in December and eventually to 4.75% next year. This further amplifies the recession, but the UK’s inflation situation increasingly looks like a mix of the US’s and the eurozone’s.”

“A recession may be required to quell inflation. The market isn’t buying it either: investors are still pricing in a peak of 4.7%, but ‘inflation insouciance’ on the part of the central bank put pressure the backend of the gilt curve and accelerated the slump in sterling, to just below 1.12.”

On Friday, the US official employment report will be release. Analysts at TD Securities expect an increase in payrolls of 220K, slightly above the market consensus of 200K. They see the dollar trading in the direction of the data. 

Key Quotes: 

“We expect payrolls to have continued to lose steam in October (TD: 220k), reflecting modest deceleration vs the 263K print registered in September. We look for October's deceleration in job creation to also be reflected in a jump in the unemployment rate to 3.7% following its new drop to 3.5% in September. We are also forecasting wage growth to accelerate to 0.4% m/m, but to slow to 4.7% on a y/y basis.”

“USD should trade in the direction of the data, though our above-consensus forecast is likely not enough to justify major upside pressure. Asymmetric reaction profile on weaker data, though we think there is some limit to the downside as CPI will be the main focus next week.”
 

• The dollar finds support at 1.0090 and approaches the 1.0145 high again.
• Renewed hopes of aggressive Fed tightening have boosted the US dollar.
• US services sector's activity data weighed on the USD earlier today.

The US dollar failed earlier today on its first attempt to breach multi-year highs at 1.0145 although the bearish reaction has been contained at 1.0090, with the pair returning above 1.0100 shortly afterward.

The Federal Reserve has given a fresh boost to the dollar

On Wednesday, the US Federal Reserve raised interest rates by 75 basis points, as expected, and reaffirmed their decision to keep tightening monetary policy until consumer inflation returns to the 2% target.

Fed President, Jerome Powell struck a hawkish tone on the press release and suggested that rates might peak at higher levels than markets had expected. These comments have dampened hopes of a slower hike in December sending the US dollar higher across the board.

On the macroeconomic front, US data have not been dollar-supportive on Thursday. The US ISM Services PMI expanded at a slower rate than expected in October, 54.4 against the consensus 55.5, which has triggered a moderate pullback on the USD.

In Switzerland, October’s Consumer Price Index has shown a sharper-than-expected deceleration. Yearly inflation slowed down to 3% from 3.3% in the previous month, against the 3.2% forecasted by the market. These figures have failed to offer any support to a vulnerable Swiss franc.

Technical levels to watch

The trade surplus widened in September but less than expected in Canada. Analysts at CIBC point out that for the third quarter as a whole, inflation-adjusted exports were up 13.7% annualized while imports were down 3%, and as such goods trade will have made a healthy contribution to GDP growth during the quarter. 

Key Quotes: 

“The goods trade surplus surprisingly widened in September, albeit from a downwardly revised level in the prior month. As a result, the $1.14bn surplus (from a revised $0.55bn in the prior month) was actually very close to the $1.2bn expected by the consensus. When combined with trade in services, Canada remained in a deficit position for a second consecutive month, albeit a slimmer one than was seen in August.”

“Net trade will be a large positive contributor to GDP in Q3, and given the rise in agricultural exports towards the end of the quarter and prospect for more to come, export growth should remain solid in Q4 as well. While a slower global economy will weigh on trade in some areas, Canadian exports should fare better than in previous instances of weakening global demand.”

“The war in Ukraine and sanctions on Russia have increased demand for some Canadian exports (wheat, potash etc) while an easing in global supply chain disruptions could be a positive for export areas that failed to benefit fully from the initial, strong, post-Covid recovery (i.e. autos).”
 

Gold remains well below levels that would be consistent with a renewed uptrend over the coming quarter. In the view of strategists at TD Securities, trend reversal threshold around $1,780 in the yellow metal appears attractive.

Downtrend in precious metals will prevail over the coming months

“We remain confident that the downtrend in precious metals prices will prevail over the coming months, but a growing chorus of market participants seek to position for an eventual central bank pivot on the horizon to catalyze a sharp repricing higher in precious metals.” 

“Our analysis argues that price action in Gold would only be consistent with an uptrend north of $1,830 by Mar2023, which appears unlikely as the Fed continues to tighten policy as it battles stubbornly elevated inflation over this timeframe. Notwithstanding, the critical thresholds for a sustained uptrend to form are largely unchanged by Sep2023. And, as we progress through the new year, the likelihood of a new easing cycle at the Fed is expected to rise.” 

“Given we expect an easing cycle to begin in 2023Q4, trend reversal thresholds around $1,780 in Gold and $22 in Silver appear attractive for those looking to position for risks surrounding implications of a Fed pivot by Sep2023, particularly should family offices and proprietary traders capitulate on their bloated long positions.”

As expected, the Bank of England (BoE) raised Bank Rate by 75 basis points to 3%. EURGBP initially moved higher. Economists at Danske bank expect the pair to remain elevated for now, but a move back lower is likely in the longer-term.

A slowing pace of hikes going forward

“In line with our expectation, the BoE hiked the Bank Rate by 75 bps to 3.00% with 7 members voting for a 75 bps hike, one member voting for 50 bps and one member voting for 25 bps. As expected, there was no news in regards to QT-communication as outright selling of government bonds commenced on 1 November.”

“We expect fiscal tightening and recession to weigh on the economy, which in our view, supports a slower hiking pace going forward. We maintain our call for a 50 bps hike in December and 25 bps in February with risks to our call skewed towards additional hikes in 2023.”

“We see a case for EURGBP to remain elevated in the near-term, but in the longer-term expect the cross to move lower as a global growth slowdown and the relative appeal of UK assets to investors are a positive for GBP relative to EUR.”

• The euro bounces up from the 0.9740 area to approach 0.9800.
• The greenback lost steam on the back of weak services activity data.
• EUR/USD seen at 0.93 in 12 months – Danske Bank.

The euro has trimmed losses on Thursday’s US trading session, bouncing up from the 0.9740 area to reach 0.9795. The pair, however, remains negative on the daily chart and trading nearly 3% down on the week.

The dollar pulls back on disappointing US data

Business activity in the US services sector expanded at a slower pace than expected in October, according to the ISM PMI, which has declined to 54.4 from 56.7 in September, beyond the 55.5 expected by the market.

Beyond that, the employment gauge has dropped to 49.1, entering levels consistent with a contraction, from 53.0 in the previous month while the new orders sub-index retreated to 56.5 from 60.6, revealing the uncertainty in the economic conditions.

These figures have weighed moderately on a hitherto strong dollar, which has been rallying across the board following Wednesday’s Federal Reserve’s monetary policy decision.

The Fed hiked rates by 0.75% for the fourth consecutive time, as widely expected, and suggested that interest rates might peak at higher levels than markets had expected. Fed President Powell’s hawkish comments dampened expectations of a dovish pivot in December and boosted the dollar and US Treasury bonds.

EUR/USD seen at 0.9300 in 12 months – Danske Bank

Currency analysts Danske Bank see the pair on the defensive amid the Fed’s hawkish stance, and point out to a 0.93 target: “Markets took the FOMC statement dovishly, but the move faded during the press conference and EUR/USD declined below pre-meeting levels while 2y UST yield rose around 6 bps. We maintain our forecast for EUR/USD at 0.93 in 12M.”

Technical levels to watch

• Japanese Yen among top performers on Thursday.
• US dollar trims gains during the American session after ISM.
• USDJPY unable to move away from the 148.00 mark.

The USDJPY erased gains during the American session and dropped from 148.44 to 147.60. The slide took place after the greenback lost momentum following the release of the ISM Service Index.

US data below expectations

Ahead of the Non-farm Payrolls report due on Friday, the ISM Service sector report showed numbers below expectations across all indicators. The headline fell from 56.7 to 54.4, against market consensus of 55.5. The employment index fell to 49.1, versus the 51.6 expected.

The greenback lost momentum after the report and following the first hour of trading on Wall Street, which saw equity prices trim losses. US yields pulled back and favored the retreat in USDJPY.

The range prevails  

The slide from 148.45 extended to 147.59 where the pair found support and redounded toward 148.00. As of writing, it is hovering around 147.85, near the level it closed on Wednesday.

The USDJPY continues to trade sideways between 147.00 and 149.00. A break above 149.00 should point to more gains while a consolidation under 147.00, would expose last week’s low near 145.00.

Technical levels

GBPUSD has dropped below 1.12. Economists at TD Securities expect the pair to challenge the 1.10 level.

Increasingly difficult to justify holding GBP

“The BoE is doing GBP no favours and clearly is less resolute to fight inflation than the Fed. With the change in government helping to reduce the risk premium around the UK, broader forces are becoming more important for GBP, much of which are US-centric. Those are likely to intensify in favour of the US unless data weakens.”

“We are left with the bias that a move back to 1.10 in Cable is in the offing in the very near-term.”

“For now, we think newfound USD strength will be an important force in restraining a surge higher in EURGBP. But, all bets are off if 0.8730 fails to hold, in which case 0.88+ is in the cards.”

• USDCAD extends its rally for six straight days.
• Initial Jobless Claims in the United States increased less than estimates, flashing the “overheated” labor market.
• The US ISM Services PMI remained at expansionary territory, showing business resilience.
• Canada’s Trade Balance September’s surplus almost doubled August’s downward revised figures.

The USDCAD advances sharply in the North American session following Wednesday’s Federal Reserve (Fed) 75 bps rate hike, which initially was perceived as a dovish hike. Still, later the Chairman of the Fed, Jerome Powell, pushed back against expectations for a Fed pivot, reiterating the need for “higher for longer.” Also, US jobs data revealed by the US Department of Labor bear out what Powell said regarding the tight labor market. At the time of writing, the USDCAD is trading at 1.3748, above its opening price by 0.27%.

Goodish US economic data and Fed’s hangover overshadowed Canada’s Trade surplus

Wall Street continues to extend its losses after the Fed’s decision. The US Initial Jobless Claims for the week ending on October 28 were lower than expected, rising by 217K vs. 220K estimates, even though the US economy continues to weaken, according to specific economic indicators. Albeit data shows the overheated labor market, Continuing claims rose by 1.49 million in the week ended on October 22, the highest since March. If the uptrend is sustained, it could be the first sign that the labor market is easing.

In the meantime, the Institute for Supply Management (ISM) revealed the Services PMI, which rose by 54.4, below forecasts of 55.3, while Factory Orders on an MoM reading grew by 0.3%, better than the previous month but aligned with estimates.

Aside from this, the Fed’s decision caused mixed reactions from market participants. The monetary policy statement was perceived as dovish due to the Fed considering the “cumulative tightening” under its belt. But, Federal Reserve Chair Jerome Powell acknowledged that the pace of rates would be slower. He added that the peak of rates compared with September projections should be revised upward, which sent US equities tumbling, US Treasury yield rising, and the US Dollar followed suit.

In the case of the USDCAD, after hitting a daily low of 1.3547, it rallied toward its daily high at 1.3712, a whole U-turn.

The Canadian economy record's a surplus though fails to underpin the CAD

On the Canadian front, the Trade Balance for September showed a surplus bolstered by crude oil and wheat exports. The surplus rose to C$1.1 billion, below estimates of C$1.2 billion, from a downwardly revised C$550 million in August.

Regarding housing data, Canadian Building Permits for the same period plunged by 17.5%, against a contraction of 6.1%, estimated a headwind for the already battered Loonie. According to Statistics Canada, it’s the first time all surveyed components registered monthly decreases since September 2019.

What to watch

For Friday, the Canadian and US economic calendar will feature employment figures.

USDCAD Key Technical Levels

Economists at Wells Fargo now forecast slightly less tightening from the Bank of England than previously. Subsequently, the GBPUSD pair is set to plunge toward 1.06 by the end of the first quarter of 2023.

Policy rate to peak at 3.75%

“We expect a 50 bps rate increase in December, and a final 25 bps increase in February next year. That would see the policy rate peak at 3.75%, which is still well below the peak of around 4.65% forecast by market participants.”

“The combination of a protracted economic recession and a central bank that under delivers versus the market's rate hike expectations are key factors behind our view of renewed Sterling weakness into early 2023, with a targeted GBPUSD exchange rate of 1.0600 by the end of the first quarter next year.”

• USDTRY prints new record highs around 18.6500 on Thursday.
• Inflation in Türkiye ran at a new 24-year top in October.
• The CBRT is expected to cut rates to single digits later in the month.

The Turkish lira remains on the defensive and lifts USDTRY to new all-time peaks around 18.6500 on Thursday.

USDTRY now shifts the attention to CBRT

USDTRY adds to Wednesday’s gains and rises to the 18.6500 region on the back of the unabated upside bias in the greenback, while another record high in the domestic inflation figures also put the lira under extra pressure.

On the latter, inflation in Türkiye rose to a new 24-year high at 85.51% in the year to October when gauged by the headline CPI and 3.54% from a month earlier. In addition, the Core CPI gained 70.45% YoY and Producer Prices advanced 157.69% vs. October 2021.

Investors’ attention is now expected to shift to the next interest rate decision by the Turkish central bank (CBRT) on November 24, where consensus appears tilted to another (the last one?) rate cut, taking the One-Week Repo Rate to single digits (currently at 10.50%) for the first time since August 2020 (8.25%).

What to look for around TRY

USD/TRY extends the upside to new all-time peaks around 18.6500 on Thursday.

So far, price action around the Turkish lira is expected to keep gyrating around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine - the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating (despite rising less than forecast in the last three months), real interest rates remain entrenched well in negative territory and the omnipresent political pressure to keep the CBRT biased towards a low-interest-rates policy.

In addition, the lira is poised to keep suffering against the backdrop of Ankara’s plans to prioritize growth via transforming the current account deficit into surplus, always following a lower-interest-rate recipe.

Key events in Türkiye this week: Inflation Rate, Producer Prices (Thursday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress of the government’s scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.07% at 18.6141 and faces the next hurdle at 18.6503 (all-time high November 3) followed by 19.00 (round level). On the downside, a break below 18.4379 (weekly low November 1) would expose 18.3765 (55-day SMA) and finally 17.8590 (weekly low August 17).

The US Dollar is stronger across the board. Kit Juckes, Chief Global FX Strategist at Société Générale, believes that growth expectations will be a big driver for the greenback and less dollar-friendly.

Drivers of economic out-performance are fading

“The US growth outlook matters more for the dollar going forwards, than where US bond yields go next. So far, US rates have risen further and faster than elsewhere, on the back of economic out-performance. A fiscally fuelled reopening saw the US outperform and both geography (far from Kyiv) and being the world’s second-largest energy producer provided a cushion as others were hit by surging gas prices.” 

“But the drivers of economic out-performance are fading. That means we are close to the end of the Dollar’s long rally and moving to a phase of trendless trading, which is likely to last for some time, before other economies’ economic prospects improve, at which point the Dollar will start to fall back.”

The British Pound remains under heavy selling pressure. Economists at Rabobank expect GBP to remain vulnerable in the coming months.

EURGBP to climb to 0.90 on a six-month view

“By the time the BoE next meets, it is likely that recessionary conditions in the UK economy will be even more apparent. This suggests that there are no guarantees that GBP will react well to higher rates in view of the huge headwinds facing the outlook for growth.”

“While GBP is no longer caught up in the unnecessary crisis triggered by a poorly timed and thought-out mini-budget, based on the UK fundamental backdrop we continue to describe the Pound as vulnerable, as we have done for many months.”

“We maintain our six-month GBPUSD 1.06 forecast.” 

“We see potential for EURGBP to climb to 0.90 on a six-month view.”

S&P 500 has seen an aggressive rejection from a cluster of resistances at 3902/12. Analysts at Credit Suisse look for a retest of key support from the 200-week average at 3620/19.

Strength has been a temporary bear market rally

“S&P 500 has seen an aggressive sell-off on increased volume from the late September high, falling 63-day average and 50% retracement of the fall from September at 3902/12. The magnitude of the rejection and break of near-term support at 3804 is seen to reinforce our core view recent strength has been a corrective bear market rally only, with an important peak now in place, although we would see this rejection further confirmed if sustained post the payrolls report this Friday.” 

“Support is seen next at the 38.2% retracement of the October/November rally at 3751, below which should see a fall to support next at the 3652/47 late October low and then a retest of the key 200-week average at 3620/19.” 

“Resistance is seen at 3802/04 initially, with 3840 ideally capping to keep the immediate risk lower. The 3894/3912 zone though is clearly expected to remain a major barrier.”

• US ISM Services PMI declined to 54.4 in October.
• US Dollar Index holds in positive territory slightly below 113.00.

The business activity in the US service sector continued to expand in October, albeit at a slower pace than in September with the ISM Services PMI declining to 54.4 from 56.7. This reading came in below the market expectation of 55.5.

Further details of the publication revealed that the Prices Paid Index rose to 70.7 from 68.7, the Employment Index slumped to 49.1 from 53 and the New Orders Index edged lower to 56.5 from 60.6.

Commenting on the survey's findings, "there are still challenges in hiring qualified workers and due to uncertainty regarding economic conditions, some companies are holding off on backfilling open positions," said  Anthony Nieves, Chair of the Institute for Supply Management Services Business Survey Committee. "Supply chain and logistical issues persist but are not as encumbering as they were earlier in the year."

Market reaction

This report doesn't seem to be having a significant impact on the US Dollar's performance against its major rivals. As of writing, the US Dollar Index was up 0.7% on the day at 112.90.

• GBPUSD extends the downtrend for the second successive day and dives to a two-week low.
• The sharp intraday fall confirms a bearish breakdown through the 1.1370 confluence support.
• The oversold RSI (14) on hourly charts warrants some caution before placing fresh bearish bets.

The GBPUSD pair extends the previous day's post-FOMC sharp downfall from the 1.1565 region and remains under heavy selling pressure for the second straight day on Thursday. The downward trajectory picks up pace after the Bank of England announced its policy decision and drags spot prices to a fresh two-week low, closer to mid-1.1100s during the early North American session.

A convincing breakthrough the 1.1370 confluence support, comprising the lower end of a one-week-old descending channel and the 100-period SMA on the 4-hour chart, was seen as a key trigger for bearish traders. Some follow-through selling below the 200-period SMA and the 1.1200 round figure aggravates the bearish pressure and might have set the stage for a further depreciating move.

The negative outlook is reinforced by the fact that oscillators on the daily chart have just started drifting into bearish territory. That said, RSI (14) on hourly charts is already flashing oversold conditions, making it prudent to wait for some consolidation or a modest bounce before the next leg down. Nevertheless, the GBPUSD pair seems poised to extend its recent slide from a multi-week high.

The next relevant target to the downside is pegged near the 1.1100 round-figure mark before spot prices eventually drop to the 1.1060 region. The downward trajectory could further get extended to the 1.1000 psychological mark en route to the September monthly low, around the 1.0925 area.

On the flip side, any meaningful recovery attempted might attract fresh sellers near the 1.1200 mark. This, in turn, should cap the GBPUSD pair near the 200-period SMA on the 4-hour chart, currently around the 1.1235-1.1240 region. A sustained strength beyond, though seems unlikely, might trigger a short-covering rally and allow bulls to aim back to reclaim the 1.1300 round figure.

GBP/USD 4-hour chart

Key levels to watch

USDJPY reached 150 for the first time since 1990 on the view that the Fed could raise rates to over 5% next year. Economists at MUFG Bank expect the pair to peak at the 155 level.

The peak in the Dollar's strength against the Yen is not far off

“If the market prices in a rise in the federal funds rate to the low 5% level through next year, we would expect the 2y UST yield to rise back to around 5%. This suggests the USDJPY could rise by five Yen from its current level of 148.”

“We forecast a near-term USDJPY ceiling of 155 given that it has already passed 150 once, is still hovering around 148, and considering the speed of its ascent over the last six-plus months.”

“The 2 April 1990 high of 160.35 could come into view if the Fed steps up its communication with the market and a terminal rate of 5.5% to 6% comes into view, but we do not expect this at present.”

• EURUSD corrects further down and revisits 0.9730 on Thursday.
• Extra weakness could see the 0.9700 zone revisited near term.

EURUSD breaches the 0.9800 support and prints new 2-week lows around the 0.9730 level on Thursday.

Considering the ongoing price action, further downside should not be ruled out in the short term. Against that, the pair could slip back to the weekly low at 0.9704 (October 21) prior to the monthly low at 0.9631 (October 13).

Further losses remain on the cards in the near term while EURUSD navigates below the 9-month resistance line, today near 0.9880.

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0474.

EURUSD daily chart

• US S&P Global Composite PMI continued to decline in October.
• US Dollar Index clings to strong daily gains at around 113.00.

The business activity in the US private sector continued to contract at an accelerating pace in October with the S&P Global Composite PMI dropping to 48.2 from 49.5 in September. This reading came in slightly better than the flash estimate and market expectation of 47.3.

Meanwhile, S&P Global Services PMI fell to 47.8 from 49.3, compared to the advanced estimate of 46.6.

Commenting on the survey, "private sector firms sought to boost demand through a slower increase in selling prices," noted Siân Jones, Senior Economist at S&P Global Market Intelligence. "Although softening, further elevated rises in prices paid by consumers present obstacles to firms in an already challenging demand environment and paint a concerning picture as we head towards the end of the year."

Market reaction

US Dollar Index showed no immediate reaction to this report and was last seen gaining 0.75% on the day at 112.95.

• Gold drops back closer to the YTD low amid the post-FOMC strong USD rally to a two-week high.
• The Fed’s hawkish outlook pushes the US bond yields higher and continues to underpin the buck.
• A weaker risk tone does little to impress bulls or lend any support to the safe-haven commodity.

Gold extends the post-FOMC sharp retracement slide from the $1,670 supply zone and remains under heavy selling pressure for the second successive day on Thursday. The downward trajectory drags the XAUUSD back closer to the YTD low, around the $1,617 area during the early North American session.

The US dollar prolongs its recent strong move up witnessed over the past week or so and is seen as a key factor driving flows away from the dollar-denominated gold. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, rallies to a nearly two-week high amid a more hawkish stance adopted by the Federal Reserve.

It is worth recalling that Fed Chair Jerome Powell on Wednesday smashed expectations for a dovish pivot and said that it was premature to discuss a pause in the rate-hiking cycle. Powell further added that the terminal rate will likely be higher than anticipated, suggesting that the Fed will continue to tighten its monetary policy to combat stubbornly high inflation.

The dramatic shift in the expected Fed rate hike path pushes the yield on the 2-year US government bond momentarily beyond the 5.0% psychological mark for the first time since May 2006. Meanwhile, the benchmark 10-year US Treasury note holds comfortably above the 4.0% threshold, which further underpins the buck and exerts additional pressure on the non-yielding gold.

Even the prevalent risk-off mood - as depicted by a generally weaker tone across the equity markets - fails to impress bulls or lend any support to the safe-haven XAUUSD. Market participants now look forward to the US ISM Services PMI, which, along with the US bond yields, will influence the USD price dynamics and provide a fresh impetus to gold.

Technical levels to watch

Some follow-through selling below the $1,615-$1,614 area will be seen as a fresh trigger for bearish traders and make the XAUUSD vulnerable to test the $1,600 round-figure mark. A convincing break below the latter should pave the way for an extension of the recent bearish trajectory witnessed over the past month or so. On the flip side, any meaningful recovery attempted might now be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the $1,630 horizontal zone. That said, a sustained strength beyond might trigger a short-covering move and lift spot prices back towards the next relevant hurdle near the $1,648-$1,650 region.

• DXY adds to Wednesday’s gains and reclaims 113.00.
• Further up comes the October peak around the 114.00 zone.

DXY advances further in response to the FOMC-induced tailwinds and regains the 113.00 barrier and above on Thursday.

The Dollar’s recovery looks poised to continue in the near term, always with the immediate target at the October highs in the 114.00 neighbourhood (October 21). Once cleared, the index could then dispute the 2022 peak near 114.80 recorded on September 28.

The current bullish stance is seen unchanged as long as the 9-month support line near 108.80 holds the downside. The latter appears reinforced by the proximity of the 100-day SMA.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 104.38.

DXY daily chart

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 75 basis points to 3%.

Key takeaways

"We maybe have the largest upside risk in inflation forecasts in MPC history."

"We do think the market curve is too high."

"Where the truth lies in between constant rate and market rate paths, we don't predict."

"There has been a questioning of UK policy."

"That will have some lasting effect."

"We will have to work hard to repair it."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

EURUSD has completed a large bearish “outside day.” Analysts at Credit Suisse expect the pair to resume the core downtrend.

Resistance at 0.9977 now ideally caps

“A sharp reversal lower post the FOMC has seen EURUSD complete a large bearish ‘outside day’ to not only add weight to our core view that consolidation from late September has been a temporary pause in the core downtrend but also clearly reassert an immediate negative bias in this range.

“A close below the uptrend from late September at 0.9766 should see the negative tone maintained for a test of the recent bullish ‘outside day’ low at 0.9708/04. Below the October low at 0.9636/34 is probably needed to confirm the core bear trend has resumed for a move back to the 0.9537 YTD low and eventually, we think, 0.9338/30.” 

“Resistance is seen at 0.9840 initially, then the 55-day average at 0.9890, which we look to now ideally cap on a closing basis. Back above 0.9977 though is needed to reassert a positive tone.”

• EURGBP gains strong positive traction and climbs to over a one-week high on Thursday.
• The British Pound weakens in reaction to the BoE’s dovish hike and remains supportive.
• A stronger USD weighs heavily on the Euro and might keep a lid on any meaningful gains.

The EURGBP cross catches fresh bids during the mid-European session and spikes to a one-and-half-week high after the Bank of England announced its policy decision. The cross is currently trading above the 0.8700 mark and looks to build on its recent bounce from nearly a two-month low touched last week.

The British Pound weakens in reaction to a dovish BoE rate hike and turns out to be a key factor that provides a goodish lift to the EURGBP cross. As was widely anticipated, the UK central bank decided to raise interest rates by 75 bps, marking the biggest hike since 1989. The BoE, however, indicated a lower terminal peak than the 5.20% currently priced into markets. This, along with the fact that two policymakers voted for a less aggressive move, weighs on Sterling.

In the accompanying policy statement, the BoE lowers its Q3 growth projections from -0.1% to -0.5% but upped the forecast for 2022 GDP as a whole to +4.25% from +3.50% previously. The central bank, however, noted that there are considerable uncertainties around the outlook and expects GDP to fall at the end of 2023. Meanwhile, the BoE Governor Andrew Baily said during the post-meeting press conference that the bank rate may have to go up further because inflation is too high.

Bailey's remarks do little to impress the GBP bulls, though the heavily offered tone surrounding the shared currency, amid the post-FOMC US Dollar rally, keeps a lid on the EURGBP cross. Hence, any subsequent move up is more likely to confront stiff resistance and remain capped near the 0.8760-0.8780 supply zone. This, in turn, warrants some caution for aggressive bullish traders, at least for the time being, and positioning for a further intraday appreciating move.

Technical levels to watch

• EURJPY extends the weekly pullback well below 145.00
• The continuation of the downtrend could retest the 143.70 region.

EURJPY remains under heavy pressure and drops to multi-session lows in the mid-144.00s on Thursday.

Further weakness appears likely in the near term and the cross could then slip back to the weekly low at 143.72 (October 24). The loss of this level could open the door to a test of the 55-day SMA at 142.40.

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 137.61, the constructive outlook is expected to remain unchanged.

EURJPY daily chart

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 75 basis points to 3%.

Key takeaways

"There is no easy outcome."

"There is a downside path for mortgage rates."

"This is a difficult time."

"There has been a UK premium on rates."

"We are seeing that premium unwind."

"Market liquidity is not back to where we were."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 75 basis points to 3%.

Key takeaways

"Rates on fixed term mortgages should not need to rise as they have done."

"This downturn dampens domestic inflationary pressure."

"MPC will not pursue a path that we think will drive inflation far below target."

"MPC does not follow the market."

"Publication of constant rate forecasts do not mean MPC expects to keep bank rate constant either."

"Regardless of path of bank rate, MPC judges risk to inflation projections skewed to upside."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

• Initial Jobless Claims in the US fell by 1,000 in the week ending October 29.
• US Dollar Index registers strong daily gains above 113.00 after the data.

There were 217,000 initial jobless claims in the week ending October 29, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 218,000 (revised from 217,000) and came in slightly better than the market expectation of 220,000.

Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1% and the 4-week moving average was 218,750, a decrease of 500 from the previous week's unrevised average.

"The advance number for seasonally adjusted insured unemployment during the week ending October 22 was 1,485,000, an increase of 47,000 from the previous week's unrevised level of 1,438,000," the DOL further noted in its publication.

Market reaction

US Dollar Index preserves its bullish momentum and trades at 113.05 after this data, rising 0.85% on a daily basis.

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 75 basis points to 3%.

Key takeaways

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

"Bank rate may have to go up further."

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

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

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

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

The US Dollar has continued to trade at stronger levels after the Fed dashed hopes again for a dovish policy pivot. Higher terminal rate expectations for Fed's hiking cycle are set to continue strengthening the greenback into year-end, economists at MUFG Bank report.

The Fed is shifting to plans for a slower but more extended hiking cycle

“The US rate market is now pricing in 62 bps of hikes at the December FOMC meeting as it weighs up whether the Fed will deliver one final 75 bps hike or step down to a 50 bps hike.” 

“The updated policy statement added as well that the Fed would take into account ‘the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments’.”

“The comments signal that the Fed is shifting to plans for a slower but more extended hiking cycle. The increase in market expectations for the Fed’s terminal policy rate support our outlook for an even stronger US dollar heading into year-end.” 

Bank of England (BoE) Governor Andrew Bailey is scheduled to hold a press conference, following the monetary policy decisions, at 1230 GMT on Thursday, November 3.

Follow our live coverage of the BoE policy announcements and the market reaction.

Also read: Breaking: BOE hikes policy rate by 75 bps to 3% as expected

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

US ISM Services PMI Overview

The Institute of Supply Management (ISM) will release the Non-Manufacturing Purchasing Managers' Index (PMI) - also known as the ISM Services PMI – at 14:00 GMT this Thursday. The gauge is expected to have to 55.5 in October from 56.7 in the previous month. Given that the Fed looks more at inflation than growth, investors will keep a close eye on the Prices Paid sub-component, which is anticipated to jump from 68.7 in September to 71.3 during the reported month.

How Could it Affect EURUSD?

Ahead of the key release, the US Dollar rallies to a nearly two-week high on Thursday amid a more hawkish stance adopted by the Federal Reserve. In fact, the US central bank indicated that it will continue to raise interest rates to combat stubbornly high inflation. This remains supportive of a sharp rise in the US Treasury bond yields, which, in turn, underpins the greenback and drags the EURUSD pair back below mid-0.9700s.

A stronger US macro data should be enough to provide an additional boost to the greenback. Conversely,  any disappointment might do little to dent the underlying strong bullish sentiment surrounding the USD, suggesting that the path of least resistance for the EURUSD pair is to the downside. Hence, any attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

Eren Sengezer, European Session Lead Analyst at FXStreet, outlines important levels to trade the major and writes: “EURUSD continues to trade below the descending trend line coming from October 27 and the Relative Strength Index (RSI) indicator stays within a touching distance of 30. In case the pair stages a technical correction, it is likely to face initial resistance at 0.9800 (psychological level) before 0.9820 (200-period SMA). Only a four-hour close above the latter could discourage sellers and open the door for an extended recovery toward 0.9860 (descending trend line, 100-period SMA).”

“On the downside, 0.9740 (psychological level) aligns as interim support before 0.9700 (psychological level, static level) and 0.9630 (Oct. 13 low),” Eren adds further.

Key Notes

  •  EUR/USD Forecast: Euro bulls lose hope as Powell reaffirms hawkish stance

  •  EURUSD tumbles to 2-week lows near 0.9750

  •  EUR/USD: Breach of 0.9750/0.9800 to easily expose 0.96 – TDS

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).

Responding to the Bank of England (BoE) policy decision, UK Chancellor Jeremy Hunt said, “today, the bank took action in line with their goal of returning inflation to target.”

Additional comments

"The government’s number one priority is to grip inflation."

"There are no easy options and we will need to take difficult decisions on tax and spending."

Market reaction

GBP/USD is licking its wounds around 1.1240, down 1.32% on the day. All eyes remain on Governor Andrew Bailey’s press conference.

• GBP/USD refreshes a two-week low after the BoE announced the expected 75 bps rate hike.
• A lower terminal rate than is currently priced in the markets weighs on the British pound.
• The Fed’s more hawkish outlook continues to boost the USD and exerts additional pressure.

The GBP/USD pair adds to its heavy intraday losses and drops a fresh two-week low after the Bank of England announced its policy decision. Spot prices, however, show some resilience below the 1.1200 mark and quickly bounce back closer to mid-1.1200s in the last hour.

As was widely anticipated, the UK central bank decided to raise interest rates by 75 bps - the biggest hike since 1989. In the accompanying policy statement, the BoE indicates a lower terminal rate than the 5.20% currently priced in the markets. This, along with a bleak outlook for the UK economy, prompts fresh selling around the GBP/USD pair amid strong follow-through US Dollar buying.

The Federal Reserve on Wednesday adopted a more hawkish stance and indicated that it will continue to raise interest rates to combat stubbornly high inflation. This, in turn, pushes the rate-sensitive two-year US government bond to its highest level since May 2006 and underpins the buck. Apart from this, a weaker risk tone offers additional support to the safe-haven greenback.

Market participants now look forward to BoE Governor Andrew Bailey's comments at the post-meeting press conference for a fresh impetus. Apart from this, traders will take cues from the US ISM Services PMI to grab short-term opportunities around the GBP/USD pair.

Technical levels to watch

EURUSD extends the corrective decline and revisits the 0.9750 region. Economists at BBH expect the worl's most popular currency pair to challenge the October 13 low near 0.9635.

ECB tightening expectations have fallen back a bit

“EURUSD is on track to test the October 21 low near 0.9705 and then the October 13 low near 0.9635.”

“With a big chunk of the eurozone already tipping into recession, can the ECB hike as aggressively as anticipated? It appears that the market is starting to have it doubts.”

Following its November policy meeting, the Bank of England (BoE) announced that it raised the policy rate by 75 basis points (bps) to 3%. Policymakers voted 7-2 in favour of this decision. One policymaker voted for a 25 bps hike and one voted for a 50 bps.

Follow our live coverage of the BoE policy announcements and the market reaction.

Market reaction

The British pound came under renewed bearish pressure with the initial reaction. As of writing, GBPUSD was down 1.6% on the day at 1.1208.

Key takeaways from policy statement

"Majority of MPC judge further increases in bank rate may be required, albeit to a lower peak than 5.2% priced into markets."

"If the outlook suggests more inflation pressure, MPC will respond forcefully as necessary."

"Very challenging outlook for UK economy; financial conditions have tightened materially since August."

"BoE forecast based on government fiscal policy up to Oct. 17, assumes energy support continues at around half current scale for 18 months after April 2023."

"Market rates imply more BoE tightening than Aug, show bank rate at 3.0% in Q4 2022, 5.2% in Q4 2023, 4.7% in Q4 2024 (Aug: 2.4% in Q4 2022, 2.9% in Q4 2023, 2.4% in Q4 2024)."

"Policy report shows inflation peaking at around 11% in Q4 (Sep forecast: peak of just under 11% in Oct. 2022)."

"Forecasts show 2.9% peak-to-trough fall in GDP based on market rates, around 1.7% if bank rate held at 3%."

"Forecast shows inflation in one year's time at 5.20% (Aug forecast: 9.53%), based on market interest rates and modal forecast."

"Forecast shows inflation in two years' time at 1.43% (Aug forecast: 2.00%), based on market interest rates."

"Forecast shows inflation in three years' time at 0.02% (May forecast: 0.76%), based on market interest rates."

"Forecast shows that if rates held at 3%, inflation 2.16% in two years' time at, 0.84% in three years."

"BoE estimates GDP growth of -0.5% QQ for Q3 2022 (Sep forecast: -0.1% QQ), sees -0.3% QQ in Q4 2022, based on market rates."

"BoE estimates GDP in 2022 +4.25% (Aug forecast: +3.5%), 2023 -1.5% (Aug: -1.5%), 2024 -1% (Aug: -0.25%), based on market rates."

"BoE estimates real post-tax household disposable income in 2022 -0.25% YY (Aug: -1.5%), 2023 -1.5% (Aug: -2.25%), 2024 +0.75% (Aug: +0.75%)."

"Policy report estimates unemployment rate 3.65% in Q4 2022 (Aug forecast: 3.67%); Q4 2023 4.94% (Aug: 4.68%); Q4 2024 5.86% (Aug: 5.68%), Q4 2025 6.40%."

"Majority of MPC favoured 75 bp rate hike because of domestic price pressure, fiscal policy."

"BoE estimates wage growth +5.75% YY in Q4 2022 (Aug forecast: +5.25%), Q4 2023 +4.25% (Aug: +5.25%), Q4 2024 +2.75% (Aug: +2.75%)."

"Majority of MPC say 75 bp increase would reduce risk of extended, costly tightening later."

After delivering a widely expected 75 bps hike for the fourth time in a row, Fed Chair Powell stressed the likely need for more rate rises even if the pace slows. Economists at HSBC think the mix of elements – higher peak rates and pushback on a pause – favours an extension higher in the USD rally.

Two more 50 bps hikes

“The momentum in drivers of the USD bullish trend since mid-2021 (i.e. higher Fed peak rate expectations, slowing global growth and risk aversion) are clearly waning. However, it is not yet at the turning point. So, while it is appropriate to look for the peak in the USD, we are likely not quite there yet.”

“The Fed has delivered the fourth 75 bps hike in this cycle and has signalled there is still work to be done. The data will determine just how much more work that is.” 

“We expect two more rate hikes in December 2022 and February 2023, each of 50 bps, up to a peak federal funds target range of 4.75-5.00%, and note that the risks remain skewed towards higher rather than lower policy rates, as US core inflation will likely remain elevated well into next year. We also do not expect any rate cuts to be delivered in 2023 or 2024.”

The US Dollar is higher after the Fed raised rates by 75 basis points again. Economists at ING believe that the EURUSD pair is set to challenge the 0.95 level.

Fed policy to prove a bullish undercurrent to the dollar

“Expectations of the policy rate being taken to 5% into early next year, inverting the yield curve still further, is a dollar positive.” 

“We think the balance of risks still favour a stronger dollar, particularly against European currencies where we see growth substantially below consensus over coming quarters.”

“EURUSD can still make a run towards 0.95 over coming months and USDJPY can still retest 150.”

“Where interest in the carry trade could emerge is in Latin America. Here the risk-adjusted implied yields of the Mexican peso are 50% above those for the Brazilian real and USDMXN could retest the year's lows at 19.42 should any key US data disappoint.”

The Bank of England (BoE) will unveil the monetary policy decision at 12:00 GMT. Economists at MUFG Bank expect the British Pound to continue weakening after the announcement.

Market expectations for further hikes are likely still too aggressive

“We expect the BoE’s updated inflation projections to continue signalling that inflation is expected to fall back well below target by the end of the forecast period when incorporating market expectations for the BoE’s policy rate for the coming years.”

“Yields still remain significantly higher than when the inflation forecasts were last updated in August when the BoE’s policy rate was expected to peak closer to 3.00%. The sharp adjustment higher in UK yields since August will reinforce downside risks to growth in the UK and help to dampen inflation risks in the medium-term.”

“We expect the BoE to signal that a larger hike today is unlikely to be the first of a series of larger hikes and that market expectations for further hikes are likely still too aggressive. It should encourage a weaker Pound and reinforce the move lower in Cable.”

See – BoE Preview: Forecasts from 10 major banks, big rate hike in doubt

BoE Monetary Policy Decision – Overview

The Bank of England (BoE) is scheduled to announce its monetary policy decision this Thursday at 12:00 GMT. The UK central bank is widely expected to lift interest rates by 75 bps - the biggest hike since 1989. Meanwhile, the worsening outlook for the UK economy might have already set the stage for a dovish pivot. Hence, the market focus will be on the accompanying statement that provides the Monetary Policy Committee's (MPC) economic and inflation projections. Apart from this, investors will scrutinize BoE Governor Andrew Bailey's comments at the post-meeting press conference at 12:30 GMT.

Analysts at TD Securities offer a brief preview of the key central bank event risk and write: “We look for a 75 bps hike from the BoE in November. While the labour market has tightened further, inflation has matched the MPC's forecasts. Moreover, the several fiscal U-turns and change of PM and Chancellor should lower the risk of a larger hike. The delay of the fiscal event shouldn't mean much for the decision as the broad characteristics of fiscal policy are already known.”

How could it affect GBPUSD?

Ahead of the BoE's Super Thursday, the GBPUSD pair tumbles to a two-week low, below mid-1.1200s on Wednesday amid post-FOMC strong follow-through US dollar buying interest. A dovish BoE tilt could exert additional downward pressure on the British Pound and set the stage for an extension of the pair's recent pullback from a multi-week high. Meanwhile, a decision to frontload the rate hike might do little to provide any respite to bulls amid looming recession risks, suggesting that the path of least resistance for the GBPUSD pair is to the downside.

Eren Sengezer, European Session Lead Analyst at FXStreet, outlines important technical levels to trade the major: “GBPUSD trades within a touching distance of 1.1250, where the 200-period SMA on the four-hour is located. In case the pair falls below that level and starts using it as resistance, additional losses toward 1.1200 (psychological level) and 1.1100 (psychological level) could be witnessed.”

“On the upside, 1.1300 (Fibonacci 61.8% retracement) aligns as first resistance ahead of 1.1350 (Fibonacci 50% retracement, 100-period SMA) and 1.1435 (Fibonacci 38.2% retracement),” Eren adds further.

Key Notes

  •  Bank of England Preview: Why Super-Thursday is set to sink sterling, even in case of a big hike

  •  BoE Interest Rate Decision Preview: A close call between 50 bps and 75 bps, GBP/USD set to suffer

  •  GBP/USD Forecast: Pound looks vulnerable as BoE decision looms

About the BoE interest rate decision

The BoE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it will be positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it will be seen as negative, or bearish.

EURNOK advances to 10.37 after Norges Bank, which had opted for hikes of 50 basis points at previous rate meetings, hikes by 25 bps. Economists at Société Générale analyze the pair's technical picture.

Norges Bank hikes rate by 25 bps

“Norges Bank raised the policy rate by 25 bps to 2.50%. A similar increase is on the cards in December. In the statement, the bank says there are signs that some areas of the economy are cooling down, and prospects for lower-than-expected freight and energy prices may curb inflation ahead. The 225 bps of increases since last December is beginning to have a tightening effect on the economy and this requires a gradual approach.” 

“A short-term pullback is taking shape; a revisit of the 200-DMA near 10.05 is not ruled out. This is first layer of support. In case the pair fails to defend this MA, a deeper downtrend is likely towards 9.91 and the lower band of the channel at 9.72/9.70.”

“Short-term resistance is at 10.56, the 76.4% retracement of recent pullback.”

The US dollar is trading at stronger levels after the FOMC meeting. Nonetheless, economists at Commerzbank will wait for employment data due out tomorrow before starting huge dollar jubilations.

Sentiment might deteriorate quickly if the US economy begins to weaken significantly

“Yesterday’s FOMC meeting was positive for the dollar and it justifiably is trading at stronger levels. Nonetheless: in the end, what matters is how the economy and inflation develop now. If signs increasingly emerge that the US economy – and in particular the labour market – begins to weaken significantly, sentiment might deteriorate quickly. In that case the central bankers’ concerns about high inflation rates becoming entrenched would become less relevant.”

“I would wait for tomorrow’s labour market data before starting huge dollar jubilations.”

• EUR/USD extends the corrective decline to the mid-0.9700s.
• The dollar remains well bid in the wake of the Fed’s rate hike.
• EMU Unemployment Rate stayed unchanged in September.

EUR/USD accelerates its losses and revisits the 0.9750 region, or 2-week lows, on Thursday.

EUR/USD weaker post-FOMC

EUR/USD retreats for the fourth consecutive session and revisits levels last seen in late October around 0.97050 on the back of the persevering upside momentum in the greenback, which was exacerbated following the FOMC event on Wednesday.

Indeed, the pair corrected sharply lower after climbing to the 0.9975/80 band on Wednesday soon after the FOMC statement showed a dovish tilt after the Fed hike rates by 75 bps for the fourth straight meeting.

However, that upside was abruptly put to an end after Chair Powell surprised investors with a hawkish message at his press conference, stressing that the ultimate terminal rate is expected to be higher than anticipated, at the time when he deemed as premature any attempt to slow the pace of the tightening cycle.

In the German debt market, the 10-year bund yields climb to multi-day highs past 2.25%, in line with the equally marked uptick in their US peers.

In the domestic calendar, the Unemployment Rate in the broader Euroland held steady at 6.6% in September. In the US docket, the ISM Non-Manufacturing will take centre stage seconded by Factory Orders, trade balance figures and Initial Jobless Claims.

What to look for around EUR

EUR/USD intensifies its move lower for yet another session after the hawkish message from Chair Powell dented any hopes of the imminence of a pivot in the Fed’s policy.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair (if it was any at all).

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: 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 losing 0.62% at 0.9754 and a breach of 0.9704 (weekly low October 21) would target 0.9631 (monthly low October 13) en route to 0.9535 (2022 low September 28). On the flip side, the next up barrier emerges at 0.9975 (weekly high November 2) seconded by 1.0093 (monthly high October 27) and finally 1.0197 (monthly high September 12).

• AUD/USD continues losing ground for the second straight day amid sustained USD buying.
• The Fed’s hawkish outlook pushes the US bond yields higher and underpins the greenback.
• The cautious market mood further benefits the buck and weighs on the risk-sensitive aussie.

The AUD/USD pair extends the previous day's post-FOMC retracement slide from the vicinity of the 0.6500 psychological mark and remains under some selling pressure for the second straight day on Thursday. The downfall drags spot prices below the 0.6300 mark, or a one-and-half-week low during the first half of the European session and is sponsored by broad-based USD strength.

The US dollar attracts aggressive buying following an early modest downtick and hits a nearly two-week high amid the prospects for further policy tightening by the Fed. Fed Chair Jerome Powell downplayed speculations for a dovish pivot and said on Wednesday that it was premature to discuss a pause in the rate-hiking cycle. Powell added that the terminal rate will still be higher than anticipated.

Investors now seem convinced that the US central bank will continue raising interest rates to combat inflation, which is reinforced by a sharp rise in the US Treasury bond yields. In fact, the yield on the rate-sensitive two-year US government bond momentarily climbs beyond 5.0% for the first time since May 2006. Moreover, the benchmark 10-year Treasury note holds comfortably above the 4.0% threshold.

This, along with the prevalent cautious mood, provides an additional boost to the safe-haven greenback and contributes to driving flows away from the risk-sensitive aussie. From a technical perspective, the overnight sustained weakness and close below the 0.6400 mark was seen as a fresh trigger for bearish traders. This could be cited as another factor behind the AUD/USD pair's ongoing downtrend.

Traders now look forward to the US economic docket, highlighting the ISM Services PMI. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and provide some impetus to the AUD/USD pair. The focus will then turn to the release of the closely-watched US monthly employment report - popularly known as NFP on Friday.

Technical levels to watch

Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group note there is still room for further gains in USD/CNH in the near term.

Key Quotes

24-hour view: “We highlighted yesterday that ‘The choppy movement is likely part of a broad sideways range and we expect USD to trade within a range of 7.2500/7.3400’. USD plunged briefly to a low of 7.2614 in NY trade before surging to a high of 7.3480. The rapid rise has scope to extend but a break of 7.3600 is unlikely. Support is at 7.3200, followed by 7.3000.

Next 1-3 weeks: “Our update from yesterday (02 Nov, spot at 7.3020) still stands. As highlighted, while upward momentum has not improved, as long as 7.2400 (no change in ‘strong support’ level from yesterday) is not breached, there is still chance for USD to head higher. That said, a break of 7.3745 appears unlikely.”

Economists at ING expect the Bank of England (BoE) to surprise with just a 50 bps hike. Therefore, the GBP/USD pair could plummet to the 1.1250 area.

Scope for a 50 bps BoE surprise 

“The BoE will only hike 50 bps. The consensus 75bp hike would end up seeing UK CPI undershooting the BoE's 2% target in 2025. In other words, the BoE does not need to increase the pace of tightening right now.” 

“The FX options market attaches a 150 pip GBP/USD range to today's event risk. That could see GBP/USD trading back to the 1.1250 area if we are right with our BoE call. EUR/GBP could trade back to 0.87 too.”

“Sterling also looks challenged from both: i) the international investment environment where US equities sold off 2.5% yesterday on the prospect of higher for longer Fed rates and ii) what is shaping up to be quite a tight fiscal event in the UK on 17 November as the new government struggles to plug its borrowing gap.”

See – BoE Preview: Forecasts from 10 major banks, big rate hike in doubt

• The index extends the post-Fed rally near the 113.00 region.
• US 2-year note yields climb past the 5.0% mark, or 16-year highs.
• Initial Claims, ISM Non-Manufacturing, Factory Orders next on tap.

The greenback, in terms of the USD Index (DXY), climbs further north of the 112.00 mark and print new multi -session tops on Thursday.

USD Index stronger post-FOMC, looks to data

The index adds to Wednesday’s advance and looks to consolidate the recent breakout of the 112.00 barrier against the backdrop of fresh buying pressure in the greenback, as market participants continue to adjust to the hawkish message from Chief Powell at his press conference after the Fed raised rates by 75 bps.

In the US money market, the short end of the yield curve climbed to levels last seen back in May 2006 past the 5.0% level earlier in the session, although they retraced part of that advance afterwards. The belly so far trade around 4.15% zone and the long end advances to the 4.20% area.

Indeed, the continuation of the march north in the dollar was exacerbated after Powell signalled that the terminal interest rate could be higher than previously estimated, while it is still premature to consider pausing the hiking cycle.

Later in the NA session, usual weekly Claims are due along with trade balance figures, the final Services PMI, Factory Orders and the key ISM Non-Manufacturing.

What to look for around USD

The index accelerates the upside and re-focuses on the 113.00 hurdle after Chair Powell lent fresh oxygen to the dollar at the FOMC event on Wednesday.

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 buck.

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: 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. Fed’s pivot could emerge in … 2024? Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.52% at 112.69 and faces the next hurdle at 113.88 (monthly high October 13) seconded by 114.76 (2022 high September 28) and then 115.32 (May 2002 high). On the other hand, 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).

USD/JPY staged a rebound late Wednesday and ended up closing the day flat near 148. Economists at TD Securities believe that the risk of intervention is high above the 150 level.

USD/JPY may begin the process of forming a top

“The combination of BOJ/MOF activity on intervention and suggestions that tweaks to YCC are possible if inflation and wages improve is a notable shift in rhetoric and may help the pair to begin the process of forming a top.”

“A higher Fed terminal is a problem but we think MOF/BOJ is now the canary in the coalmine; given FX intervention has a poor track record generally, why bother employing it if you did not expect to make some policy shifts of your own.” 

“We think intervention risk is very high above 150 in USD/JPY.”

• GBP/USD dives to over a one-week low on Thursday amid strong follow-through USD buying.
• The Fed’s hawkish outlook pushes the US bond yields higher and continues to boost the buck.
• Technical selling below key support levels aggravates the bearish pressure ahead of the BoE.

The GBP/USD pair attracts aggressive intraday selling near the 1.1420 region on Thursday and dives to a one-and-half-week low during the first half of the European session. The downward trajectory drags spot prices to a nearly two-week low, around the 1.1255 region, and is sponsored by strong follow-through US dollar buying interest.

The Federal Reserve stuck to a more hawkish stance on Wednesday and indicated that it will continue to raise interest rates to combat stubbornly high inflation. In the post-meeting press conference, Fed Chair Jerome Powell said that it was premature to discuss a pause in the rate-hiking cycle and that the terminal rate will still be higher than anticipated. The prospects for further policy tightening by the US central bank trigger a fresh leg up in the US Treasury bond yields and boost demand for the greenback.

Apart from this, the prevalent cautious market mood offers additional support to the safe-haven buck and contributes to the offered tone surrounding the GBP/USD pair. Meanwhile, the latest leg down could further be attributed to some technical selling below the Asian session low, around the 1.1375 region. A subsequent break through the 1.1350 support, or the 200-period SMA on the 4-hour chart, and the 1.1300 mark could be seen as a fresh trigger for bearish traders. This, in turn, supports prospects for further losses.

That said, investors might refrain from placing aggressive bets and prefer to wait for the Bank of England policy decision, scheduled to be announced at 12:00 GMT. The UK central bank is expected to hike interest rates by 75 bps. Apart from this, the focus will be on the latest Economic projections and BoE Governor Andrew Bailey’s comments at the post-meeting press conference, which will influence the British pound.

Later during the early North American session, traders will take cues from the US ISM Services PMI. Apart from this, the US bond yields and the broader risk sentiment will drive the USD demand. This might further contribute to producing short-term trading opportunities around the GBP/USD pair. Nevertheless, the technical setup suggests that the path of least resistance for spot prices is to the downside.

Technical levels to watch

• EUR/USD has turned bearish following the Fed event.
• Near-term technical outlook shows that sellers continue to dominate the action.
• The dollar is likely to continue to outperform its rivals in case US stocks extend slide.

After having surged toward parity with the initial reaction to the Federal Reserve's policy statement, EUR/USD made a sharp U-turn and closed deep in negative territory on Wednesday. The pair has failed to stage a meaningful rebound and extended its slide early Thursday. The technical outlook shows sellers continue to dominate EUR/USD's action and additional losses toward 0.9700 could be witnessed unless the pair manages to stabilize above 0.9820.

The Federal Reserve raised its policy rate by 75 basis points but this decision by itself was ignored by market participants as it was already priced in. In the policy statement, the US central bank noted policymakers would take into account "cumulative tightening, policy lags and economic and financial developments" in determining the pace of rate hikes. This comment triggered a dollar selloff as it was assessed as a convincing sign that the Fed could opt for a smaller rate increase in December.

During the press conference, however, FOMC Chairman Jerome Powell noted that he expected the terminal rate to be revised higher in December's Summary of Economic Projections. The chairman explained that their message to markets was that it was more important for them to reach the top end of the policy rate rather than the size or the speed of rate increases.

Powell's comments caused US stock indices to suffer heavy losses and provided a boost to Treasury bond yields. In turn, the dollar regathered its strength and easily continued to outperform its rivals.

US stock index futures trade modestly lower early Thursday and another selloff in Wall Street after the opening bell could force EUR/USD to extend its slide. The US economic docket will feature the weekly Initial Jobless Claims and the ISM Services PMI report for October but investors are likely to stay focused on the impact of the Fed event on markets.

Meanwhile, European Central Bank (ECB) President Christine Lagarde noted that they have to be attentive to spill-over from the Fed policy but this comment doesn't seem to be helping the shared currency find demand in a meaningful way.

EUR/USD Technical Analysis

EUR/USD continues to trade below the descending trend line coming from October 27 and the Relative Strength Index (RSI) indicator stays within a touching distance of 30. In case the pair stages a technical correction, it is likely to face initial resistance at 0.9800 (psychological level) before 0.9820 (200-period SMA). Only a four-hour close above the latter could discourage sellers and open the door for an extended recovery toward 0.9860 (descending trend line, 100-period SMA).

On the downside, 0.9740 (psychological level) aligns as interim support before 0.9700 (psychological level, static level) and 0.9630 (Oct. 13 low).

USD/JPY faces further consolidation within the 145.50-149.60 range in the short-term horizon, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “Yesterday, USD whipsawed as it plunged to a low of 145.66 in NY trade before snapping back up to close at 147.90. The volatile price actions have resulted in a mixed outlook and further choppy movement would not be surprising, likely between 146.40 and 148.40.”

Next 1-3 weeks: “On Monday (31 Oct, spot at 148.00), we highlighted that USD appears to have moved into a consolidation phase and is likely to trade between 145.50 and 149.60 for the time being. There is no change in our view for now.”

European Central Bank (ECB) policymaker and Germany’s central bank head Joachim Nagel said on Thursday, the central bank “should not refrain from further hike rates, we have to bring inflation down in the mid-term.”

Further comments    

Market reaction

EUR/USD is holding the lower ground, as investors assess the ECB commentary amid a broadly stronger US dollar. The pair is trading 0.50% lower on the day at 0.9765, at the time of writing.

European Central Bank (ECB) policymaker Mario Centeno said on Thursday, the central bank has “already made a large part of the necessary rate hikes to contain inflation in the Eurozone.”

Additional comments

Related reads

• Lagarde speech: We have to be attentive to spill-overs from the Fed policy
• ECB’s Panetta: We need to bring inflation back to our 2% target as soon as possible, but not sooner

EUR/USD has dived below 0.98. Economists at ING expect the pair to challenge 0.9650 tomorrow if US jobs and wage data do not slow as much as expected.

EUR/USD could trade in a 0.9760-0.9850 range today

“We feel momentum could easily build for a push to 0.9650 tomorrow if US jobs and wage data do not slow as much as expected.”

“In Europe today, there are a lot of European Central Bank speakers, where the doves are trying to get the message across that the forthcoming recession will do some of the work in taking inflation off its highs.”

“EUR/USD could trade in a 0.9760-0.9850 range today.”

European Central Bank (ECB) President Christine Lagarde is on the wires this Thursday, via Reuters, participating in a panel discussion titled "Sustainability and Money: Shaping the Economy of the Future" at the Bank of Latvia's Economy Conference.

Key quotes

Market reaction

The euro has come under additional downside pressure, with EUR/USD heading closer towards 0.9750. The pair is down 0.52% on the day.

Norway’s Norges Bank (NB) is due to deliver another hike. Economists at ING note that the EUR/NOK could break under 10.20, however, the krone’s upside potential is limited.

50 bps hike can offer some extra help to the krone

“We note that consensus is split between a 25 bps and a 50 bps move today: we expect a half point hike, as the September CPI upside surprise (6.9% year-on-year) may have overshadowed concerns about slowing economic activity. We think this can offer some extra help to the krone, which is already benefiting from oil’s good performance and the support from Norges Bank’s reduced daily FX purchases for November.” 

“EUR/NOK may break below 10.20 in the near-term, but we suspect that a worsening of risk sentiment conditions into year-end may limit further NOK appreciation.”

See – Norges Bank Preview: Forecasts from five major banks, back to 25 bps hikes

• USD/CAD scales higher for the sixth straight day and climbs to a one-and-half-week high.
• The Fed’s hawkish outlook boosts the USD and remains supportive of the positive move.
• Retreating oil prices undermines the loonie and also contributes to the intraday strength.

The USD/CAD pair regains traction following an early dip to the 1.3680 region and moves into positive territory for the sixth successive day on Thursday. Spot prices rally closer to mid-1.3700s, hitting a one-and-half-week high during the early European session, and seem poised to prolong the recent bounce from sub-1.3500 levels.

The underlying bullish sentiment surrounding the US dollar, bolstered by a more hawkish stance adopted by the Federal Reserve, turns out to be a key factor offering support to the USD/CAD pair. It is worth recalling that the US central bank delivered a 75 bps rate hike for the fourth time in a row to combat stubbornly high inflation. Adding to this, Fed Chair Jerome Powell smashed expectations for a dovish pivot and said that rates would need to rise more than previously expected.

A fresh leg up in the US Treasury bond yields reinforces the prospects for further policy tightening by the Fed and continues to act as a tailwind for the buck. Furthermore, a softer risk tone provides an additional boost to the safe-haven greenback. Meanwhile, a modest pullback in crude oil prices from a three-week high is seen undermining the commodity-linked loonie. This, in turn, supports prospects for a further near-term appreciating move for the USD/CAD pair.

Even from a technical perspective, the overnight post-FOMC strong move up pushed spot prices beyond the 1.3670-1.3685 resistance zone. A subsequent strength and acceptance above the 1.3700 mark reaffirms the positive bias and favours bullish traders, suggesting that the path of least resistance for the USD/CAD pair is to the upside. Market participants now look forward to the US ISM Services PMI, which, along with the US bond yields, will drive the USD and provide some impetus to the major.

Technical levels to watch

USD/CAD looks set for further upside beyond 1.3700. Economists at TD Securities expect the pair to test the 1.38 level.

A higher Fed terminal means the BoC has a bigger problem now

“1.37 is a key pivot level as it marks downtrend resistance from the October 13th highs.”

“A higher Fed terminal means the BoC has a bigger problem now; the risk is growing of a wider terminal rate differential with the Fed, which means greater risk of more damage to the interest rate sensitive sectors of the economy.”

“Short-term, a topside extension to 1.38+ should be in the offing as risk looks challenged here.”

European Central Bank (ECB) executive board member Fabio Panetta said on Thursday, “we need to bring inflation back to our 2% target as soon as possible, but not sooner”.

Additional quotes

Market reaction

The EUR/USD pair was last seen trading at 0.9786, down 0.31% on the day.

The FOMC delivered, as expected, a 75 bps increase in the Fed Funds target range to 3.75-4.00%. Economists at Danske Bank adjust their Fed call and expect a 50 bps hike in February in addition to one more 75 bps hike in December.

75 bps in Dec and 50 bps in Feb

“Fed hiked rates by 75bp as broadly expected. Powell delivered a hawkish message, emphasizing the need to tighten financial conditions further. We have not seen Fed make significant progress towards its goals over the past month.” 

“We adjust our Fed call and now see the terminal rate at 5.00-5.25% after a 75 bps hike in December and a 50 bps hike in February.”

“Markets took the FOMC statement dovishly, but the move faded during the press conference and EUR/USD declined below pre-meeting levels while 2y UST yield rose around 6 bps. We maintain our forecast for EUR/USD at 0.93 in 12M.”

Preliminary readings from CME Group for natural gas futures markets showed open interest shrank by around 3.4K contracts for the first time since October 25 on Wednesday. In the same direction, volume reversed two daily builds in a row and dropped by around 74.4K contracts.

Natural Gas remains capped by the 200-day SMA

Wednesday’s strong gains in prices of the natural gas were in tandem with diminishing open interest and volume, indicating that the continuation of the rebound looks not favoured in the very near term. Against that, the 200-day SMA, today around $6.75 per MMBtu, continues to limit occasional bullish attempts.

FX option expiries for Nov 3 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9750 1.09b
• 0.9775 614m
• 0.9800 211m
• 0.9850-55 1.03b
• 0.9880-90 990m
• 0.9900-05 2.2b
• 0.9950-55 849m
• 0.9970 351m
• 0.9985-95 718m
• 1.0000-10 1.96b

- GBP/USD: GBP amounts        

• 1.1290-1.1300 870m
• 1.1440-50 352m
• 1.1500 404m

- USD/JPY: USD amounts                     

• 146.37 218m
• 147.00 226m
• 147.50-60 1.25b
• 148.00 316m
• 149.00 480m
• 150.00 765m

- USD/CHF: USD amounts        

• 0.9975 325M
• 1.0000 283m
• 1.0025 355m

- AUD/USD: AUD amounts  

• 0.6300-10 562m
• 0.6325 520m
• 0.6445-50 443m

- USD/CAD: USD amounts       

• 1.3605-10 481m
• 1.3740-55 753m

- EUR/GBP: EUR amounts        

• 0.8825 584m
• 0.8700 491m

- EUR/JPY: EUR amounts

• 144.00 504m
• 147.00 250m

GBP/USD is trading in negative territory at around mid-1.13s. What the Bank of England signals regarding the speed of future rate hikes is decisive for sterling’s development, economists at Commerzbank report. 

BoE set to hike its key rate by 75 bps

“It is expected that the BoE will hike its key rate by 75 bps which would be the biggest step since the late 80s; which would be in line with the highest rise of inflation levels since then, with inflation reaching 10.1% in September.”

“It is generally expected that the BoE will seem cautious and present today’s step as the exception rather than the new norm. In view of the economic risks – not least due to the presumably more restrictive fiscal policy – that seems likely from our point of view too. In that case, the market is not likely to react with much surprise.”

“We would expect a stronger market reaction if the BoE sounds more hawkish than expected. This would not be a bad strategic step to strengthen market confidence in its fight against inflation. However, in view of the recovery on the gilt market as well as the FX market it might not see much need for that, which might well come back to haunt it long-term though.”

See – BoE Preview: Forecasts from 10 major banks, big rate hike in doubt

NZD/USD is now seen navigating the 0.5740-0.5900 range in the next weeks, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “NZD spiked briefly to 0.5942 in NY trade before plunging to close at 0.5819 (-0.35%). NZD traded on a weak note in early Asian trade and the bias today is for NZD to weaken. That said, the major support at 0.5740 is unlikely to come under threat. Resistance is at 0.5840, followed by 0.5870.”

Next 1-3 weeks: “Our latest narrative was from last Thursday (27 Oct, spot at 0.5835) where NZD could rise but it has to close above 0.5880 before further sustained advance is likely. NZD did not close above 0.5880 and yesterday (02 Nov), it dropped to a low of 0.5815 before extending its decline in early Asian trade. Upward pressure has subsided and we expect NZD to trade between 0.5740 and 0.5900 for the time being.”

CME Group’s flash data for crude oil futures markets noted traders increased their open interest positions for yet another session on Wednesday, this time by around 3.1K contracts. In the same line, volume rose for the third consecutive session, now by around 35.2K contracts.

WTI: Focus is now on the October high at $93.62

Prices of the WTI added to the weekly recovery and briefly surpassed the key $90.00 mark per barrel on Wednesday. The uptick was amidst increasing open interest and volume and this opens the door to a probable challenge of the October peak at $93.62 in the very near term.

EUR/USD ended up posting its lowest daily close in two weeks on Wednesday. Economists at TD Securities expect the pair to challenge 0.96 on a dip under 0.9750/0.9800.

ECB will have a tougher time on fighting a higher Fed terminal rate

“The break above downtrend resistance (established from the February highs) in EUR/USD is a false dawn.”

“We spot key support into 0.9750/0.9800 where daily uptrend support from the October low comes in. A breach of that would easily expose 0.96.”

“The ECB will have a tougher time on fighting a higher Fed terminal rate. We seriously doubt the ECB can push their own terminal rate estimates that much higher.”

• NZD/USD turns lower for the second straight day amid the emergence of fresh USD buying.
• The Fed’s hawkish outlook pushes the US bond yields higher and underpins the greenback.
• A softer risk tone further benefits the safe-haven buck and weighs on the risk-sensitive kiwi.

The NZD/USD pair attracts some sellers near the 0.5835-0.5840 area on Thursday and turns lower for the second successive day. Spot prices slide below the 0.5800 mark during the early European session and seem poised to extend the overnight post-FOMC sharp pullback from the highest level since September 20.

The US dollar reverses an intraday dip and climbs to a one-and-half-week high in the last hour, which, in turn, is seen as a key factor exerting downward pressure on the NZD/USD pair. The US central bank on Wednesday hinted at a possible policy change in the future, though Fed Chair Jerome Powell dashed hopes for a dovish pivot. In fact, Powell said that it was premature to discuss a pause in the rate-hiking cycle and that the terminal rate will still be higher than anticipated.

Powell's hawkish remarks suggest that the Fed will continue raising interest rates to combat inflation. This is reinforced by a fresh leg up in the US Treasury bond yields, which continues to underpin the greenback. Moreover, a softer risk tone offers additional support to the safe-haven buck and weighs on the risk-sensitive kiwi. The market sentiment remains fragile amid worries about economic headwinds stemming from rapidly rising borrowing costs and China's zero-COVID policy.

The fundamental backdrop seems tilted firmly in favour of the USD bulls and suggests that the path of least resistance for the NZD/USD pair is to the downside. Some follow-through selling below the weekly low, around the 0.5775 region, will reaffirm the negative bias and pave the way for a further near-term depreciating move. Market participants now look forward to the US ISM Services PMI for some impetus later during the early North American session ahead of the NFP report on Friday.

Technical levels to watch

Economists at Commerzbank remain optimistic as far as the outlook for the Norwegian krone is concerned.

Good reasons for a strong krone

“If one looks at Norway’s terms of trade, one should expect that the krone appreciated massively against the euro, not least because the eurozone’s terms of trade have developed in the diametrically opposed direction to those of Norway. After all, the eurozone is an energy importer, whereas Norway exports energy, and not exactly on a small scale either.”

“Things are also looking good for the currency as far as monetary policy is concerned. According to a Bloomberg poll, analysts are split as regards today’s rate decision. One side expects a 50 bps rate hike, the other side expects a smaller step of 25 bps. But even if Norges Bank hiked its rates slightly more slowly, Norwegian real interest rates would still remain much higher than in the eurozone, not least because inflation in Norway is approx. 3 percentage points lower.”

See – Norges Bank Preview: Forecasts from five major banks, back to 25 bps hikes

• Gold price is resuming its Fed-induced downside, as US dollar bulls regain traction.  
• Markets remain risk averse amid aggressive Fed rate hike bets, ahead of US NFP.
•  XAU/USD path of least resistance appears down, with eyes on Oct lows at $1,617.

Gold price has erased early recovery gains and resumes its bearish momentum for the second straight day this Thursday. The US dollar regains upside traction, riding higher on the hawkish Fed outlook wave. The world’s most powerful central bank delivered on the expected 75 bps rate hike on Wednesday while Fed Chair Jerome Powell stuck with his resolve to bring down inflation by noting that more rate increases are needed and the ‘ultimate level’ of rates are likely higher than earlier estimates. The dollar staged a solid comeback in tandem with the Treasury yields, weighing heavily on the bright metal. Traders now await the BoE rate hike announcements, which are likely to underscore the Fed-BoE policy contrast, adding to the ongoing dollar strength while exacerbating the pain in XAU/USD. The next of relevance for the bullion remains Friday’s US Nonfarm Payrolls release for further hints on the Fed’s next rate hike move.

Also read: Gold Price Forecast: For how long can XAUUSD hold $1,630 support? BOE in focus

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price is challenging the critical $1,630 support, which is the pivot point one-week S1.

A fresh drop towards the pivot point one-day S1 at $1,624 remains in the offing. Further down, sellers will aim for the October month low at $1,617. At that level, the pivot point one-week S2 hangs around.

Alternatively, the immediate resistance is seen at the previous day’s low at $1,635, above which the previous week’s low at $1,638 will be tested.

A firm break above the latter will kickstart a renewed upswing in the bullion, with the Fibonacci 23.6% one-month and one-day at $1,643 on buyers’ radars.

The next powerful upside hurdle is aligned at $1,648, where the SMA10 one-day, Fibonacci 38.2% one-day and Fibonacci 23.6% one-week merge.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

In the opinion of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, the downtrend in GBP/USD should pick up further pace once 1.1330 is cleared.

Key Quotes

24-hour view: “Yesterday, we expected GBP to ‘trade in a choppy manner between 1.1430 and 1.1550’. Our view for choppy trading was not wrong even though GBP traded within a much wider range than expected (1.1388/1.1565). The weak daily closing of 1.1390 (-0.83%) suggests downside risk for GBP today. That said, a sustained drop below the major support at 1.1330 is unlikely (next support is at 1.1260). Resistance is at 1.1430, followed by 1.1480.”

Next 1-3 weeks: “Our latest narrative was from Tuesday (01 Nov, spot at 1.1470) where GBP ‘appears to have moved into a consolidation phase and is likely to trade between 1.1330 and 1.1635 for the time being’. Yesterday (02 Nov), GBP dropped sharply to 1.1388 and short-term downward momentum is beginning to improve. That said, GBP has to break below 1.1330 before a sustained decline is likely. The chance of GBP breaking 1.1330 would remain intact as long as GBP does not move above the ‘strong resistance’ level (currently at 1.1525) within the next couple of days.”

Gold price is finding its feet after a volatile trading post-Federal Reserve event. For how long can XAUUSD hold $1,630 support? FXStreet’s Dhwani Mehta analyzes the outlook of the yellow metal.

Bank of England rate hike decision to trigger fresh volatility

“Daily closing below the $1,630 demand zone is needed to reinforce the downtrend towards the $1,620 round number, below which the October low at $1,617 will be back in play.”

“On a surprisingly hawkish BoE announcement, the GBP/USD pair could rally, dragging the US currency down across the board. The renewed weakness in the US Dollar could aid the rebound in the XAUUSD price.”

“The bearish 21-Daily Moving Average (DMA) at $1,656 will again lure buyers on a sustained break above the $1,640 barrier and the psychological $1,650 level.”  

See – BoE Preview: Forecasts from 10 major banks, big rate hike in doubt

Here is what you need to know on Thursday, November 3:

Following Wednesday's highly volatile market action during the Fed event, the dollar looks to stabilize early Thursday with the US Dollar Index moving sideways in a tight range above 112.00. US stock index futures trade modestly higher on the day after having suffered heavy losses mid-week and the 10-year US Treasury bond yield holds above 4%. The Bank of England (BoE) will unveil the monetary policy decisions and Governor Andrew Bailey will comment on the outlook in a press conference from 1230 GMT. The US economic docket will feature September Goods Trade Balance data, the weekly Initial Jobless Claims figures and the ISM's Services PMI later in the day. 

Bank of England Preview: Why Super-Thursday is set to sink sterling, even in case of a big hike.

As expected, the Fed decided to raise its policy rate by 75 basis points to the range of 3.75-4% following its November policy meeting. In the policy statement, the Fed noted that policymakers will take cumulative tightening, policy lags and economic and financial developments into account in determining the pace of rate hikes. This comment triggered a strong dollar selloff but FOMC Chairman Jerome Powell's remarks during the press conference allowed the currency to regather its strength.

Powell reiterated that it was very premature to even be thinking about pausing rate hikes and said that he was expecting December's dot plot to show a higher terminal rate than September's projection. The chairman explained that slower rate hikes could come as soon as December or February but reassured markets that they will continue to tighten the policy to not allow inflation to get entrenched.

Fed Quick Analysis: Powell pivot? Not so fast, why this looks like a dollar buying opportunity.

EUR/USD reversed its direction after having advanced toward parity in the late American session on Wednesday and ended up posting its lowest daily close in two weeks. The pair was last seen trading in a narrow channel at around 0.9800.

The BoE is forecast to hike its policy rate by 75 bps to 3%. British Prime Minister Rishi Sunak's decision to postpone the fiscal policy announcement, however, puts the bank in a tough spot. Bailey will surely be asked about how Sunak's budget could impact the policy moving forward and his comments could impact the British pound's performance against its rivals in a significant way. GBP/USD lost more than 150 pips on Wednesday and was trading in negative territory at around mid-1.1300s at the time of press.

BoE Interest Rate Decision Preview: A close call between 50 bps and 75 bps, GBP/USD set to suffer.

USD/JPY staged a rebound during Powell's presser late Wednesday and ended up closing the day flat near 148.00 The pair stays relatively quiet early Thursday as it awaits the next catalyst.

Pressured by the decisive rebound witnessed in the US Treasury bond yields during Powell's press conference, gold registered large losses on Wednesday. XAU/USD stays under bearish pressure and trades at its lowest level since October 20 at around $1,630.

Bitcoin lost more than 1% on Wednesday but managed to stay afloat above $20,000. Ethereum came within a touching distance of $1,500 but found support near that level.

Open interest in gold futures markets rose for the second session in a row on Wednesday, this time by just 155 contracts according to advanced prints from CME Group. Volume followed suit and went up for the second straight session, now by around 26.3K contracts.

Gold: A drop to $1,615 is shaping up

Wednesday’s marked pullback in gold prices was against the backdrop increasing open interest and volume, leaving the yellow metal vulnerable to further downside in the very near term. That said, gold could confront the 2022 low at $1,615 sooner rather than later.

According to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, further downside could drag EUR/USD to the 0.9755 level in the next few weeks.

Key Quotes

24-hour view: “EUR spiked to a high of 0.9975 before crashing to end the day on a weak note at 0.9817 (-0.58%). The sharp and swift drop has gathered momentum and EUR is likely to drop below the support at 0.9800. In view of the oversold conditions, a break of the next support at 0.9755 is unlikely. The downward pressure is intact as long as EUR does not move above 0.9880 (minor resistance is at 0.9850).”

Next 1-3 weeks: “Our latest narrative was from two days ago (01 Nov, spot at 0.9885) where ‘the pullback in EUR could extend but a sustained decline below 0.9800 is unlikely for now’. Yesterday, EUR dropped sharply and closed at 0.9817 (-0.58%). Downward momentum has improved and the decline in EUR could extend to the next major support at 0.9755. Overall, only a break of 0.9920 (‘strong resistance’ level was at 1.0000 yesterday) would indicate that EUR is not ready to decline further. Looking ahead, if EUR breaks below 0.9755, the next level to focus on is at 0.9705.”

• USD/JPY edges lower for the third successive day, though the downside remains cushioned.
• The Fed’s hawkish outlook pushes the US bond yields higher and underpins the greenback.
• Geopolitical risks and intervention fears might hold back bulls from placing aggressive bets.

The USD/JPY pair struggles to capitalize on the previous day's post-FOMC recovery from a multi-day low and attracts some sellers near the 148.00 mark on Thursday. The intraday downtick, however, finds some support at lower levels, allowing spot prices to bounce over 40 pips from the vicinity of the 147.00 round figure.

A more hawkish stance adopted by the Fed continues to underpin the US dollar and acts as a tailwind for the USD/JPY pair. In fact, Fed Chair Jerome Powell - though raised the prospect of smaller rate hikes going forward - downplayed expectations that the US central bank may pause its rate-hiking cycle. In the post-meeting press conference, Powell hinted that the Fed will keep raising interest rates to contain inflation.

Powell added that the terminal rate is at a much higher level than initially anticipated, which, in turn, triggered a fresh leg up in the US Treasury bond yields. In contrast, the Bank of Japan, so far, has shown no inclination to hike interest rates and reiterated that it will continue to guide the 10-year bond yield at 0%. The resultant widening of the US-Japan rate differential offers additional support to the USD/JPY pair.

That said, expectations for a fresh intervention by the Japanese authorities to soften any steep fall in the domestic currency, along with geopolitical risks, benefit the safe-haven JPY. In fact, North Korea fired an unidentified ballistic missile toward the East Sea that reportedly has flown over Japan. This comes amid the protracted Russia-Ukraine war and warrants caution before placing fresh bullish bets around the USD/JPY pair.

Nevertheless, the Fed-BoJ policy divergence still should continue to limit any meaningful corrective slide, suggesting that the path of least resistance for the USD/JPY pair is to the upside. Market participants now look forward to the US ISM Services PMI, due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair.

Technical levels to watch

Economists at TD Securities discuss the Bank of England interest rate decision and its implications for the GBP/USD pair.

Hawkish (10%): 100 bps hike

“With the EPG coming to an end in April, the MPC worries about the likely more persistent inflation profile, opting to shift to a restrictive policy stance as quickly as possible. Messaging is one of accelerating the pace, rather than adding further to terminal, but there remains little guidance beyond this meeting. GBP/USD at 1.1581.”

Base Case (60%): Cautious 75 bps hike

“The MPC decides 8-1 to hike Bank Rate by 75 bps, but the tone remains a somewhat cautious one, with emphasis on uncertainty. Projections will be perplexing, with market pricing for the yield curve already out of date. The MPC will likely avoid giving any hints on neutral or terminal policy rates, but that could come in December or beyond. GBP/USD at 1.1466.”

Dovish (30%): 50 bps hike

“With the growth picture still soft and fiscal policy likely to add further to the downside, the MPC errs on the side of caution (not unlike their recent strategy), opting for a smaller rate hike. The Year 3 inflation forecast is played up, which could even show negative inflation at that point. GBP/USD at 1.1380.”

See – BoE Preview: Forecasts from 10 major banks, big rate hike in doubt

• GBP/USD holds lower ground inside a one-week-old bearish channel.
• MACD tease bulls but 1.1510 is the key hurdle.
• Key Fibonacci retracements could act as an extra filter to the south.

GBP/USD reverses the early-day recovery as it retreats to 1.1390 heading into Thursday’s London open.

The Cable pair’s latest weakness could also be linked to the RSI pullback. However, the MACD conditions tease buyers of late.

That said, a lower line of the one-week-old bearish channel, around 1.1375, restricts the immediate downside of the GBP/USD.

It’s worth noting that the 50% and the 61.8% Fibonacci retracement of October 21-27 could restrict the GBP/USD pair’s further downside around 1.1355 and 1.1280 in that order.

Alternatively, the 38.2% Fibonacci retracement and the 200-HMA, respectively around 1.1425 and 1.1485, challenge the short-term GBP/USD rebound inside the stated channel.

Following that, a convergence of the 100-HMA and the bullish formation’s upper line, at 1.1510, appears a tough nut to crack for the pair buyers.

Should the GBP/USD quote remains firmer past 1.1510, the odds favoring its run-up towards September’s peak of 1.1738 can’t be ruled out.

To sum up, GBP/USD remains on the back foot but the downside room appears limited.

It should also be observed that the pair’s clear rally beyond 1.1510 could give control to the bulls.

GBP/USD: Hourly chart

Trend: Limited downside expected

• Copper price struggles to cheer pullback in DXY amid fears of higher rates, less demand.
• China reports strong coronavirus numbers, Fed’s Powell turns down hopes of slower rate hikes.
• The world refined copper market reported 16,000 tonnes of deficit in August.

Copper price remains directionless while struggling around the weekly lows during early Thursday. That said, the demand-supply matrix and softer US dollar favor the metal buyers but fears of higher rates and lesser demand from China, the world’s biggest metal buyer, seem to challenge the commodity prices.

While portraying the mood of the red metal traders, the copper price on the COMEX appeared mildly bid near $3.4480 while Reuters stated a three-month contract on the London Metal Exchange (LME) as having the quote of $7,621, down 0.10%, around 05:21 GMT.

“The world's refined copper market showed a 16,000-tonne deficit in August, compared with 80,000 tonnes in July, the International Copper Study Group said,” mentioned Reuters. The news also quotes ICSG as saying that for the first eight months of the year, the market was in a 292,000-tonne deficit compared with a 152,000-tonne deficit in the same period a year earlier, the ICSG said.

Elsewhere, the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing China’s zero-covid policy. Further, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

It should be noted that the outlook for the industrial metal also deteriorated due to the previous day’s Fed action. Fed’s 75 bps increase in the benchmark rate initially triggered the market’s optimism as the rate statement highlighted the odds of a slower rate hike. The update stated, “Cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”  However, Powell’s speech triggered the risk-aversion wave as he cited the need to bring down inflation “decisively” while also suggesting a bit longer play for the restrictive policy.

Moving on, copper prices are likely to grind lower amid broad economic fears and an anticipated increase in the US dollar. However, today’s US ISM Services PMI for October, forecasted to ease to 55.5 in October compared to 56.7 in previous readings, will precede Friday’s jobs report to direct short-term moves.

European Central Bank (ECB) policymaker Martins Kazaks said in a statement on Thursday, “It's clear we need to raise interest rates.”

“Inflation is very high in the Eurozone,” Kazaks added.

Market reaction

The shared currency is a little impressed by these comments, trading at 0.9815, modestly flat on the day.  

UAE Energy Minister Suhail Mohamed Al Mazrouei said on Thursday, oil is in a 'decline mode’.

He added that “demand is to fall over time.”

Market reaction

WTI is witnessing fresh selling pressure on the latest comments by the UAE Energy Minister. The US oil faced rejection once again at the $89 mark, turning south to near $88.65, as of writing. The black gold has erased its early gains.

• USD/CAD retreats from seven-day high, prints the first daily loss in six.
• Convergence of previous resistance, 200-SMA challenges sellers amid upbeat RSI conditions.
• Multiple hurdles to test bulls before the yearly top.

USD/CAD seesaws around the intraday low as it pares the first weekly gain in three heading into Thursday’s European session. In doing so, the Loonie pair makes rounds to 1.3700, after flashing the day’s low of 1.3682.

Even so, the quote defends the previous day’s upside break of a downward-sloping resistance line from October 13, now supporting around 1.3670. Also increasing the strength of the 1.3670-65 area is the 200-SMA.

It’s worth noting that the firmer RSI (14) and a successful break of the previous key resistances keep the USD/CAD buyers hopeful of reaching the yearly top surrounding 1.3980. However, multiple hurdles near 1.3750 and 1.3830 could test the upward trajectory.

In a case where the Loonie pair remains firmer past 1.3980, the 1.4000 psychological manget may act as an extra check for the bulls before directing them to the May 2020 high near 1.4175.

Meanwhile, a downside break of the resistance-turned-support confluence near 1.3670-65 isn’t an open welcome to the USD/CAD bears as a weekly ascending trend line, close to 1.3550, offers an additional filter to probe the declines.

Additionally challenging the pair’s south run is the horizontal support including multiple lows marked since early October, near 1.3500.

USD/CAD: Four-hour chart

Trend: Bullish

• An H&S formation has accelerated the odds of a bearish reversal.
• Overall negative market sentiment has underpinned the greenback.
• Declining 20-EMA adds to the downside filters.

The AUD/USD pair has witnessed fresh demand after a nose-diving to near 0.6326 in the Tokyo session. As the risk-on profile has attempted a rebound after an intense sell-off in the risk-perceived currencies, the antipodean has displayed a pullback move to near 0.6363.

The pullback move could be short-lived as the negative risk profile has eased marginally but not faded away. Meanwhile, the US dollar index (DXY) has shifted into a sideways structure below the critical support of 112.00.

On an hourly scale, the asset has already delivered a downside break of the Head and Shoulder chart pattern that signals a bearish reversal. The aussie bulls are testing the south-side break of the chart pattern’s neckline at 0.6370. This could be a make or a break for the asset ahead.

Downward-sloping 20-period Exponential Moving Average (EMA) at 0.6377 adds to the downside filters.

Meanwhile, the Relative Strength Index (RSI) (14) is struggling to ditch the bearish range of 20.00-40.00, which indicates more downside ahead.

Going forward, a downside break of Thursday’s low at 0.6326 will drag the asset towards October 24 low at 0.6273, followed by October 21 low at 0.6210.

On the flip side, a decisive break above Wednesday’s high at 0.6493 will drive the asset toward the previous week’s high at 0.6522. A breach of the latter will send the major toward October high at 0.6548.

AUD/USD hourly chart

• Asia-Pacific equities remain mostly red as Fed’s Powell backs aggressive rate hikes.
• Off in Japan restricts bond market moves in Asia and hence DXY gets the chance to pare post-Fed gains.
• Downbeat China data, covid woes and North Korea’s test fire also weigh on sentiment.
• Upbeat service sector data from India favor markets ahead of RBI’s special meeting.

Share markets in the Asia-Pacific region portray the typical moves after the hawkish Fed decision during early Thursday. The risk-aversion could also be linked to China’s covid woes and geopolitical fears emanating from North Korea. However, holiday in Japan and a light calendar elsewhere restricts the market moves of late.

While portraying the mood, the MSCI’s index of Asia-Pacific shares ex-Japan reverses from a two-week high to print half a percent intraday loss heading into Thursday’s European session. It should be noted that equities in China remain in the red as covid fears escalate.

A lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing China’s zero-covid policy. Additionally, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

Elsewhere, North Korea fired an unidentified ballistic missile toward the East Sea that has since been reported to have flown over Japan, per Reuters. Following the same, Japan warns residents to take shelter in the threat of the North Korean missile. Recently, the US warns Pyongyang over such an effort and raised market fears in Asia.

It should be noted that the mixed Aussie trade numbers and downbeat China Caixin Services PMI exert downside pressure on the ASX 200. Further, markets in Hong Kong lead the bears as HKMA copies the Fed’s 0.75% rate hike.

India’s BSE Sensex appears snapping the downtrend, even with mild gains, as the S&P Global India services Purchasing Managers' Index edged up to 55.1 in October from September's six-month low of 54.3, versus 54.6 expected, per Reuters. The news states that activity in India's dominant services industry gathered pace in October despite high inflationary pressures, underpinned by robust domestic demand, leading to the second fastest hiring pace in over three years, a private survey showed.

On a broader front, S&P 500 Futures print mild gains whereas the US 10-year and 2-year Treasury yields seesaw around 4.10% and 4.62% by the press time.

It should be noted that the Fed’s 75 bps increase in the benchmark rate initially triggered the market’s optimism as the rate statement highlighted the odds of a slower rate hike. The update stated, “Cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”  However, Powell’s speech propelled the fears as he cited the need to bring down inflation “decisively” while also suggesting a bit longer play for the restrictive policy.

Moving on, the US ISM Services PMI, forecasted to ease to 55.5 in October compared to 56.7 in previous readings, could offer immediate directions but the pre-NFP trading lull is likely to challenge the momentum traders.

Also read: S&P 500 Futures dribble near one-week low as yields fade post-Fed rally

Analysts at Societe Generale provide a sneak peek at what they expect from the Bank of England’s (BoE) ‘Super Thursday’.

Also read: BoE Interest Rate Decision Preview: A close call between 50 bps and 75 bps, GBP/USD set to suffer

Key quotes

“We maintain our forecast of a 75 bps hike on the way to a peak of 4.5% at the March 2023 meeting.“

“Now that the markets have settled down and pension funds seem to have weathered their collateral problems after the Bank’s successful intervention, it looks likely that active gilt sales will commence, as twice rescheduled, on 1 November.”

“The revised plan excludes sales at the long end because of the impact of the pension fund issue on that part of the curve.”

• USD/INR has slipped to 82.75 after a breakdown of intraday consolidation.
• The RBI will provide a special report on inflation equipped with reasons and remedies for higher inflation.
• Fed’s hawkish guidance has turned the overall risk tone extremely negative.

The USD/INR pair has surrendered its opening gains recorded due to a bigger rate hike announcement by the Federal Reserve (Fed) on Wednesday. In the morning session, the asset displayed a gap-up open as a fourth consecutive 75 basis point (bps) rate hike by the Fed weighed on risk-perceived currencies.

Fed chair Jerome Powell also sounded hawkish while providing guidance cited that it is very premature to be thinking about pausing the policy tightening spell now as short-term inflation has remained higher than projections.

Meanwhile, the US dollar index (DXY) is oscillating below 112.00 after a marginal fall, however, the overall risk tone is extremely negative as policy tightening measures have weakened economic projections. S&P500 futures are failing to recover firmly as higher interest rates have escalated fears of a decline in earnings guidance by the corporate.

Now, investors are looking for the release of a special inflation report by the Reserve Bank of India (RBI) that will display reasons and remedies for higher inflation. Retail inflation in India has climbed to a high of 7.4% beyond the tolerance of 6% as mandated by the RBI consecutively for three quarters.

This week, the release of the US Nonfarm Payrolls (NFP) data will be of utmost importance. But before that, Wednesday’s release of US Automatic Data Processing (ADP) Employment Change has remained upbeat. The US economy has added 239k fresh jobs in the labor market, which will support the Fed to keep up the pace of hiking rates further.

The US NFP is seen lower at 200k vs. the prior release of 263k. While the Unemployment Rate will increase to 3.6%.

• Gold price has remained sideways below $1,640.00 amid quiet risk impulse.
• Investors are shifting their focus toward US employment data after a hawkish Fed policy.
• The US NFP is seen lower at 200k vs. the prior release of 263k.

Gold price (XAU/USD) is displaying back-and-forth moves in a mild range below $1,640.00 in the Tokyo session. Volatility has been squeezed after a wild gyration post the announcement of the interest rate decision by the Federal Reserve (Fed).

The market mood seems quiet as S&P500 futures have displayed a marginal recovery after bloodshed on Wednesday. The US dollar index (DXY) is displaying a rangebound profile below 112.00. The returns on 10-year US government bonds are stabilized at 4.12%.

Fed-infused volatility will take time to shrug off from the market as the fourth consecutive 75 basis points (bps) rate hike by Fed chair Jerome Powell came along with hawkish guidance. Now, investors are shifting their focus toward the US employment data, which is due on Friday.

On Wednesday, the US Automatic Data Processing (ADP) reported that the US economy has added 239k fresh jobs in the labor market. And, the consensus for US Nonfarm Payrolls (NFP) indicates that the labor market has been filled with 200k jobs vs. the prior release of 263k. A wide divergence in ADP and NFP data could bring volatility in gold prices.

Gold technical analysis

On an hourly scale, the gold prices are hovering around weekly lows placed from Tuesday’s low at $1,630.77. The precious metal is auctioning below the 20-period Exponential Moving Average (EMA), which indicates more weakness ahead.

Also, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which signals a continuation of downside momentum.

Gold hourly chart

• Silver remains mildly bid inside three-week-old rising wedge bearish chart pattern.
• Steady RSI suggests continued grinding between 50-DMA and 100-DMA.
• Two-month-old ascending trend line adds to the downside filters.

Silver price (XAG/USD) remains firmer around $19.30 while paring the post-Fed losses during early Thursday in Europe. In doing so, the bright metal rebounds from the 50-DMA to stay inside a three-week-old rising wedge bearish chart pattern.

Given the sluggish RSI, the commodity prices are likely to remain sidelined between the 50-DMA and the 100-DMA, currently around $19.10 and $19.50 in that order.

However, the bearish formation teases sellers in case of the $19.10 break. That said, the 61.8% Fibonacci retracement of September-October upside, near $18.95, acts as the additional downside filter before directing the bullion bears towards the theoretical target surrounding $17.30.

During the anticipated fall, an upward-sloping support line from early September and the yearly low, close to $18.50 and $17.55 respectively, could act as intermediate halts for the XAG/USD prices.

On the contrary, an upside break of the 100-DMA hurdle surrounding $19.50 could propel prices toward the recent high of $20.08 before the stated wedge’s upper line, close to $20.15, could challenge the silver buyers.

In a case where XAG/USD remains firmer past $20.15, the odds of witnessing a run-up targeting the previous monthly peak of $21.25 can’t be ruled out.

Silver: Daily chart

Trend: Limited upside expected

• EUR/USD struggles to defend the bounce off an eight-day low.
• Sluggish yields allow DXY bulls to take a breather, hawkish ECBspeak also defends pair buyers.
• Recession woes, Fed’s signals for aggressive rate hikes keep bears hopeful even as ECB’s Lagarde may push back bears.
• US ISM Services PMI could offer extra signals for Friday’s NFP and direct near-term USD moves.

EUR/USD prints mild gains around 0.9825-30 during a sluggish Thursday morning in Europe as bears take a breather following the Fed-inspired volatility. In doing so, the major currency pair rebounds from the lowest level in a week while taking a U-turn from a six-week-old support line.

The latest recovery could be linked to the broad US dollar weakness amid a lack of momentum in the bond market and as traders reassess the Fed’s hawkish message. That said, the US Dollar Index (DXY) retreats from the post-Fed peak of a one-week high to 111.90 whereas the US 10-year and 2-year Treasury yields seesaw around 4.10% and 4.62% by the press time.

It should be noted that the Culture Day holiday in Japan appeared to have restricted the bond market moves due to Tokyo's dominance in Asian Treasury moves.

Additionally, the recent hawkish comments from the ECB policymaker Pablo Hernandez de Cos also favor EUR/USD buyers. In his latest speech, ECB’s de Cos said that ECB "will need additional interest rate increases" to fight off inflation even considering the growing likelihood of a eurozone recession.”

Even so, the recent fears emanating from North Korea and China, as well as the recession woes in the bloc, challenge the EUR/USD traders.

North Korea fired an unidentified ballistic missile toward the East Sea that has since been reported to have flown over Japan, per Reuters. Following the same, Japan warns residents to take shelter in the threat of the North Korean missile. Recently, the US warns Pyongyang over such an effort and raised market fears in Asia. On the other hand, the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing China’s zero-covid policy. Further, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

It’s worth mentioning that the downbeat prints of Eurozone activity numbers for October and a static Unemployment Rate in Germany highlight economic fears for the old continent. Elsewhere, the US Federal Reserve (Fed) also offered a dollar buying opportunity the previous.

Also read: Fed Quick Analysis: Powell pivot? Not so fast, why this looks like a dollar buying opportunity

Amid these plays, the Asia-Pacific equities are down but the S&P 500 Futures print mild gains amid a lackluster session ahead of the European open.

Moving on, EUR/USD traders should pay attention to a speech from ECB President Christine Lagarde for fresh impulse ahead of the US ISM Services PMI, forecasted to ease to 55.5 in October compared to 56.7 in previous readings. While ECB’s Lagarde may help intraday buyers to keep the reins, if she manages to hide recession fears, the US PMI data can help recall the USD buyers despite printing softer outcomes should the details suggest strong employment growth.

Technical analysis

Although an upward-sloping support line from October 13 restricts immediate EUR/USD downside around 0.9810, bulls need to cross the 0.9880 resistance confluence including the 100 and 200 EMAs to retake control.

• USD/JPY prints three-day downtrend, holds lower ground near intraday bottom.
• Yields stay sluggish around multi-day high after Fed-inspired run-up.
• US warns North Korea for test-firing missiles toward Japan, South Korea.
• US ISM Services PMI will decorate calendar ahead of the key NFP.

USD/JPY bears keep the reins for the third consecutive day even as Tokyo cheers the Culture Day holiday. That said, the quote’s latest weakness could be linked to the US dollar’s failure to keep the post-Fed gains, as well as sluggish yields. Also exerting downside pressure on the yen pair could be the fears emanating from North Korea’s test-firing of missiles toward Japan and South Korea.

North Korea fired an unidentified ballistic missile toward the East Sea that has since been reported to have flown over Japan, per Reuters. Following the same, Japan warns residents to take shelter in the threat of the North Korean missile. Recently, the US warns Pyongyang over such an effort and raised market fears in Asia.

On the same line could be the coronavirus fears from China as the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing the dragon nation’s zero-covid policy. Additionally, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

Elsewhere, the US 10-year bond coupons ease to 4.096% while its two-year counterpart snaps a four-day uptrend as it drops to 4.611% at the latest. Overall, the bond yields remain inactive due to Japan’s absence from the Treasury markets. That said, the Asia-Pacific equities are down but the S&P 500 Futures print mild gains amid a lackluster session ahead of the European open.

On Wednesday, Fed’s 75 bps increase in the benchmark rate initially triggered the US dollar’s slump as the rate statement highlighted the odds of a slower rate hike. The update stated, “Cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”  However, Powell’s speech propelled the greenback as it cited the need to bring down inflation “decisively” while also suggesting a bit longer play for the restrictive policy.

Moving ahead, an absence of Japanese traders may restrict the odds of the USD/JPY rebound while the sluggish yields exert downside pressure on the pair as traders await the US ISM Services PMI, forecasted to ease to 55.5 in October compared to 56.7 previous readings. Following that, Friday’s US Nonfarm Payrolls (NFP) will be the key, mainly due to the strong ADP data.

Technical analysis

A downside break of the 21-DMA support, near 147.60 by the press time, directs USD/JPY bears towards the six-week-old ascending support line, near 146.00 at the latest.

• GBP/USD has climbed above 1.1400 after a pullback move ahead of BOE policy.
• The risk-off profile has trimmed marginally and the DXY has slipped below 112.00.
• The pound bulls have rebounded as a rate hike by the BOE will trim Fed-BOE divergence.

The GBP/USD pair has witnessed fresh demand around 1.1380 and has scaled above 1.1400 in the Tokyo session after a perpendicular fall on Wednesday. The cable has attempted a rebound as the risk-off profile has eased marginally after remaining at the rooftop. S&500 futures have also attempted a recovery while the US dollar index (DXY) has shifted its auction profile below 112.00.

The pound bulls are gaining traction as a rate hike announcement by the Bank of England (BOE) in the European session will trim the Federal Reserve (Fed)-BOE policy divergence. Fed chair Jerome Powell announced a fourth consecutive 75 basis points (bps) rate, which pushed interest rates to 3.75-4%. Now, the extent of the BOE’s rate hike will determine the decline in the Fed-BOE’s policy divergence.

Economists at Goldman Sachs came forward with a projection of 75 basis points (bps) as price growth has reclaimed a double-digit inflation rate. While economists at ING believe that BOE Governor Andrew Bailey will continue with a 50 bps regime as volatility infused in the UK financial markets after the disaster of the mini-budget has been shrugged-off post after the appointment of Rishi Sunak for novel leadership.

Apart from that, a new plan of liquidity tightening from UK PM Rishi Sunak and Chancellor Jeremy Hunt by tweaking fiscal policy will also support BOE’s price stability plans. UK administration has announced spending cuts and tax rise to curb the debt crisis. Now, the conjunction of tight monetary policy and fiscal policy will provide synergy in the fight against the inflation monster.

• USD/CAD has slipped below 1.3700 as the risk-off mood has eased marginally.
• Fed’s hawkish guidance brought a sheer decline in risk-perceived currencies.
• Oil prices have reclaimed $89.00 on a decline in oil stockpiles reported by the EIA.

The USD/CAD pair has sensed selling pressure after registering a fresh weekly high at 1.3724 in the Tokyo session. The responsiveness of a decline in the asset is marginal in comparison with the late New York rally, therefore, it would be early to announce that the risk aversion theme has faded. S&P500 futures have displayed a rebound while the US dollar index (DXY) has dropped below the critical support of 112.00.

The 10-year US Treasury yields are stabilized around 4.12% as a bigger rate hike by the Federal Reserve (Fed) was followed by hawkish guidance. Despite pushing the interest rates to the highest at 3.75-4% since 2008, ceasing of more policy tightening seems far as Fed chair Jerome Powell has announced that pausing tightening measures is very premature at this stage.

Long-term inflation expectations are well anchored but short-term inflation expectations have not displayed a meaningful slowdown yet. Therefore, the Fed will continue its momentum toward achieving discussed terminal rate of 4.75%.

Risk-perceived currencies are taking a sigh of relief as wild gyrations are generally followed by a contraction in volatility. Going forward, the housing sector could face significant troubles as interest obligations are skyrocketing and households could postpone their demand for new homes. Apart from that investors will also keep an eye on delinquency costs.

On Friday, US/Canada employment data will remain in focus. The US Nonfarm Payrolls (NFP) is seen lower at 200k vs. the prior release of 263k. While the unemployment rate will increase to 3.6%.

Meanwhile, Canada’s Net Change in Employment is seen lower at 10k against the former figure of 21.1k. While the jobless rate is expected to decline to 5.2%.

Oil prices have resurfaced to $89.00 after a corrective move as a decline in oil stockpiles by the Energy Information Administration (EIA) has strengthened oil bulls. The EIA reported a decline in oil inventories by 3.115M barrels for the week ending October 28.

• Gold price struggles to extend the corrective bounce off a fortnight-old support line.
• Off in Japan restrict bond moves, allowing DXY bulls to take a breather.
• Geopolitical, covid woes weigh on Asia equities, US stock futures print mild gains.
• US ISM Services PMI, NFP will be crucial for XAU/USD bears to retake control.

Gold price (XAU/USD) pares the biggest daily loss in a week around $1,638 during early Friday morning in Europe. In doing so, the bright metal cheers the US dollar’s weakness despite the risk-negative headlines. The metal’s latest rebound also pays little heed to inactive Treasury bond yields due to the holiday in Japan.

A pullback in the US Dollar Index (DXY) from a one-week high to 111.90, mainly tracing the US Treasury yields should have defended the XAU/USD buyers amid sluggish hours of Thursday. It should be noted that the US 10-year bond coupons eased to 4.096% while its two-year counterpart snaps a four-day uptrend as it drops to 4.611% at the latest.

Additionally, the Fed’s 75 bps rate hike and the language in the Rate Statement also tease DXY bears. That said, the Fed Rate Statement highlighted the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

On the contrary, the escalating geopolitical tensions between North Korea and Japan join the risk-negative covid news from China to exert downside pressure on the sentiment. That said, North Korea’s firing of missiles and Japan’s warning to residents weigh on the market’s risk profile, which in turn weighs on the risk barometer pair. On the same line could be the coronavirus fears from China as the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing the dragon nation’s zero-covid policy. Additionally, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

It’s worth noting that Fed Chair Powell’s hawkish message appears the key negative catalyst for the XAU/USD prices.

Against this backdrop, the Asia-Pacific equities are down but the S&P 500 Futures print mild gains amid a lackluster session ahead of the European open.

Looking forward, the US ISM Services PMI bears the downbeat forecasts of 55.5 for October compared to 56.7 previous readings and appears important for gold traders. Following that, Friday’s US Nonfarm Payrolls (NFP) will be the key, mainly due to the strong ADP data.

Technical analysis

Gold price justifies the sluggish MACD and RSI (14) while flirting with the fortnight-old support line, around $1,633 by the press time.

The recovery moves, however, remain limited unless crossing a downward-sloping resistance line from October 11, close to $1,670 at the latest. That said, the 200-SMA level of $1,662 guards the quote’s immediate upside.

Alternatively, a clear downside break of the aforementioned support line figure of $1,633 could quickly drag the XAU/USD bears toward the previous monthly low near $1,617 ahead of highlighting the yearly bottom of $1,614 and the $1,600 threshold.

Overall, gold price remains on the bear’s radar even as sellers take a breather of late.

Gold: Four-hour chart

Trend: Further downside expected

• USD/CNH renews intraday low, stays defensive after reversing from short-term key resistance line.
• China’s Caixin Services PMI dropped to five-month low.
• Key HMAs, RSI conditions suggest a bumpy road for the bears.

USD/CNH ticks down to refresh intraday low near 7.3160 after China reported downbeat services activity data during early Thursday.

In doing so, the offshore Chinese currency (CNH) pair consolidates the Fed-inspired gains but struggles to extend the late Wednesday’s pullback from a one-week-old descending resistance line.

That said, China’s Caixin/S&P Global Services PMI for October dropped to the lowest level in five months while flashing 48.4 figure versus 49.3 prior.

Despite the quote’s latest inaction, the bearish MACD signals and the U-turn from a short-term key resistance line direct USD/CNH sellers toward the 50-HMA and 100-HMA support levels, respectively near 7.3050 and 7.2980.

However, an upward-sloping support line from Friday, near 7.2840, joins the ascending support line on RSI (14) to challenge the pair bears afterward.

Alternatively, recovery moves need to cross the aforementioned resistance line, close to 7.3485, to convince USD/CNH buyers.

Following that, a run-up towards the all-time high marked in October around 7.3750 can’t be ruled out.

To sum up, USD/CNH justifies short-term bearish technical signals despite weaker fundamentals to support sellers. Though, the downside room appears limited.

USD/CNH: Hourly chart

Trend: Limited downside expected

• AUD/USD grinds higher around intraday top, pares the biggest daily loss in a week.
• Three-week-old ascending trend line defends buyers but 200-HMA is the key hurdle to win the fort.
• Fed’s Powell propelled US dollar, Aussie trade numbers initially failed to impress AUD bulls.
• Market sentiment remains dicey as traders lick post-Fed wounds ahead of US ISM Services PMI, NFP.

AUD/USD seesaws near intraday high surrounding 0.6360 despite downside China PMI data during early Thursday. The reason could be linked to the early-day releases of Aussie trade numbers and the US dollar’s consolidation of the Fed-inspired gains.

China’s Caixin Services PMI for October dropped to the lowest level in five months while flashing 48.4 figure versus 49.3 prior.

Earlier in the day, Australia’s trade surplus increased to 12,444M In September versus 8,850M expected and 8,324M prior while the Exports rallied by 7.0%, compared to 2.6% prior. However, the growth of the Imports dropped to 0.4% versus 4.5% prior.

Also challenging the Aussie pair buyers could be the escalating geopolitical tensions between North Korea and Japan join the risk-negative covid news from China to exert downside pressure on the sentiment. On the same line could be the Fed’s readiness for further rate hikes.

That said, North Korea’s firing of missiles and Japan’s warning to residents weigh on the market’s risk profile, which in turn weighs on the risk barometer pair. On the same line could be the coronavirus fears from China as the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing the dragon nation’s zero-covid policy. Additionally, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

However, a pullback in the US Dollar Index (DXY) from a one-week high to 111.90, mainly tracing the US Treasury yields should have defended the AUD/USD buyers. It should be noted that the US 10-year bond coupons ease to 4.096% while its two-year counterpart snaps a four-day uptrend as it drops to 4.611% at the latest.

Moving on, the US ISM Services PMI bears the downbeat forecasts of 55.5 for October compared to 56.7 previous readings and appears important for near-term AUD/USD moves. Following that, Friday’s US Nonfarm Payrolls (NFP) will be the key, mainly due to the strong ADP data.

Technical analysis

AUD/USD pair bounces off a three-week-old ascending trend line while posting the recent gains. However, the bearish MACD signals and a clear downside break of the 200-HMA keep the sellers hopeful unless the quote crosses the 0.6405 hurdle.

Even if the quote rises beyond 200-HMA, the weekly resistance line near 0.6430 could act as an extra filter to the north before welcoming the bulls.

Meanwhile, a downside break of the immediate support line, close to 0.6325 at the latest, could quickly drag the AUD/USD prices towards the late October swing low of around 0.6210.

Following that, a downward trajectory towards the previous monthly low, also the yearly bottom, surrounding 0.6170, will be in focus.

AUD/USD: Hourly chart

Trend: Limited upside expected

• EUR/USD bulls are eyeing a move higher away from the counter trendline. 
• Bears eye a run back to 0.9700 key support. 

The euro will depend on how the market levels out following the hectic Federal Reserve event that left the US dollar hanging on a thread. In this respect, the bond markets will be important. So far, the 10-year yield has carved out the M-formation on the daily chart with the yield moving in on the neckline and hugging the counter trendline.

US dollar & 10-year yield technical analysis

However, the retracement has potentially run its course in a 50% mean reversion. The bulls will need to get above 4.20% for a convincing upside continuation bias. 

As for the greenback, as measured by the DXY index, it has jumped back to test 112.00.

Looking forward, if the bulls can get above 112.00 and then 112.50, there will be prospects of a move to 114.00. Given that the euro makes up the majority of the basket of currencies that the dollar is measured against, this can signify the possible trajectory for the euro as well:

EUR/USD weekly chart

On the weekly chart, the price is testing the neckline of the W and a counter-trendline support area. This would tie in with the prospects of lower US yields and a softer US dollar if DXY cannot get above 112.50 soon. 

EUR/USD daily chart

The daily chart is also pointing to a lower level as its tries to break the trendline. The M-pattern's last leg is relatively short compared to the front side of the formation so it could be expected to extend lower in the coming sessions on Thursday. However, 0.9700 could be a tough nut to crack. 

China's Caixin/ S&P Global services PMI for October arrived at 48.4 vs. 49.3 prior, showing that the country’s services activity saw a sustained slowdown in the reported month.

October survey data suggested that the ongoing efforts to stop the spread of COVID-19 disrupted business operations and weighed on demand.

Wang Zhe, Senior Economist at Caixin Insight Group said, “with Covid prevention and containment measures tightened in the face of sporadic outbreaks in many areas, services activity remained in contractionary territory for the second consecutive month.”

AUD/USD shrugs off downbeat data

Discouraging Chinese Services PMI fails to deter AUD bulls, as AUD/USD keeps its recovery mode intact at around 0.6360, up 0.16% on the day, as of writing.

• Market sentiment remains sluggish even as Fed’s Powell sounded hawkish.
• Headlines surrounding North Korea, China join fears of recession to weigh on risk profile.
• Yields retreat from multi-day high, stock futures hesitate in following Wall Street’s losses.
• BOE, risk catalysts could entertain traders ahead of Friday’s NFP.

The risk profile remains blurred during early Thursday as traders lick their wounds after Fed-inspired volatility. Also amplifying the sluggish markets could be the anxiety ahead of today’s key Bank of England (BOE) monetary policy decision and Friday’s US Nonfarm Payrolls.

That said, escalating geopolitical tensions between North Korea and Japan join the risk-negative covid news from China to exert downside pressure on the sentiment. On the same line could be the Fed’s readiness for further rate hikes.

While portraying the mood, the S&P 500 Futures remain indecisive as it flirts with the one-week low, probing a three-day downtrend, whereas the US Treasury yields retreat from the post-Fed highs. It should be noted that the US 10-year bond coupons ease to 4.096% while its two-year counterpart snaps a four-day uptrend as it drops to 4.611% at the latest.

That said, North Korea’s firing of missiles and Japan’s warning to residents weigh on the market’s risk profile, which in turn weighs on the risk barometer pair. On the same line could be the coronavirus fears from China as the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing the dragon nation’s zero-covid policy. Additionally, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

On Thursday, Fed’s 75 bps increase in the benchmark rate initially drowned the US Treasury yields as the rate statement highlighted the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.  However, Powell’s speech propelled the greenback as it cited the need to bring down inflation “decisively” while also suggesting a bit longer play for the restrictive policy.

Against this backdrop, the US Dollar Index (DXY) drops and prices of commodities, as well as Antipodeans, consolidate the previous day’s losses.

Moving on, the BOE is less likely to offer any relief to the market sentiment unless providing a surprise move and hence, the yields are likely to regain the upside momentum, which in turn could weigh on the equities and commodities. However, the US dollar may witness hardships in rising ahead of Friday’s US jobs report.

Also read: S&P 500 seesaws between 3830-3896 post-Fed decision, on Powell commentary

• NZD/USD has witnessed a rebound from 0.5800, however, the risk-off profile is intact.
• The Fed has kept hawkish guidance on the policy as short-term inflation expectations are not anchored yet.
• Kiwi investors will focus on Caixin Services PMI data ahead.

The NZD/USD pair has displayed a pullback move after dropping to near the round-level support of 0.5800 in the Tokyo session. The pullback move seems to lack confidence as the market pulse is still risk-averse after the hawkish stance on policy rates and guidance by the Federal Reserve (Fed).

After a bloodbath, S&P500 has witnessed a pause in the downside momentum, however, the pessimism is still high as corporate would require to come forward with lower earnings guidance and impact on net profit margins due to the fourth consecutive 75 basis points (bps) by the Fed. Meanwhile, the US dollar index (DXY) has dropped marginally to near 112.00.

Citing inflationary pressures as responsible for a bigger rate hike, Fed chair Jerome Powell has also provided hawkish guidance. Fed policymaker doesn’t see any pause in the policy tightening cycle yet as short-term inflation expectations are still not anchored. This has pushed the 10-year US Treasury yields at 4.12%.

This week, the US Nonfarm Payrolls (NFP) data will be of utmost importance. The US NFP is seen lower at 200k vs. the prior release of 263k. While the jobless rate will increase to 3.6% from the former print of 3.5%. Employment generation in the US economy is increasing but at a diminishing rate that could compel the Fed in the December monetary policy meeting to slow down its pace of hiking interest rates. Also, lower consumer spending could de-rail the 75-bps rate hike spell.

On the NZ front, investors will keep an eye on Caixin Services PMI data. The economic data is likely to bring adjustment in the asset as NZ is a leading trading partner of China, therefore Chinese services activities have a significant impact on kiwi dollar.

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.2472 vs the  last close of 7.2890.

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.

• GBP/USD seesaws around seven-day low as the key support line challenge sellers.
• Bearish MACD signals, descending RSI line joins 50-SMA breakdown to favor sellers.
• 100-SMA, ascending trend line from late October adds to the downside filters.
• Bulls need to cross weekly resistance line to retake control.

GBP/USD licks its wound around a one-week low as a short-term key support trend line challenge bears near 1.1380 during early Thursday.

Even so, the bearish MACD signals and a clear downside break of the 50-SMA keep the pair sellers hopeful. Also suggesting the quote’s further decline is the absence of the oversold RSI (14).

In addition to the immediate support line surrounding 1.1380, the 100-SMA level near 1.1360 also challenges the GBP/USD bears.

Should the quote drops below 1.1360 SMA support, its fall to an upward-sloping trend line from September 29, at 1.1215 appears imminent.

It’s worth noting that the GBP/USD pair’s sustained weakness past 1.1215 will make it vulnerable to approaching the late October swing low of 1.1060.

Meanwhile, recovery moves may initially aim for the 50-SMA hurdle surrounding 1.1490 before eyeing the 1.1500 threshold.

Following that, a one-week-old descending resistance line, near 1.1580 by the press time, becomes crucial to recall GBP/USD buyers.

That said, the cable pair’s successful trading beyond 1.1580 could quickly approach the previous monthly top of 1.1640 before directing the bulls to September’s high around 1.1740.

Also read: GBP/USD bears attack 1.1400 support on FOMC showdown, BOE’s “Super Thursday” eyed

GBP/USD: Four-hour chart

Trend: Further downside expected

• AUD/JPY takes offers to renew multi-day low, drops for the third consecutive day.
• Headlines surrounding North Korea’s missile attacks, covid weigh on the risk appetite.
• Fed’s move propelled yields and drowned equities earlier.
• Yields, risk catalysts are important for fresh impulse ahead of RBA’s Monetary Policy Statement.

AUD/JPY stands on slippery grounds near the mid-93.00s during Thursday’s Asian session amid mixed Australia trade numbers and risk aversion. In doing so, the cross-currency pair ignores firmer Treasury bond yields during the three-day downtrend to the lowest levels since October 24.

Australia’s trade surplus increased to 12,444M In September versus 8,850M expected and 8,324M prior while the Exports rallied by 7.0%, compared to 2.6% prior. However, the growth of the Imports dropped to 0.4% versus 4.5% prior.

Elsewhere, North Korea’s firing of missiles and Japan’s warning to residents to weigh on the market’s risk profile, which in turn weighs on the risk barometer pair. On the same line could be the coronavirus fears from China as the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing the dragon nation’s zero-covid policy.

It should be noted that the US 10-year Treasury yields rallied to the highest level in a week, firmer around 4.11% by the press time. The reason could be linked to the US Federal Reserve (Fed) Chairman’s speech highlighting the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. It’s worth noting that the Fed’s 75 bps rate hike couldn’t favor the yields earlier on Wednesday.

Against this backdrop, , the S&P 500 Futures print mild losses at the latest while tracking Wall Street’s downbeat performance.

Moving on, a light calendar at home may restrict AUD/JPY moves, as well as the anxiety ahead of the Reserve Bank of Australia’s (RBA) Monetary Policy Statement, up for publishing on Friday. Even so, the sour sentiment could keep the pair directed toward the south.

Technical analysis

A clear downside break of the 21-DMA, around 93.65 by the press time, directs AUD/JPY towards 92.80 horizontal support.

• AUD/USD is declining towards 0.6300 despite the better-than-projected Australian Trade Balance data.
• The risk-sensitive currencies are facing a sell-off on Fed’s interest rate hike.
• Going forward, investors will focus on US employment data.

The AUD/USD pair has slipped below the immediate support of 0.6330 despite the Australian Bureau of Statistics having reported a steep rise in Trade Balance data. Trade activities have been accounted at 12,444M than the projections of 8,850M and the prior release of 8,324M. Exports have increased sharply by 7% while imports have grown by 0.4%.

The asset displayed a juggernaut fall in the late New York session as a fourth consecutive rate hike of 75 basis points (bps) by the Federal Reserve (Fed) along with a hawkish commentary on guidance spurted the risk aversion theme. S&P500 witnessed a bloodbath as hawkish guidance from Fed chair Jerome Powell has raised concerns over US corporate earnings ahead.

A continuation of policy tightening will force the corporate to postpone its expansion plans due to higher interest obligations. Also, the real estate market will be the biggest victim due to expensive mortgages.

The US dollar index (DXY) has moved to 112.20 amid the rising safe-haven’s appeal. While 10-year US Treasury yields have jumped to 4.12%.

A rate hike by the Fed has also widened the Fed-Reserve Bank of Australia (RBA) policy divergence. This week, the RBA Governor Philip Lowe continued its 25 bps rate hike structure, keeping in mind, economic prospects should remain firmer along with the agenda of bringing price stability.

Going forward, investors will focus on the release of the US employment data. The US Nonfarm Payrolls (NFP) is seen lower at 200k vs. the prior release of 263k. While the Unemployment Rate will increase to 3.6%. It looks like higher interest rates and lower consumer spending has paused the recruitment process by various firms.

The trade balance released by the Australian Bureau of Statistics is out as follows:

• Australia Sept balance goods/svcs AUD+12,444 mln, s/adj (Reuters poll: A$+8,850 mln).
• Australia Sept goods/services exports +7 pct MoM, seasonally adjusted.
• Australia Sept goods/services imports 0 pct MoM, seasonally adjusted.

AUD/USD, meanwhile, remains under pressure as the US dollar climbs back into positive territory across the board following a hawkish turn of events at the FOMC on Wednesday. At the time of writing, AUD/USD is trading at 0.6327 and is lower by 0.32% so far on the day.

About Aussie Trade Balance

The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.

• USD/CAD takes the bids to refresh intraday high, prints six-day uptrend.
• A clear break of three-week-old descending trend line, 21-DMA favors bulls.
• The one-month-old horizontal region appears a tough nut to crack for bears.

USD/CAD renews weekly top near 1.3720 as it extends the five-day-old winning streak to Thursday’s Asian session.

In doing so, the Loonie pair justifies the previous day’s upside break of the downward-sloping resistance line from October 13, now support, as well as the 21-DMA. Also keeping the bulls hopeful are the recently easing bearish MACD signals.

With this, the USD/CAD buyers are all set to challenge the late October swing high near 1.3855 before targeting the previous monthly top near 1.3980.

It’s worth noting, however, that the 1.4000 psychological magnet may challenge the Loonie pair’s further upside.

Alternatively, the 21-DMA restricts the USD/CAD pair’s pullback near the 1.3700 round figure, a break of which will highlight the resistance-turned-support line, around 1.3670 at the latest, for the bear’s conviction.

Even so, a one-month-long horizontal region comprising lows marked in October and the 50-DMA, around 1.3505-3485, holds the gate for the seller’s easy ruling.

To sum up, USD/CAD buyers are likely to extend the post-Fed rally towards refreshing the weekly top. However, the upside room appears limited, which in turn highlights the scope of a pullback after an initial run-up.

USD/CAD: Daily chart

Trend: Further upside expected

• USD/JPY bears are lurking as the price remains in bearish territory. 
• The threat of intervention is back in focus for the days ahead. 

USD/JPY remains on the backside of the counter-trendline on the hourly chart which leaves a bearish bias on the charts for the days ahead. There is also a bearish wick on the daily chart that would be expected to be filled in. However, intervention risks weigh also. On the other hand, the US dollar is back in bullish territories on the charts and US yields have battled back also. The following illustrates the bias on the various time frames across the assets. 

US 10-year yields daily chart

The ten-year yield has carved out an M-formation on the daily chart and is pressuring the neckline that meets the counter-trendline resistance on the way to a 50% mean reversion of the prior bearish impulse.  Failures here will be supportive to the yen, especially in an environment whereby the MoF's actions are aimed at scaring off speculators and slowing the pace of JPY falls. 

DXY daily chart

As for the US dollar, it has climbed back into bullish territory. Looking forward, if the bulls can get above 112.00 and then 112.50, there will be prospects of a move to 114.00. 

USD/JPY H1 chart

This leaves the outlook for the yen tainted but highly uncertain. The fundamental support a weaker level vs the greenback but the threat of MoF intervention could prune rallies through a grind higher. The bulls will need to get over 148.80 but will most probably be at higher risk for sudden bouts of yen strength as the intervention gets underway. 

On the other hand, a compelling feature o the daily chart has emerged:

The bearish wick would be expected to be filled in:

• EUR/JPY prints four-day downtrend with mild losses, depressed near one-week low.
• Yields rallied, equities slumped after Fed’s Powell delivered hawkish signals.
• ECBSpeak failed to impress buyers amid fears of a recession in the bloc.
• ECB President Lagarde could offer intermediate relief with her hawkish rhetoric.

EUR/JPY extends the week-start bearish bias as sellers attack 145.10 during the four-day downtrend to Thursday’s Asian session. The cross-currency pair’s latest weakness could be linked to the market’s geopolitical fears and the recession woes surrounding Eurozone. In doing so, the quote ignores firmer Treasury bond yields and hawkish comments from European Central Bank (ECB) officials.

Downbeat October PMIs for Eurozone and Germany join North Korea’s firing of missiles and Japan’s warning to residents to weigh on the market’s risk profile, which in turn weighs on the risk barometer pair. On the same line could be the coronavirus fears from China as the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing the dragon nation’s zero-covid policy.

Elsewhere, the US 10-year Treasury yields rallied to the highest level in a week, firmer around 4.11% by the press time. The reason could be linked to the US Federal Reserve (Fed) Chairman’s speech highlighting the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. It’s worth noting that the Fed’s 75 bps rate hike couldn’t favor the yields earlier on Wednesday.

It should be noted that the recently hawkish comments from the ECB policymaker Pablo Hernandez de Cos also failed to impress EUR/JPY buyers. In his latest speech, ECB’s de Cos said that ECB "will need additional interest rate increases" to fight off inflation even considering the growing likelihood of a eurozone recession.”

Moving on, the market’s risk catalysts and the movement of Treasury bond yields, as well as comments surrounding the Bank of Japan (BOJ) could entertain the EUR/JPY traders ahead of today’s speech from ECB President Christine Lagarde.

That said, ECB’s Lagarde has been hawkish of late, which in turn signals the odds of the pair’s corrective bounce.

Technical analysis

A daily closing below the five-week-old ascending trend line, around 146.50 at the latest, directs EUR/JPY bears towards the 144.10-00 horizontal support comprising tops marked during late September and early October.

• EUR/GBP is looking to recapture the weekly high at 0.8630 ahead of BOE’s monetary policy.
• Volatility dropped in the UK due to novel leadership could delight the BOE to continue 50 bps rate hike regime.
• UK recession fears have escalated as the economy could display a 1.4% decline in GDP rate.

The EUR/GBP pair has rebounded firmly after a minor correction to near 0.8606 in the Tokyo session. The cross is aiming to recapture the weekly high at 0.8630 ahead of the interest rate decision by the Bank of England (BOE). The asset has remained sideways for the past three trading sessions after a reversal from 0.8580.

The majority of the market participants are expecting that the BOE will push interest rates by 75 basis points (bps) as the inflation rate has recaptured the double-digit figure. However, economists at ING are of the view that the BOE will continue its 50 bps rate hike regime as the volatility infused in the UK’s financial markets due to the disaster of mini-budget supported by former UK Prime minister Liz Truss has been trimmed on Sunak’s appointment as a new leader.

Fiscal policy is now in conjunction with monetary policy as Sunak and Chancellor Jeremy Hunt have favored spending cuts along with tax hikes to curtail the debt crisis. Therefore, BOE policymakers could continue their path of bringing price stability with ease on economic prospects.

Also, soaring recession fears in the UK economy amid sky-rocketing price growth and low confidence of international investors would compel the BOE to go brisk on critical rates.

Economists at Goldman Sachs believe that “The country is likely to have a four-quarter cumulative fall in the gross domestic product (GDP) of 1.6%.” The investment banking firm has also lowered UK’s growth projections to -1.4% from -1.0% for 2023 on an annual basis.

On the Eurozone front, a release of the Harmonized Index of Consumer Prices (HICP) at 10.7% has opened doors for one bigger rate hike by the European Central Bank (ECB). Going forward, the speech from ECB President Christine Lagarde will remain in focus. The ECB policymaker may dictate the likely monetary policy action ahead.