• USD/CAD keeps pullback from three-day-old resistance line, pokes immediate support.
• RSI conditions favor sellers aiming for the 200-SMA.
• Bulls need validation from yearly peak for a further upside move.

USD/CAD teases sellers around an immediate support line near 1.3775 during Tuesday’s Asian session. In doing so, the Loonie pair justifies the previous day’s failure to cross a three-day-old resistance line, as well as the bearish divergence on the RSI (14).

That said, the quote is likely to break the nearby support of 1.3775, which in turn could quickly drag prices toward the 200-HMA support level near 1.3735. However, Monday’s bottom surrounding the 1.3700 theshold could challenge the pair bears afterward.

Also acting as a downside filter is a horizontal area surrounding 1.3675 that comprises the levels marked since the last Thursday.

In a case where the USD/CAD prices decline below 1.3675, the odds of witnessing a slump toward the monthly low near 1.3500 can’t be ruled out.

Meanwhile, an upside break of the ascending resistance line from Thursday, near 1.3785 by the press time, could recall the buyers trying to renew the yearly top marked the last month, currently around 1.3840.

In that case, April 2020 bottom surrounding 1.3960 will gain the market’s attention as the strong hurdle.

Overall, USD/CAD is likely to witness a pullback but a reversal of the present bullish trend is out of the question at the moment.

USD/CAD: Hourly chart

Trend: Pullback expected

• Gold price has turned sideways after a sheer downside below $1,670.00 amid a risk-off market mood.
• Intensified missile attacks by Russia on Kyiv have trimmed the risk appetite of investors.
• This week, the US inflation data will be of utmost importance.

Gold price (XAU/USD) is displaying topsy-turvy moves below $1,670.00 in early Asia. The precious metal is expected to display sheer volatility if it ditches the cushion of $1,660.00 as the risk-off profile is intensifying amid aggressive attacks on Ukraine by Russia. After damaging the Crimean bridge in Russia that is acting as a supply line for Russian troops in southern Ukraine, Russia has intensified missile attacks in Kyiv.

Meanwhile, the US dollar index (DXY) has been strengthened on the dismal market mood and has established comfortably above the round-level hurdle of 113.00. US markets were closed on Monday but S&P500 futures have remained majorly rough amid negative market sentiment.

This week, the mega event of the US inflation data will provide lucid guidance for further direction. A decline in gasoline prices has resulted in a trimmed consensus for the headline US inflation data. The economic data is seen lower at 8.1%. While the core inflation that excludes oil and food prices is seen higher at 6.5%.

As per CME Fedwatch tool, more than 78% odds are favoring that the Federal Reserve (Fed) will announce a fourth consecutive 75 basis points (bps) rate hike.

Gold technical analysis

On an hourly scale, the gold prices have established below the 50% Fibonacci retracement placed at $1,672.61 and are declining towards the 61.8% Fibo retracement at $1,658.90. The 50-and 200-period Exponential Moving Averages (EMAs) have delivered a death cross at around $1,690.00, which adds to the downside filters.

Adding to that, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates more weakness ahead.

Gold hourly chart

• GBP/JPY is slightly up, but the Japanese intervention looming might likely stall the rally.
• The GBP/JPY trapped between the 20/200-DMA at around 161.26-160.65.
• Short term, the GBP/JPY is neutral-to-downward biased, and once it clears 161.00, a fall toward 160.00 is on the cards.

The GBP/JPY slightly advances as the Asian Pacific session begins, up by a minimal 0.03%, after finishing Monday’s trading day almost flat, seesawing between the 20 and 200-day EMAs. At the time of writing, the GBP/JPY is trading at 161.11.

GBP/JPY Price Forecast

From a daily chart perspective, the GBP/JPY is neutral-biased. However, it is worth noting that the cross-currency is approaching the 200-day EMA at 160.65, which, if broken, would exacerbate a fall toward the 50% Fibonacci retracement at 158.29. On the flip side, If the GBP/JPY clears the 20-day EMA at 161.26, it might open the door for a re-test of the 50-day EMA at 162.14.

In the one-hour timeframe, the GBP/JPY is neutral-to-downward biased. During the last two trading days, the pair has bottomed around the 160.50-161.50 area, fluctuating above/below the 20-EMA. At the time of typing, the GBP/JPY sits above the 20-EMA, which usually it’s a bullish signal. However, the presence of the 50, 100, and 200-EMAs, above the exchange rate would cap any rallies towards a re-test of October’s 7 high at 162.60.

Therefore, the GBP/JPY first support would be the daily pivot at 161.04. Once cleared, the next support would be the confluence of October 10 and the S1 daily pivot at around 160.46/49, followed by the S2 daily pivot at 159.94. A breach of the latter will expose the confluence of the September 30 low at 159,43 and the S3 pivot point at 159.35-43 area.

GBP/JPY Additional Technical Levels

• EUR/USD rests on 12-day-old horizontal support after four-day downtrend.
• Uncertainty over Germany’s support joint EU debt to battle energy crisis favored sellers at the latest.
• Fears of recession intensify amid escalating Russian shelling in Ukraine, hawkish Fedspeak and downbeat EU data.
• Return of full markets and comments from Fed/ECB policymakers will be crucial to determine the downside move.

EUR/USD bears take a breather around 0.9700 as a short-term horizontal support tests further downside after a four-day south-run to early Tuesday in Asia. Even so, the risk-aversion wave and fears that the recession is imminent for the old continent, not to forget the hawkish Fedspeak, keep the major currency pair sellers hopeful.

Recently, Germany’s rejection of the previous market chatters that Berlin backs the European Union (EU) joint debt issuance to battle the energy crisis, favored by Bloomberg, seemed to have flared the risk-off mood and weighed on the EUR/USD prices. However, the absence of major data/events and mixed comments from the Fed policymakers appeared testing the bears of late.

That said, “US can lower inflation relatively quickly without recession or large increase in unemployment,” said Chicago Fed President Charles Evans on Monday. The policymaker also added that the Fed needs to "carefully and judiciously" navigate to a "reasonably restrictive" policy rate. It should be noted that Federal Reserve Vice Chair Lael Brainard made the case for cautious rate hikes for the future, per the Wall Street Journal (WSJ).

On the contrary, “The European Central Bank (ECB) will have to take significant interest step again in October,” policymaker Klaas Knot said on Monday, adding that it's “too early to say how big step needs to be.” Further, European Central Bank (ECB) Governing Council member Mario Centeno said, “Normalization of monetary policy is absolutely necessary and desired”.

Elsewhere, the Eurozone Sentix Investor Confidence index deteriorated to -38.3 in October from -31.8 in September vs. -34.7 expected. The index fell to its lowest level since March 2020 while signaling a deep recession.

Other than the uncertainty over the debt issuance and central bankers’ comments, not to forget the downbeat data, hawkish Fed bets and Friday’s strong US jobs report also drowned the EUR/USD prices of late. On the same line could be the recently escalating Russian shelling on Kyiv. However, holidays in the US, Japan and Canada might have challenged the sellers.

That said, the US Dollar Index (DXY) rose to the one-week high during the four-day uptrend amid the risk-aversion wave.

Moving on, a slew of ECB and the Fed policymakers are up for speaking and hence may entertain the EUR/USD pair traders during the full markets. Even so, the odds favoring the bearish moves are high.

Technical analysis

With the oversold RSI challenging the EUR/USD bears, the quote struggles between a two-week-old horizontal support area and a weekly resistance line, respectively near 0.9680-70 and 0.9750 in that order.

• AUD/USD juggles around 0.6300 ahead of the US inflation figures.
• A decline in core US CPI data is necessary for a less hawkish tone by the Fed.
• Market sentiment is extremely negative amid renewed Russia-Ukraine tensions.

The AUD/USD pair is oscillating around the immediate hurdle of 0.6300 in the Toyo session after a rebound move from a fresh two-year low at 0.6274. A rebound in the asset seems a dead cat bounce as the risk sentiment is extremely negative amid a weaker S&P500. The asset has displayed a five-day losing spell and is expected to remain on the tenterhooks ahead of the US Consumer Price Index (CPI) data.

Meanwhile, the US dollar index (DXY) has established firmly above 113.00 as investors are hiding behind the safe haven amid a risk-off market mood. The recent escalation in Russia-Ukraine tensions after Moscow claimed that Ukrainian military attacks have demolished a bridge linking the occupied Crimean Peninsula to Russia. The Crimean Bridge serves as a major supply line for Russian military forces available in southern Ukraine.

The event has escalated the fears of nuclear operations by Russia, which could damage the harmony in Europe to a broader extent.

Going forward, the extent of the deviation in the US CPI data will display the true picture of the rate hike announcement by the Federal Reserve (Fed) in November. As per the consensus, the headline US inflation will land at 8.1%, lower than the prior release of 8.3%.

Thanks to the falling gasoline prices in the US, which might keep the plain-vanilla inflation in check. While the release of the core CPI catalysts is gathering more importance. The event has not displayed signs of exhaustion yet. Also, it is expected to improve to 6.5% from the prior release of 6.3%.

On the Aussie front,

• Silver price extends its losses below the 100-day EMA on risk-aversion.
• Fed’s aggressive tightening cycle and increasing geopolitical tensions bolstered the US dollar.
• US central bankers expressed that the Fed needs to be restrictive, with rates around 4.50% in early 2023.
• Silver Price Forecast: If it surpasses the 20-day EMA, it could pave the way to $19.00.

Silver price tumbles below the 100-day EMA, down for four consecutive days courtesy of a risk-off impulse sparked by the US central bank expectations for further tightening, tensions arising between the US-China chip embargo, and the escalation of the Russia-Ukraine war. Therefore, traders seeking safety kept the greenback in the driver’s seat. At the time of writing, the XAG/USD is trading at $19.59 a troy ounce, down by 2.50%.

US equities closed in the red, extending their losses for the fourth consecutive day. The lack of US economic data released on Monday keeps market players leaning on Federal Reserve speeches led by Vice-Chair Lael Brainard and Chicago’s Fed President Charles Evans.

Brainard said that even though the US economy decelerated “more than anticipated,” she added that some sectors remain lagging behind the effects of monetary policy. She commented that monetary policy needs to be restrictive for some time to reassure that inflation would get back under the Fed’s objective.

Earlier, Charles Evans said that the US central bank might be able to slow down inflation “while also avoiding a recession.” He estimates that the Federal funds rate (FFR) will peak at around 4.5% early in 2023 and remain higher for longer.

In the meantime, the greenback appreciated during the day on the escalation of the Russia/Ukraine conflict, as shown by the US Dollar Index, up 0.35%, at 113.145. Also, US semiconductors embargo on China is expected to spur some retaliation from one of the largest economies in Asia.

It is worth noting that the US bond market is closed, though it was not an excuse for the precious metals to begin the week on the wrong foot. However, the US 10-year bond yield is at 3.961%, while US 10-year Treasury Inflation-Protected Securities (TIPS) would open on Tuesday, yielding 1.62%.

All that said, most traders are expecting US inflation data to be released on Thursday. Expectations on the monthly reading are at 0.2%, above the previous reading, while on an annual based, they are at 8.1%, on the back of falling energy prices. Concerning core inflation, which strips food and energy, the MoM is expected to slow by 0.4%, less than August’s, while the year-over-year is estimated to jump by 6.5%, higher than the 6.3% in the previous month.

Silver Price Forecast

The XAG/USD dropped below the 100-day EMA at $19.95, extending its losses, nearby the 20-day EMA at $19.53. It should be noted that the Relative Strength Index (RSI) is getting towards the 50-midline, which, once broken downwards, would signal that sellers are gathering momentum. Then, the XAG/USD first support would be the 20-day EMA previously mentioned, followed by the 50-day EMA at $19.40, which, once cleared, could open the door for a re-test of the September 28 daily low at $17.97.

• NZD/USD bulls could be back in play for the day ahead. 
• The bulls eye a return to the middle of the sell-off. 

As per the prior day's analysis, the price has moved lower and we start the middle of the week on the back foot. The Kiwi is at a new cycle low ahead of key US Consumer Price Index data on Thursday night.

The driving force is US rates but the inflation risks in New Zealand could be contained by a hawkish central bank, offering support tot he bird. this gives rise to prospects of a correction for the day ahead in NZD/USD as the following analysis leans towards.

Prior analysis, NZD/USD 

The price was attempting to slide out of the resistance of the dynamic bearish trendline that was formed on the back of the NFP data on Friday and that  the bulls needed to clear 0.5625 to put a firm grip on the baton:

NZD/USD update, M15 chart

However, as the analysis illustrated if the bulls were unable to get above there, then the downside would be in play and that is what we got. The price sank, as expected, and the question now is whether this is going to be the high or low for the week. Given the number of catalysts on the calendar, perhaps not. However, in the meanwhile, the double bottom could be significant, at least for the Asian day ahead on Wednesday. 

A break of the dynamics trendline resistance could be an opportunity for traders to look for a discount and target a significant correction towards the midpoint of the day's range near 0.5585 on a break of 0.5575. Bearish below 0.5550. 

What you need to take care of on Tuesday, October 11:

The American dollar extended last week’s momentum and rose on Monday against most of its major rivals as risk aversion dominated financial boards.

On the one hand, the dismal mood was backed by Russia as the country resumed its aggressive attacks on Ukraine, firing multiple missiles that targeted communication and energy systems. The attack reached Kyiv and triggered a massive power outage in several Ukrainian cities.

Conversely, the Bank of England announced additional monetary measures to support the financial system. The central bank doubled its temporary QE bond purchases to £10 billion per day for the upcoming days, although buying should end on Friday.

Global stock markets closed in the red, reflecting market concerns. The EUR/USD pair settled at around 0.9700, while GBP/USD finished the day in the 1.1050 price zone. AUD/USD fell to 0.6274 a fresh 2-year low. USD/CAD trades around 1.3760 as crude oil prices give up on the dismal market’s mood.

The dollar appreciated against safe-haven rivals, with USD/CHF now trading at around parity and USD/JPY reaching 145.70, approaching the highs that triggered BOJ’s intervention.

Gold currently changes hand at $1,667 a troy ounce while WTI fell to $90.60 a barrel.

The focus this week will be on the US Consumer Price Index, to be out on Thursday.

Ethereum Classic price is down twice as much as Bitcoin and hints at a countertrend bounce

• WTI Oil peaks at $93.60 and retreats to $90.50 area.
• Oil prices decline on profit-taking, economic concerns.
• The near-term positive trend remains intact while above $90.50 .

Front-month WTI prices have retraced half of the last Friday’s jump on Monday, returning to levels below $91.00. The US oil benchmark has broken a 5-day rally, deprecianting from 5-week highs at $93.60 to the mid range of $90.00.

Economic concerns and profit-taking weigh on oil prices

Crude prices have retreated beyond 2% on the day after the September Chinese Caixin Services PMI, released last week, showed a decline to 49,3, from 55 in August, casting shadows about the prospects of global demand for crude.

Furthermore, the sharp oil rally seen last week, which pushed prices 17% higher ,could have triggered some profit-taking movements that would have added negative pressure on prices.

Monday’s reversal has offset last week’s bullish momentum triggered by the production cuts announced by the OPEC+. The club of the world’s largest oil suppliers decided to slash oil production by 2 million barrels per day, the largest production cut since the outbreak of the COVID-19 pandemic, which sent crude prices skyrocketing.

WTI crude, testing support level at $90.50 area

From a technical perspective, WTI process might find suppot at the 50-hour SMA, now at $90.50, which has contained previous reversals over the last week, and would keep the near-8.2% term bullish trend intact.

Below $90.50, next potential targets would be $90.00 psychological level and mid-September highs around 86.50.

On the upside, above $93.00 (intra-day high) WTI prices might be aiming for $94.45 (38.2% retracement of the June – October decline) and then $97.25 (August 29 high).

Technical levels to watch

• EUR/JPY bulls could be nearing capitulation within the recent soft correction. 
• Bears are targeting a blow-off to test below 141.00.

EUR/JPY, as the following analysis will illustrate, could be on the verge of a significant move to the downside. The price has been in a broad bearish trend since the start of the month and there could be more to come from the bears should the correction decelerate as follows: 

EUR/JPY H1 chart

EUR/JPY M15 chart

While there this is by no means a cert', the price is forming a series of topping formations as per the arrows on top of the peaks. This signifies that the correction is decelerating and that a downside continuation is likely to be imminent. Given the grinding correction, there is the prospect of a sharp sell-off below 141.20 for a test below 141 for the days ahead.

However, the price could just as well creep below the trendline support and meet demand around 141.25 before gathering there ahead of the sell-off. In either scenario, USD/JPY bulls will need to capitulate which is a possible scenario considering the fears of intervention from the Bank of Japan:

''We are wary that a move above 145 in USDJPY will compel FX intervention, which could be more likely given the upcoming Consumer Price Index (especially if stronger). That could introduce temporary USD drag. Nonetheless, the USD remains best in class, and we look to accumulate on dips,'' analysts at TD Securities explained. 

• The US dollar hits one-week high at 1.3780.
• Lower oil prices an hawkish Fed hopes are undermining the CAD.
• USD/CAD seen rallying to 1.40 before dropping to 1.32 – CIBC.

The US dollar’s recovery from session lows near 1.3700 has managed to reach one-week highs at 1.3780 during Monday’s US session. The pair, however, has failed to consolidate above the top of last week’s horizontal range, at 1.3750/60.

Lower oil prices and hopes of a hawkish Fed hit the CAD

Crude prices have posted a significant retreat on Monday, which has been weighing on the oil-sensitive loonie. The US benchmark WTI has dropped to prices near $90.50 after having traded above $93, with Brent oil depreciating nearly 3% on the day to levels below $96. 

On the other end, the US dollar remains bid across the board, with the market pricing in another aggressive rate hike by the Federal Reserve following this week’s monetary policy meeting.

Last Friday’s upbeat US employment report has boosted confidence on the strength of US economy, in the face of a global economic downtrend, which has paved the way for the Central Bank to maintain its hawkish stance.

USD/CAD might reach 1.40 before diving to 1.32 next year – CIBC

The FX Analysis Team at CIBC sees the pair aiming to 1.40 before pulling back in 2023: “The Fed’s hawkish announcement in late September and general risk aversion has sent the USD on a broadly stronger trajectory, and the loonie has depreciated as a result. There's likely more of the same to come, given a gap opening up in where policy rates will peak, and soft global growth favouring the USD and capping any upside for commodities (…) A run to 1.40 is quite possible, and a rebound at year end should still see CAD in 1.38 territory (…) In 2023, we see scope for a broad softening in the USD as the Fed pauses hiking below current market expectations, which will see CAD end the year stronger, with USD/CAD at 1.32.”

Technical levels to watch

• NZD/USD fell to two and half-year lows at 0.5544 as the greenback strengthened.
• Fed’s policymakers emphasized rates need to be restrictive for some time, above the 4% threshold.
• Last week’s US NFP opened the door for further Fed hikes.
• NZD/USD Price Forecast: To re-test the 2020 YTD low at 0.5469 if it breaks below 0.5500.

The NZD/USD fell to a fresh two and half-year low at 0.5544, due to a dampened market mood, with investors seeking safety bolstered the greenback on several factors. At the time of writing, the NZD/USD is trading at 0.5567, after hitting a daily high at 0.5629, below its opening price by 0.67%.

Given the backdrop of the Federal Reserve’s aggressive tightening, which could take a toll on US Q3 company earnings, geopolitical risks and US-China arising tensions, are the main drivers of market mood.

Of late, comments of Fed officials led by Vice-Chair Lael Brainard commented that the US economy has decelerated by “more than anticipated”, but added that some sectors are not feeling the effects of rate hikes. She said that monetary policy needs to be restrictive for some time to ensure that inflation returns to the Fed’s 2% target. Earlier, Chicago’s Fed Evans expressed that the US central bank could be able to slow down inflation “while also avoiding a recession,”  and still sees the Federal funds rate (FFR) above the 4.5% early in 2023 “and then remaining at this level for some time.”

Last week’s US economic data, mainly the Nonfarm Payrolls, justifies the Fed’s need for additional rate increases. With the US economy adding more than 263K jobs to the economy and the unemployment rate easing, the odds of the Fed hiking rates by 75 bps lie at 80% for November’s meeting

The US Dollar Index, a gauge of the greenback’s value, climbs 0.21%, at 112.980, gaining against most G8 currencies.

Albeit the NZD/USD dropped to fresh YTD lows, prices might be capped by the Reserve Bank of New Zealand’s (RBNZ) hawkish rhetoric and 50 bps rate hike during the last week’s meeting.

 According to ANZ analysts: “In our view, the RBNZ said “all the right things” last week, and are clearly determined to get on top of rampant inflation, but markets continue to fret about recession risks, and at the same time, US interest rates continue to rise, undermining higher Kiwi rates. It’s all a bit messy, and market participants pushing back against the trend softening in risk appetite continue to get hit hard.”

NZD/USD Price Forecast

The NZD/USD weekly chart suggests the major could be testing the 2020 yearly low of 0.5469, 100 pips lower than the exchange rate at the time of typing. Nevertheless, RSI’s standing in oversold conditions, alongside price exhaustion, it opens the door for a consolidation. However, traders need to be aware that the release of US inflation figures on Thursday could open the door for further losses beyond 0.5469.

In a follow-up to prior news from the European session, Germany backs joint EU debt to tackle energy crisis – Bloomberg, whereby it was stated that Germany has reportedly agreed to back joint EU debt to tackle the energy crisis, in more recent trade, Reuters reporter that Germany has no plans to back a joint European Union debt issuance. 

This came from a government source who told Reuters on Monday, denying a media report saying Chancellor Olaf Scholz supported joint debt issuances to tackle the energy crisis.

Market impact

During the general volatility of the Europena session, the original news may have been impactful, but in a quieter afternoon New York session, there has been no impact in this headline. However, investors are keeping a close watch on the deepening crisis in the European Union. Soaring gas and electricity prices threaten to shatter any semblance of policy cohesion in the 27-member bloc. Borrowing costs between member countries are beginning to diverge which is a negative for the euro as investors flood into the US dollar for a safe haven.

Tensions have flared after the German government last month unveiled a €200 billion ($306 billion) support package aimed at helping German households and the nation's businesses to cope with runaway inflationary energy bills. The Germans received a chorus of protest and a furious backlash from other EU countries, who accused Berlin of using its fiscal muscle to provide massive subsidies to benefit German producers.

Meanwhile, EUR/USD is down on the day by 0.24%, but up from its lows of 0.9681 that were made as the US dollar creeps back towards its 20-year highs. 

• The euro bounces up above 2-week lows at 0.9680 to return past 0.9700.
• The pair attempts to set a bottom after a 5-day reversal.
• EUR/USD could reach 0.90 by year-end – MUFG.

Euro’s reversal from 0.9750 area earlier on Monday’s US trading session found support tight above the two-week low at 0.9680 and the pair is now trading above 0.9700 again.

Consolidating losses at 0.9700 after a five-day reversal

The euro seems to have found support at 0.9680, to gather strength following a fie-day downtrend that has pushed the common currency about 3% lower from last week’s peak at 1.0000.

A German Government source has recently denied an earlier report by Bloomberg pointing out to German support to a joint EU debt plan to tackle the energy crisis. These rumours offered a fresh impulse to the euro to climb towards 0.9750.

On a bigger picture, investors’ concerns about the escalating war in Ukraine, after Russia launched the biggest attack since the start of the war, coupled with the impact of higher oil prices are undermining confidence in the Eurozone economic prospects and weighing on the euro.

Furthermore, the US dollar remains bid across the board ahead of the Federal Reserve’s monetary policy meeting, due next Wednesday. The buoyant US employment report released last Friday showed that US economy remains solid despite the increasing global uncertainty. In this backdrop, the market is pricing in another aggressive Fed rate hike, which is underpinning demand for the USD.

EUR/USD could reach 0.90 by year-end – MUFG

Currency analysts at MUFG maintain their bearish perspectiveds for the pair on months ahead: “The key for any broad turn in US dollar strength must be a pause in the tightening cycle. We suspect the Fed will pause after hiking in December which should allow some EUR/USD correction from levels closer to 0.9000.”

Technical levels to watch

• Gold bears move in on a critical area of support following a massive decline at the start of the week.
• The US dollar and yields have been relentless due to market sentiment surrounding the Fed narrative.

The gold price, as per the start of the week's pre-open analysis, Gold, the Chart of the Week: XAU/USD bears eye a run to key support near $1,675, US CPI eyed, has dropped significantly lower on Monday. Not only did the price take out $1,675, but it has also made a low of $1,665.77, taking on a key support area as the markets stay on the theme of a hawkish Federal Reserve.

The gold price dropped from a high of $1699.91 from the get-go this week, sliding in Asia and not looking back, pausing for only a brief hourly candle in European markets and at the open of New York forex trade at around $1,677. However, with an elevated US dollar and US yields reaching for blue skies, gold bulls had no choice but to capitulate, making way for a strong second wind from the bears during Wall Streets' first few hours of trade.

The yield on the 10-year US Treasury bond has made a high of 3.992%, surging in the last hour in what might be the last-ditch effort to breach the psychological 4.00% level having already cleared the prior week's highs. The next target beyond there is last month's high of 4.019%. In turn, the US dollar has reached a high of 113.333 after climbing from a low of 112.621 as per the DXY index which is now holding above both Friday's and last week's highs. It is worth noting that, speculators’ net long USD index positions recovered ground for the second consecutive week following a string of hawkish Fed speak. That said, net longs remained below recent averages which leaves room for further upside in the greenback.

The Fed is driving gold

As for the driver, the Fed sentiment, analysts at TD Securities, who have been advocating an imminent drop in the gold price for many weeks explain again that ''inflation's rising persistence suggests the Fed is unlikely to stop hiking preemptively.''

''A prolonged period of restrictive rates suggests traders should ignore gold's siren calls, as a sustained downtrend will likely prevail, while quantitative tightening continues to drive real rates higher. Indeed, a constant flow of hawkish Fedspeak has seen the upside momentum in gold ease in recent days.'' The analysts also cite important inflation data this week and remind their readers that ''there are plenty of catalysts which could see the focus shift back toward hawkish interest rate policy.''

In terms of Fed speakers, we have heard from both Chicago Fed President Charles Evans and, in more recent trade, Federal Reserve Vice Chair Lael Brainard. Evans said that the Fed needs to  "carefully and judiciously" navigate to a "reasonably restrictive" policy rate, as reported by Reuters, while Brainard argued that US monetary policy has begun to be felt in an economy that may be slowing faster than expected. Both officals however, explained that "monetary policy will be restrictive for some time to ensure that inflation moves back to target over time," Brainard said. "Target rate needs to rise a bit above 4.5% by early next year and remain there as Fed takes stock," Evans argued. 

Fed fund futures are now pricing in a 92% chance of a 75-basis-point hike at the next Fed meeting. Higher interest rates increase the opportunity cost of holding zero-yield bullion. 

As for the rest of the week, we have the Fed minutes, US Consumer Price Index and Retail Sales. With regards to the two key events, firstly, the minutes, the analysts at TD Securities explained that '' the September dot plot revealed a higher-than-expected Fed Funds terminal rate of 4.625%, with a fairly even dot distribution around this level. The question is how much of this was reflected in the deliberations at the Sep meeting. The tone of these deliberations likely was more hawkish given core CPI inflation trends, upsetting the current dovish pivot markets narrative.'' 

Secondly, for CPI, the analysts said, ''core prices likely stayed strong in September, with the series registering another large 0.5% MoM gain. Shelter inflation likely remained strong, though we look for used vehicle prices to retreat sharply. Importantly, gas prices likely brought additional relief for the headline series again, declining by about 5% MoM. Our m/m forecasts imply 8.2%/6.6% YoY for total/core prices.''

Gold technical analysis

As per the pre-open analysis, the price dropped significantly at the start of the week:

Gold H1 chart

The price has reached the start of the prior rally as follows: 

As illustrated, the price has made its way into the forecasted support area but still has some way to go until reaching last week's low. A correction into the key Fibonaccis that has a confluence with the prior structure could result in an onward move in the yellow metal to test the weekly lows:

A move beyond that resistance structure, however, could have implications for a move deeper correction, as per the following 4-hour analysis:

Reuters reported that the Federal Reserve Vice Chair Lael Brainard said in a speech on Monday that tighter US monetary policy has begun to be felt in an economy that may be slowing faster than expected. She said, however, that the full brunt of Federal Reserve interest rate increases still won't be apparent for months

"Output has decelerated so far this year by more than anticipated, suggesting that policy tightening is having some effect" in sectors like housing that are directly influenced by borrowing costs for home mortgages, Brainard said in comments prepared for delivery to a National Association for Business Economics conference.

"In other sectors, lags in transmission mean that policy actions to date will have their full effect on activity in coming quarters, and the effect on price setting may take longer."
With foreign central banks all pulling in the same direction towards higher rates to fight inflation, she said, "the moderation in demand should be reinforced" even further.

"I now expect that the second-half rebound will be limited, and that real (gross domestic product) growth will be essentially flat this year," Brainard said.

"Uncertainty remains high, and I am paying close attention to the evolution of the outlook as well as global risks," that could stress financial markets Brainard said.

"In this environment, a sharp decrease in risk sentiment or other risk event that may be difficult to anticipate could be amplified, especially given fragile liquidity in core financial markets."

Still "monetary policy will be restrictive for some time to ensure that inflation moves back to target over time," Brainard said.

"In light of elevated global economic and financial uncertainty, moving forward deliberately and in a data-dependent manner will enable us to learn how economic activity, employment, and inflation are adjusting."

US dollar and bond yields update

The yield on the 10-year US Treasury bond has made a high of 3.992%, surging in the last hour of trade in what might be the last-ditch effort to breach the psychological 4.00% level having already cleared the prior week's highs. The next target beyond there is last month's high of 4.019%. In turn, the US dollar has reached a high of 113.333 after climbing from a low of 112.621 as per the DXY index which is now holding above both Friday's and last week's highs. 

• The euro, unable to breach 0.8800, consolidates gains at 0.8785.
• BoE's pledge to support UK economy does not aid the pound
• The pair fails to capitalize on the brad-based GBP weakness.

The euro has failed to break resistance area at 0.8800/20 on its third attempt over the last days. The pair, however, maintains a mildly positive tone and remains steady at the upper range of 0.8700.

BoE pledge to support economy fails to aid the pound

The Bank of England’s new set of measures to support economy announced earlier on Monday have not helped to shore the pound sterling. The cable remains offered across the board, and has reached fresh two-week lows against the USD.

The sterling has remained on the back foot for the past recent weeks after UK Prime Minister, Liz Truss disrupted markets with a plan to cut taxes and increase government spending, which sent the currency into a tailspin.

On the other end, the euro, with challenges of its own ,has been unable to capitalize on GBP weakness. The common currency is going through a steady downtrend against the US dollar, crushed by investors’ concerns about the economic consequences of the escalating war in Ukraine and the high energy prices.

EUR/GBP capped below 0.8810/20 resistance area

From a technical perspective, the euro is going through a near-term positive trend, which should breach above 0.8820 (October 6,7 highs) in order to build momentum and attack 0.8850 (Sept. 30 high, Sept 26 and 28 lows), which would open the path towards 0.9000 area.

On the downside, immediate support lies at 0.8740 (October, 7 low) and then probably at 0.8690 (Sept. 22 low). Below here there is an important level at 0.8625 (September 15 low), which could trigger a Head and Shoulders figure, potentially pushing the pair towards the 0.8400 area.

Technical levels to watch

• GBP/USD dropped to the 1.1000 area on broad US dollar strength.
• Investors’ mood deteriorated on expectations of weaker US Q3 earnings, on fears of the Fed’s triggering a recession.
• Fed officials expect rates to be above 4% in 2023, disregarding rate cuts throughout the year.
• UK’s Finance Minister, Kwasi Kwarteng, moved forward the presentation of his fiscal plan, to October 31, before BoE’s November meeting.

The GBP/USD extended its losses to four straight days after reaching an October high of 1.1495 after UK’s Prime Minister Liz Truss made a U-turn in the 45% tax cut budget. However, the damage was done, as the Bank of England (BoE) had to step in to calm the turmoil in the bond market. Nevertheless, recent US dollar strength, alongside weak fundamentals in the UK, is a headwind for the GBP/USD.

At the time of writing, the GBP/USD is trading at 1.1025 after hitting a daily high of 1.1110, though it is below its opening price by 0.58%.

Sentiment remains sour, as reflected by US equity markets. Fears that US companies will miss Q3 earnings expectations keep investors on their toes. That, alongside worries that the US Federal Reserve would continue to tighten monetary policy but would not be able to achieve a “soft landing,” added a pinch of salt to the already deteriorated mood.

Last  Friday’s US Nonfarm Payrolls report was better than expected, which opened the door for further Fed tightening. Also, the Unemployment Rate ticked lower, from 3.7% estimated to 3.5%, revealing that the Fed needs to do more.

Fed officials during the last week expressed that they’re resilient to tackle inflation, despite acknowledging that the economy is slowing down and that it could trigger a recession. However, Fed policymakers said that rates must be higher in restrictive mode, above the 4% threshold.

During the day, the Chicago Fed President Charles Evans said that the US central bank could be able to slow down inflation “while also avoiding a recession.” Evans added that he stills sees the Federal funds rate (FFR) above the 4.5% early in 2023 “and then remaining at this level for some time.”

The US Dollar Index, a gauge of the greenback’s value, is advancing 0.45%, at 113.245, bolstered by investors seeking safety.

On the UK’s side, the Bank of England intervened in the UK’s bond market on Monday. Even though the BoE was expected to buy double September’s 28 GBP 5 billion, they only bought GBP 853 million. Of note is that the Chancellor of the Exchequer, Kwasi Kwarteng, said he would bring forwards his medium-term fiscal plan, including how the tax cuts will be paid for, on October 31, according to Reuters.

The change in the date, from November 23 to October 31, would give some time to the BoE to assess the government’s budget before it announces its monetary policy on November 3.

All that said, the GBP/USD reacted downwards, despite increasing bets that the Bank of England would hike rates aggressively. Nevertheless, UK’s gloomy economic outlook, and Brexit jitters, would likely keep the British pound pressured, opening the door for a re-test of the GBP/USD YTD lows around 1.0350s.

GBP/USD Key Technical Levels

• US dollar's rally reaches prices above 1.0000 for the first time since June.
• The greenback surges on hawkish Fed hopes and geopolitical concerns.
• USD/CHF seen at 0.9600 by year-end – UBS.

The US dollar is extending its four-day rally on Monday, and has launched a first attempt to break above 1.0000 on Monday’s US session. The paor remains 0.7% higher on the daily chart, to maintain a sharp four-day rally against the swissie.

A hawkish Fed and geopolitical fears are boosting USD demand

Last Friday’s buoyant US Nonfarm payrolls report has reaffirmed investor’s bets for another aggressive rate hike at the Federal Reserve meeting due later this week US bond’s yields rose sharply after the release of the US employment report, giving a fresh boost to the US dollar.

US Non-Farm Payrolls increased by 263,000 in September, beating expectations of a 250,000 increment, while the unemployment level declined to a 50-year low 3,5% from 3,7% in the previous month. 

Furthermore, the escalation on the Ukrainian war, with Russia launching on Monday the biggest air strike since the war stared, has increased risk aversion at the start of the week, ultimately favouring the safe-haven USD.

USD/CHF to decline towards 0.96 by year-end – UBS

Currency analysts at UBS, however, observe the current US dollar rally as a good selling opportunity: “While Swiss inflation moderated both on a YoY and MoM basis in September, we believe the SNB remains on a tightening path and wants a stronger CHF to continue to fight inflation (…) Any rally toward USD/CHF 0.99 or higher is a good opportunity to sell the greenback in favor of the franc, in our view, forecasting the pair to hit 0.96 by year-end and 0.92 by June next year.”

Technical levels to watch

• USD/JPY marches firmly at around the 145.70s area as threats of Japanese intervention loom.
• Last week’s US employment report justifies the Fed’s case to go 75 bps in the November meeting.
• Fed’s Evans is optimistic that the Fed might slow down inflation without “causing” a recession.

The USD/JPY is advancing steadily towards the YTD high at around 145.90, increasing the odds of another FX intervention by Japanese authorities to bolster the JPY, which has remained weakening against most G8 currencies, particularly the greenback. At the time of writing, the USD/JPY is trading at around 145.77, up 0.28%, shy of printing a new 24-year high, above 145.90.

Risk aversion keeps the greenback appreciating against most currencies. The US bond market is closed in observation of the Columbus holiday, with USD/JPY traders leaning on US dollar dynamics and market sentiment.

Last week’s US economic data, led by the US Nonfarm Payrolls, beat estimates, opening the door for further Fed rate hikes. In the past week, Fed officials emphasized the need to raise rates higher to tame inflation down, pushing back against cutting rates in 2023.

Earlier, Chicago’s Fed President Charles Evans said that the US central bank could be able to slow down inflation “while also avoiding a recession.” Evans added that he stills sees the Federal funds rate (FFR) above the 4.5% early in 2023 “and then remaining at this level for some time.”

Elsewhere, the US Dollar Index, a gauge of the greenback’s value against a basket of rivals, edges up by 0.35% at 113.147, a tailwind for the USD/JPY. Therefore, USD/JPY traders should expect further upside, though fears of another Bank of Japan’s (BoJ) intervention in the FX markets looming might stall the rally at around the 146.00 mark.

What to watch

The US economic docket will feature Fed speaking, led by Vice-Chair Lael Brainard and Loretta Mester. Data-wise, the September US Producer Price Index (PPI) will be unveiled on Wednesday, followed by inflationary figures on the consumer side by Thursday.

USD/JPY Key Technical Levels

• The Australian dollar breaks below 0.6280 to fresh 2, 1/2-year lows.
• Ukrainian war, and hopes of a big Fed rate hike are crushing the Aussie.
• AUD/USD might extend decline to 0.6041 – Credit Suisse.

The Australian dollar has resumed its ecline on Monday’s US trading session. The pair has reversed the tame recovery attempt seen earlier in the day, to break below 0.6285 reaching 0.6275 area for the first time in more than two years

The aussie suffers against a strong US dollar

A risk-sensitive AUD is going through a strong bearish trend on the back of the downbeat sentiment and a strong US dollar, with the market betting on another aggressive rate hike in the US after the Federal Reserve’s meeting due later this week.

Investors’ concerns about the escalation in the Ukrainian war, after Russia launched the biggest air attack since the invasion started in February, are dampening demand for the aussie, which favours safe-havens like the USD.

Beyond that, the Reserve Bank of Australia disappointed the markets last week with a 25 basis points’ rate hike, instead of the 50 BP expected, which has increased negative pressure on the pair.

AUD/USD could extend its decline to 0.6040 – Credit Suisse

According to currency analysts at Credit Suisse, the pair might still see some more downtrend before posting any relevant recovery: “With the broader risk-off environment looking set to remain in place for the upcoming months, our view is to look for a further setback towards the next key support zone at 0.6041 – the 78.6% retracement and the low from April 2020.”

Technical  levels to watch

• Gold price stumbles below $1700, extending its losses underneath the 20-day EMA.
• Broad US dollar strength keeps the yellow metal on the defensive.
• Fed’s Evans: Expect the Federal funds rate (FFR) to peak at around 4.50% in 2023; has high hopes to achieve a “soft landing.”
• Gold Price Forecast: To extend its losses towards $1650 after failing to hold $1700.

Gold price slides below the 20-day EMA, courtesy of a risk-off impulse, as portrayed by US equities trading in the red, as the greenback advances sharply amid the Columbus day holiday, which keeps the US bond market close. At the time of writing, the XAU/USD is trading at $1668.60, below its opening price by more than 1.50%.

A risk-off impulse keeps the greenback in the driver’s seat, as shown by the US Dollar Index (DXY), up by 0.35%, at 113.142. Since October 5, when the DXY hit 110.05, the buck has recovered 2.75%, though it keeps trailing the YTD high at around 114.778. Most of the commodity prices, US dollar-denominated, are under pressure, with oil down by 0.28% and the precious metals remaining heavy.

In the past week, Fed officials reiterated their commitment to bringing inflation to the Fed’s 2% target. On Monday, the Chicago Fed President Charles Evans said that he expects the Federal funds rate (FFR) to end at around 4.5% early in 2023 and then to remain around that level for “some time.” He sounded optimistic that the Fed could achieve a soft landing due to Fed projections of the unemployment rate hitting 4.4% by the end of next year, while the Fed’s inflation measure to fall to 2.8% from August’s 6.2%.

Also, the last week’s US Nonfarm Payrolls report, exceeding estimates, further justifies Evan’s case for the Fed to continue tightening at a large size. Fed’s odds of a 75 bps rate hike are at an 80% chance, according to the CME FedWatch Tool, for the November meeting.

Elsewhere, the US economic calendar will feature further Fed speaking, led by Vice-Chair Lael Brainard. Data-wise, the docket will reveal Wednesday’s Producer Price Index (PPI) for September and FOMC minutes. The next day, traders’ focus will shift to US inflation figures, namely the CPI and unemployment claims. To close the week, US Retail Sales, alongside the University of Michigan Consumer Sentiment, are widely expected.

Gold Price Forecast

Gold is sliding below the 20-day EMA after failing to crack the 50-day EMA on October 4 and 5. Since then, the yellow metal price has tumbled, accelerating its free-fall, to re-test the $1650 figure. Once cleared, it could pave the way towards the YTD low at $1614.92, followed by $1600. Worth noting that the RSI is in bearish territory, with enough room to spare, before reaching oversold conditions.

• The euro, capped at 0.9750, remains close to two-week lows at 0.9680.
• Rumours of a EU debt joint agreement might have favoured the pair.
• Hopes of another big Fed rate hike are underpinning the US dollar.

The common currency has launched an attempt to take off from two-week lows at 0.9680, before hitting resistance right below 0.9750 during Monday’s US trading session.

Euro picks up on news about a joint debt agreement

A Bloomberg news report pointing out to the possibility that Germany might have agreed to back joint debt for loans to tackle the energy crisis might explain the EUR/USD's squeeze. The pair jumped about 45 pips in the matter of minutes to pull back to previous levels, around 0.9700, shortly afterwards.

From a wider perspective, the euro remains heading south, trading 0.25% down on the day and on track to a four-day negative streak against an stronger US dollar.

The greenback remains bid across the board with the investors bracing for another aggressive rate hike by the Federal Reserve later this week, following the buoyant US employment report seen on Friday.

US Non-Farm Payrolls increased by 263,000 in September, beating expectations of a 250,000 increment, while the unemployment level declined to 3,5% from 3,7% in the previous month. These figures have boosted confidence that the Fed will maintain its hawkish stance, which is underpinning demand for the USD.

Technical levels to watch

AUD/USD has ended its recent pause after breaking below 0.6361. Analysts at Credit Suisse look for continued downside to 0.6041 and likely beyond.

Resistance moves to 0.6361/80

“We see the core bearish trend as resumed and with risk sentiment likely to remain weak, we look for further deterioration to follow.” 

“Support shifts to 0.6281/74 and then a more meaningful support is seen at the late April 2020 low at 0.6250. Whilst we stay wary of signs of a brief pause here as well, our bias would be to see a direct move below here to eventually reach the 78.6% retracement of the 2020/21 uptrend and April 2020 low 0.6041/5978 and likely a move lower towards the 2020 low at .5506 thereafter.” 

“Resistance moves to 0.6361/80 and then to 0.6411, though above here we look for the 13-day average at 0.6478 to continue to cap to maintain the downside.”

Germany has reportedly agreed to back joint EU debt to tackle the energy crisis, Bloomberg reported on Monday. 

Last Tuesday, European Economic Commissioner Paolo Gentiloni and Internal Market Commissioner Thierry Breton called for joint borrowing to finance the response to the energy crisis in the euro area. German Finance Minister Christian Lindner, however, argued that a joint debt would not be the answer to the current crisis, which was very different from the one caused by the coronavirus pandemic.

Market reaction

With the initial reaction, EUR/USD pair jumped above 0.9740 before quickly retreating to the 0.9700 area. 

S&P 500 has gapped sharply lower on increased volume. Economists at Credit Suisse look for a retest and break of 3594/84 for an eventual fall to their 3235/3195 core objective.

Price gap from Friday at 3707/3745 to cap

“An extremely poor end to last week has seen the S&P 500 gap sharply lower on increased volume post the payrolls report and this has seen an ‘island top’ reversal left behind to suggest the corrective rebound may already be over.” 

“We look for a retest of pivotal flagged support from the rising long-term 200-week average and current cycle low at 3594/84. Whilst this should again be respected, we continue to look for a sustained break in due course. Our core objective though remains at the 3235/3195 support cluster, which includes the 38.2% retracement of the entire uptrend from the 2009 GFC low.” 

“Resistance is seen at 3682 initially, with the price gap from Friday at 3707/3745 now ideally capping.”

In the view of economists at Wells Fargo, the Japanese yen still has potential to weaken against the US dollar in the medium-term. The USD/JPY pair is forecast at 149 by the first quarter of 2023.

Yen to strengthen heading into late 2023

“The increasing divergence in monetary policy between a hawkish Federal Reserve and dovish Bank of Japan means we believe the yen still has room to weaken against the US dollar in the medium term, even if the Ministry of Finance intervenes in FX markets again to support the currency.”

“We believe that as yields continue to diverge, the yen can weaken toward a USD/JPY exchange rate of 149.00 by Q1-2023, before recovering somewhat as next year progresses.”

EUR/USD remains under pressure following the rejection of key resistance at 1.0000/1.0051. Analysts at Credit Suisse look for a fall back to the 0.9537 low.

Initial resistance seen at 0.9818

“Support is seen initially at 0.9683, below which should cleat the way for a move back to the 0.9537 low. We look for a move below here to test the lower end of the downtrend channel from February, today seen at 0.9446, but would look for a fresh rebound from here. Our next core objective remains at 0.9338/30.”

“Resistance is seen initially at the 13-day exponential average and price resistance at 0.9818 which we look to try and cap on a closing basis. Above can see strength back to 0.9927, potentially a retest of 0.9991/1.0005.”

• USD/CAD oscillates in a narrow band amid holiday-thinned liquidity conditions on Monday.
• A combination of factors, however, continues to act as a tailwind and limits the downside.
• Retreating oil prices undermines the loonie and lends support amid sustained USD buying.

The USD/CAD pair struggles to gain any traction on Monday and seesaws between tepid gains/minor losses through the early North American session. The pair, however, manages to hold above the 1.3700 mark and is supported by a combination of factors.

Crude oil prices edge lower and snap a five-day winning streak to the highest level since late August amid worries that a deeper global economic downturn will hurt fuel demand. This, in turn, undermines the commodity-linked loonie and acts as a tailwind for the USD/CAD pair amid the underlying bullish sentiment surrounding the US dollar.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies - stands tall near a one-and-half-week high amid hawkish Fed expectations. Market players seem convinced that the US central bank will continue to tighten its monetary policy at a faster pace and have been pricing in another 75 bps rate hike in November.

The bets were further lifted by the robust US monthly employment details released on Friday, which pointed to the resilient economy. Apart from this, concerns about a deeper global economic downturn, a further escalation in the Russia-Ukraine conflict and fresh US-China trade jitters continue to benefit the safe-haven greenback.

That said, thin liquidity conditions in the wake of holidays in the US and Canada hold back bulls from placing aggressive bullish bets around the USD/CAD pair. Investors also prefer to wait for a fresh catalyst from this week's releases of the FOMC meeting minutes on Wednesday, which will be followed by the latest US consumer inflation figures on Thursday.

Technical levels to watch

GBP/USD maintains a small bearish “reversal day” to suggest the recovery is over. Analysts at Credit Suisse look for an eventual retest of the 1.0347 low.

Support seen at 1.0933/16, then 1.0786

“Support is seen at 1.1057/55 initially, then price support from the top of the late September base at 1.0933/16. Below here is seen needed to add further momentum to the decline with support seen next at 1.0786 ahead of 1.0539 and eventually back to the 1.0347 low.” 

“Big picture, we look for an eventual test of the key psychological parity level.” 

“Resistance is seen at 1.1186 initially, with a move back above 1.1227 needed to raise the prospect of further high-level ranging and a fresh test of resistance at 1.1490/1.1500, but with sellers expected to again show here.”

• GBP/USD edges lower for the third straight day and drops to over a one-week low on Monday.
• A combination of factors continues to underpin the USD and exerts some downward pressure.
• The technical setup also favours bears and supports prospects for additional near-term losses.

The GBP/USD pair recovers a few pips from over a one-week low and trades in neutral territory, around the 1.1075 region during the early North American session.

An intraday recovery in the global risk sentiment - as depicted by a positive turnaround in the equity markets - caps gains for the safe-haven US dollar and acts as a tailwind for the GBP/USD pair. The British pound further draws support from the Bank of England's move to launch the Temporary Expanded Collateral Repo Facility (TECRF) to support market functioning.

That said, worries about a deeper global economic downturn, a further escalation in the Russia-Ukraine conflict and fresh US-China trade jitters should keep a lid on any optimistic move. This should lend support to the buck amid hawkish Fed expectations. This, along with concerns about the UK government's fiscal policy, might cap the upside for the GBP/USD pair.

From a technical perspective, spot prices, so far, have shown some resilience below the 38.2% Fibonacci retracement level of the recent recovery from an all-time low. That said, the post-NFP breakdown below the 1.1180 confluence - comprising of 100-period SMA on the 4-hour chart and the lower end of a two-week-old ascending trend channel - favours bearish traders.

This, in turn, suggests that the path of least resistance for the GBP/USD pair is to the downside and any attempted recovery might still be seen as a selling opportunity. Hence, a subsequent fall below the 1.1025 area (the daily swing low), towards the 1.1000 psychological mark, remains a distinct possibility ahead of the monthly UK employment details on Tuesday.

On the flip side, the 1.1100 mark now seems to act as an immediate barrier ahead of the 100-period SMA on the 4-hour chart, currently around the 1.1165 region. This is followed by the 1.1200 round figure, which if cleared decisively could trigger a short-covering rally. The GBP/USD pair could then accelerate the recovery move and aim back to reclaim the 1.1300 round-figure mark.

GBP/USD 4-hour chart

Key levels to watch

Chicago Fed President Charles Evans said on Monday that the Fed needs to  "carefully and judiciously" navigate to a "reasonably restrictive" policy rate, as reported by Reuters.

Additional takeaways

"US can lower inflation relatively quickly without recession or large increase in unemployment."

"Target rate needs to rise a bit above 4.5% by early next year and remain there as Fed takes stock."

"Without a period of restrictive policy to restrain demand, inflation would not fall to anything near 2% target."

"Many risks could derail Fed hopes for soft landing including Ukraine war, slow supply improvement, covid and monetary policy either not fixing inflation or weighing more than expected on jobs."

"Maybe labor shortages are having an unusually large influence on inflation, which could allow fast improvement on inflation as the economy cools."

"Inflation is currently the Fed's primary concern."

"Good news is that longer-horizon inflation expectations have generally remained within a range consistent with 2% target."

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen posting small daily gains at around 113.00.

• USD/TRY keeps the erratic performance just below 18.60.
• Unemployment Rate in Türkiye eased to 9.6% in August.
• President Erdogan advocated for further rate cuts over the weekend.

The Turkish lira starts the week on the defensive and lifts USD/TRY back to the 18.5800 region on Monday.

USD/TRY focuses on geopolitics, USD

USD/TRY quickly leaves behind Friday’s retracement on the back of the continuation of the bid bias in the dollar, while renewed Russian shelling on several highly populated Ukrainian cities have been also sustaining extra inflows into the safe haven universe.

In the meantime, the selling pressure in the Turkish lira is not expected to abandon the currency for the foreseeable future, not after President Erdogan comments over the weekend reiterating that the One-Week Repo Rate will be in single digits by year-end.

The Turkish central bank (CBRT) meets again on October 20 and is therefore expected to keep lowering the interest rate (currently at 12.00%).

In the domestic calendar, the Unemployment Rate in Türkiye receded to 9.6% in August (from 10.0%).

What to look for around TRY

USD/TRY keeps navigating the area of all-time tops near 18.60 amidst the combination of omnipresent lira weakness and the renewed bid bias in the dollar.

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 higher exports and tourism revenue) and the improvement in the current account.

Key events in Türkiye this week: Unemployment Rate (Monday) – Current Account (Tuesday) – Industrial Production, Retail Sales (Wednesday) – End Year CPI Forecast (Friday).

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 0.21% at 18.5778 and faces the next hurdle at 18.5908 (all-time high October 4) followed by 19.00 (round level). On the downside, a break below 18.1591 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low).

In a joint press conference with World Bank Group President David Malpass, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said that they cannot afford inflation to become a 'runaway train,' as reported by Reuters.

Gerogieve further noted that they were seeing a significant problem in China due to the housing market dragging down growth.

Meanwhile, Malpass noted that there was a risk and a real danger of a global recession next year. "Development efforts are facing a crisis amid a vast array of problems," he added.

Market reaction

THese comments don't seem to be having a significant impact on risk mood. As of writing, the S&P Futures were virtually unchanged on the day.

• NZD/USD drifts lower for the third straight day and moves back closer to the YTD low.
• The USD remains well supported by a combination of factors and exerts some pressure.
• Recession fears, geopolitical risks, US-China trade jitters weigh on the risk-sensitive kiwi.

The NZD/USD pair attracts fresh selling following an early uptick to the 0.5630 region and turns lower for the third successive day on Monday. The pair remains depressed below the 0.5600 mark heading into the North American session and moves well within the striking distance of the YTD low set in September.

A combination of factors assists the US dollar to scale higher for the fourth straight day, which, in turn, is seen exerting downward pressure on the NZD/USD pair. The prospects for a more aggressive policy tightening by the Federal Reserve, a further escalation in the Russia-Ukraine conflict and fresh US-China trade jitters act as a tailwind for the safe-haven buck.

The robust US monthly jobs report released on Friday pointed to the resilient economy and gives the US central bank enough space to keep hiking rates at a faster pace to combat stubbornly high inflation. In fact, the markets are currently pricing in a greater chance of the fourth consecutive supersized 75 bps rate increase at the next FOMC policy meeting in November.

On the geopolitical front, Russia launched a barrage of missile attacks in Ukrainian cities, including the capital Kyiv, in response to the attack on the Kerch Strait bridge over the weekend. Furthermore, the White House announced export controls to cut China off from certain semiconductor chips, raising concerns about the worsening trade ties between the world's two largest economies.

The latest developments further fuel worries about a deeper economic downturn and continue to weigh on investors' sentiment. This is evident from a generally weaker tone around the equity markets, which tends to drive haven flows towards the greenback and further undermines the risk-sensitive kiwi. This, in turn, supports prospects for a further depreciating move for the NZD/USD pair.

That said, RSI (14) on the daily chart remains on the verge of breaking into oversold territory and warrants some caution for aggressive bearish traders amid relatively thin trading volumes. Investors might also prefer to move to the sidelines ahead of this week's release of the FOMC minutes on Wednesday and the latest US consumer inflation figures on Thursday.

Technical levels to watch

EUR/USD has dipped under 0.97. Economists at MUFG Bank expect the pair to inch closer to the 0.90 level before the Federal Reserve pauses its hike cycle.

The risks are firmly to the downside

“Over the near-term, the risks are firmly to the downside and we expect a period of further US dollar strength as financial market conditions worsen as asset prices correct further to the downside. This will help push inflation expectations further lower.” 

“The key for any broad turn in US dollar strength must be a pause in the tightening cycle. We suspect the Fed will pause after hiking in December which should allow some EUR/USD correction from levels closer to 0.9000.”

The Reserve Bank of Australia’s (RBA) surprise decision to slow the pace of tightening by delivering a smaller 25 bps hike weighed on the aussie. Economists at MUFG Bank expect the AUD/USD pair to challenge the 0.6000 level.

RBA policy update reinforces downside risks

“We continue to believe that risks remain tilted to the downside for commodity currencies in the near-term.”

“The RBA’s policy shift has increased the likelihood that AUD/USD will fall towards the 0.6000 level.”

See: AUD/USD could witness further losses toward 0.6100 – SocGen

• EUR/USD gathers extra downside traction and breaches 0.9700.
• A deeper retracement could expose a move to the YTD low.

EUR/USD drops for the fourth consecutive session and revisits the sub-0.9700 region at the beginning of the week.

Further losses appear well on the cards for the time being. Against that, the pair should not meet any contention of note until the 2022 low at 0.9535 (September 28) prior to the round level at 0.9500.

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0608.

EUR/USD daily chart

• DXY extends the upside move beyond the 113.00 yardstick.
• The continuation of the rebound could see the YTD peak revisited.

DXY’s bounce picks up extra pace and leaves behind the key barrier at 113.00 the figure at the beginning of the week.

If bulls push harder and the index surpasses 114.00, then the next target of note should emerge at the 2002 peak near 114.80 recorded on September 28 ahead of the round level at 115.00.

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 7-month support line near 107.60.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 102.93.

DXY daily chart

• USD/JPY gains some positive traction on Monday and climbs to over a two-week high.
• Aggressive Fed rate hike bets continue to boost the USD and lend support to the pair.
• The Fed-BoJ policy divergence favours bulls and supports prospects for further gains.

The USD/JPY pair edges higher on the first day of a new week and climbs to over a two-week high, though lacks follow-through buying. Spot prices, however, stick to modest intraday gains near mid-145.00s and remain well within the striking distance of a 24-year high touched in September.

The US dollar buying remains unabated on the first day of a new week, which, in turn, is seen as a key factor offering support to the USD/JPY pair. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, climbs to a one-and-half-week high amid expectations for a more aggressive policy tightening by the Fed.

The markets are currently pricing in a greater chance of the fourth consecutive supersized 75 bps rate increase at the next FOMC meeting in November. The bets were reaffirmed by Friday's robust US monthly jobs report (NFP), which pointed to the resilient economy. This remains supportive of elevated US Treasury bond yields and underpins the USD.

The Bank of Japan, on the other hand, has been lagging behind other major central banks in the process of policy normalisation and remains committed to continuing with its monetary easing. The resultant Fed-BoJ policy divergence favours bullish traders and supports prospects for a further near-term appreciating move for the USD/JPY pair.

That said, intervention fears hold back traders from placing fresh bulls bets and capping gains for the major, at least for the time being. It is worth recalling that Japan's finance minister Shunichi Suzuki said last week that the government stands ready to intervene in FX markets to prevent deeper losses in JPY.

Market participants also seem reluctant to place aggressive bets and might prefer to move to the sidelines ahead of this week's key event/data risks. The minutes of the last FOMC meeting held on September 20-21 will be released on Wednesday, which will be followed by the latest US consumer inflation figures on Thursday.

Investors will look for clues about the Fed's future rate hike path, which, in turn, will influence the near-term USD price dynamics and provide a fresh directional impetus to the USD/JPY pair. In the meantime, spot prices seem more likely to prolong the range-bound price action amid thin liquidity on the back of a bank holiday in the US.

Technical levels to watch

After closing the previous week on a firm footing on the upbeat US September jobs report, the US Dollar Index (DXY) extends its gains. Kit Juckes, Chief Global FX Strategist at Société Générale, believes that the index could break above the 115 level.

No new news, but no reason to sell the dollar either

“In the aftermath of the US labour market report, and ahead of US CPI data on Thursday, we are left largely just reacting to known news. The US jobs data are strong enough to make a 75 bps Nov 2 hike pretty much a done deal; The Chinese economy is weak; the war in Ukraine goes on. The result: The dollar remains bid, though not wildly so.” 

“Positioning isn’t stretched according to the CFTC data, but the message from custodian banks suggests this may understate how many long dollar positions there are at any one point in time. Certainly, there is nothing that argues for building dollar shorts.”

“I wouldn’t be surprised if DXY spent the rest of the year trading 110-115, but if it breaks one way or the other, the upside is the more vulnerable.”

• EUR/JPY extends the bearish move to the sub-141.00 region.
• Further downside could revisit the 139.80/50 band in the near term.

EUR/JPY accelerates its losses and breaks below the 141.00 region to print new 2-week lows on Monday.

The continuation of the decline would likely leave the recent peaks in the 144.00 neighbourhood as short-term tops. In case the downside accelerates, there is an interim support at the 139.80/50 band, where the 100- and 55-day SMAs converge.

In the meantime, while above the key 200-day SMA at 136.20, the constructive outlook for the cross should remain unchanged.

EUR/JPY daily chart

• Gold remains under heavy selling pressure for the fourth successive day on Monday.
• Aggressive Fed rate hike bets continue to boost the USD and weigh on the XAU/USD.
• The risk-off mood could lend some support ahead of this week’s key event/data risks.

Gold extends last week's retracement slide from the $1,730 region and continues losing ground for the fourth successive day on Monday. The downward trajectory remains uninterrupted through the first half of the European session and drags spot prices to a one-week low, around the $1,678 region in the last hour.

Expectations that the Fed will stick to its aggressive policy tightening path lifts the US dollar to a one-and-half-week high, which, in turn, is seen weighing on the dollar-denominated gold. The robust US monthly jobs report released on Friday pointed to the resilient economy and gives the US central bank enough space to keep hiking rates at a faster pace to combat stubbornly high inflation.

In fact, the markets are now pricing in a greater chance of the fourth consecutive supersized 75 bps rate increase at the next FOMC policy meeting in November. This remains supportive of elevated US Treasury bond yields and further contributes to driving flows away from the non-yielding yellow metal. Hence, the market focus remains on the FOMC minutes and the US consumer inflation data.

Investors will look for fresh clues about the Fed's future rate hike path, which, in turn, will play a key role in influencing the USD and provide a fresh directional impetus to gold. Apart from this, traders, this week will take cues from the US monthly Retail Sales data. In the meantime, the prevalent risk-off mood could limit losses for the safe-haven XAU/USD amid holiday-thinned liquidity.

The market sentiment remains fragile amid worries about economic headwinds stemming from rapidly rising borrowing costs. Apart from this, a further escalation in the Russia-Ukraine conflict and renewed US-China trade jitters temper investors' appetite for riskier assets. That said, the lack of any buying interest around gold suggests that the path of least resistance is to the downside.

Technical levels to watch

Copper (LME) keeps hovering at the 55-day moving average (DMA). Nonetheless, the broader risk still leans lower during the fourth quarter, according to strategists at Credit Suisse.

200-DMA at $9,054 to cap

“Copper keeps hovering at the 55-DMA, currently seen at $7,768. With a large top still in place and the market below falling long-term moving averages, we stay biased towards further weakness during Q4 and we note that a break below $6,844 would open up support seen next at $6,300/6,269.”

“Only above the recent $8,318 August consolidation high would stabilize the market more meaningfully. However, we would expect the 200-DMA, currently seen at $9,054, to cap the market the very latest.”

AUD/USD has breached below 0.6365, the lower limit of recent consolidation. Next supports are located at 0.6210 and 0.6100, economists at Société Générale report.

Signals of rebound are still not visible

“AUD/USD is probing a multi-month channel limit, however, signals of rebound are still not visible.” 

“Failure to reclaim 0.6365/0.6430 would mean persistence in decline. Next potential objectives are located at 0.6210 and 0.6100, the 76.4% retracement of the uptrend during 2020 and 2021.”

See: AUD/USD to extend its decline towards 0.6041 – Credit Suisse

• USD/CAD struggles to gain any meaningful traction, though the downside remains cushioned.
• Retreating oil prices undermines the loonie offering some support amid sustained USD buying.
• Holiday-thinned liquidity might hold back bulls from placing aggressive bets around the major.

The USD/CAD pair fails to capitalize on its modest intraday uptick and retreats a few pips from a one-week high touched earlier this Monday. Spot prices, however, manage to hold comfortably above the 1.3700 mark and remain well supported by a combination of factors.

Crude oil prices edge lower and snap a five-day winning streak to the highest level since late August amid worries that a deeper global economic downturn will hurt fuel demand. This, in turn, undermines the commodity-linked loonie and acts as a tailwind for the USD/CAD pair amid sustained US dollar buying interest.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies - hits a one-and-half-week high amid expectations for a more aggressive policy tightening by the Fed. The markets have been pricing in a greater chance of a supersized 75 bps Fed rate hike for the fourth consecutive meeting in November.

The bets were reaffirmed by the recent hawkish remarks by several Fed officials and Friday's upbeat US monthly jobs report, which pointed to the resilient economy. Apart from this, the prevalent risk-off environment also offers support to the safe-haven buck and supports prospects for additional gains for the USD/CAD pair.

That said, relatively thin trading volumes on the back of a bank holiday in the US and Canada might hold back traders from placing aggressive bets. Investors might also prefer to move to the sidelines ahead of the release of the FOMC minutes, the US consumer inflation figures and the US Retail Sales figures this week.

Nevertheless, the USD/CAD pair seems poised to aim back to reclaim the 1.3800 round-figure mark and retest the YTD peak, around the 1.3835-1.3834 region touched last week. Hence, any meaningful pullback might still be seen as a buying opportunity and is more likely to remain limited, at least for the time being.

Technical levels to watch

Local media in Hungary have reported that the Europen Council may be considering extending the deadline for a decision on freezing funds for Hungary by two more months. Thus, the forint should strengthen, economists at Commerzbank report.

EC may extend deadline by two months

“The usual decision timeframe was one month, but the EC could extend this by a maximum of further two months in exceptional circumstances – it appears that this extension is now being granted.”

“The media report is likely to be HUF-supportive news: 1) it raises the probability that some compromise may be worked out in time for the funds to be released; and 2) crucially, that recent legislative changes announced by the Hungarian government (in an attempt to address corruption in the use of EU funds) is perhaps being viewed favourably by the EC.”

• AUD/USD kicks off the new week on a downbeat note and drops to over a two-year low.
• Aggressive Fed rate hike bets continue to boost the USD and exert downward pressure.
• RBA’s dovish tilt, the risk-off mood also drives flows away from the risk-sensitive aussie.

The AUD/USD pair extends last week's post-NFP bearish breakdown momentum through the 0.6400 mark and remains under intense selling pressure on Monday. Spot prices continue losing ground through the first half of the European session and weaken further below the 0.6300 round figure, hitting the lowest level since April 2020 in the last hour.

The US dollar buying remains unabated on the first day of a new week, which, in turn, is seen exerting heavy downward pressure on the AUD/USD pair. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, climbs to a one-and-half-week high and continues to drag support from a combination of factors.

The robust US monthly employment details released on Friday pointed to the resilient economy and gives the Fed enough space to keep hiking interest rates at a faster pace to curb inflation. In fact, the markets are pricing in over 80% chances of another supersized 75 bps Fed rate hike move for the fourth consecutive meeting in November.

This pushed the US Treasury bond yields higher, which, along with the prevalent risk-off environment, acts as a tailwind for the safe-haven greenback. The market sentiment remains fragile amid growing worries about a deeper global economic downturn, a further escalation in the Russia-Ukraine conflict and renewed US-China trade jitters.

The Australian dollar, on the other hand, is undermined by the fact that the Reserve Bank of Australia (RBA) sent a dovish signal last week and decided to slow the pace of policy tightening. This, in turn, supports prospects for additional losses, though a slightly oversold RSI (14) on the daily chart warrants caution for bearish traders.

Furthermore, thin trading volumes - amid the US bank holiday in observance of Columbus Day - make it prudent to wait for some consolidation or a modest bounce before positioning for an extension of the downtrend. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the AUD/USD pair is to the downside.

Technical levels to watch

USD/CNY briefly challenged the peak of 2019 at 7.19. Since then, the pair has reversed back lower and could extend its decline on a dip under 7.02, economists at Société Générale report.

Initial resistance aligns at 7.17/19

“USD/CNY has faced stiff resistance near the upper limit of a multiyear channel near 7.26 forming a weekly shooting star. This is not a reversal pattern but denotes temporary exhaustion.” 

“An initial pullback is taking shape; 7.02, the 23.6% retracement from 23.6% is first support. In case this breaks, there would be a risk of a deeper down move.”

“7.17/7.19 is immediate resistance zone.”

Experts from the German Gas Commission came out on the wires, via Reuters, this Monday, sharing their view on the government’s gas relief program.

Key takeaways

“The European Central Bank (ECB) will have to take significant interest step again in October,” policymaker Klaas Knot said on Monday, adding that it's “too early to say how big step needs to be.”

Additional quotes

Related reads

• Eurozone Sentix Investor Confidence worsens to -38.3 in Oct vs. -34.7 expected
• ECB’s Centeno: Monetary policy normalization is absolutely necessary and desired

USD/ZAR has maintained its uptrend throughout the third quarter of 2022. Analysts at Credit Suisse see potential to reach the all-time high at 19.3446.

Uptrend from April at 16.8571 to curb any correction lower

“We expect a solid break above 18.0709 to eventually take place, though we think there is certainly room for further ascent to follow towards the all-time high at 19.3446.”

“We look for the uptrend from April at 16.8571 to curb any deeper correction lower to keep the upside pressure in place.”

“Normalization of monetary policy is absolutely necessary and desired,” European Central Bank (ECB) Governing Council member Mario Centeno said on Monday.

Additional quotes

“Policy normalization must be gradual.”

"A policymaker cannot become a factor of instability"

Market reaction

EUR/USD is unimpressed by the above comments, losing 0.56% on the day at 0.9684, at the time of writing.

EUR/USD stays under modest bearish pressure on Monday. Economists at ING expect the world’s most popular currency pair to trade back to back to 0.95 soon.

European Central Bank unlikely to change its hawkish rhetoric

“The energy crisis is forcing a radical shift in the export-oriented economic framework of the eurozone, a theme that will prevent a rapid return to above-parity levels in EUR/USD. After all, our BEER FX equilibrium model has consistently shown that the EZ-US terms of trade (price of exports divided by price of imports) differential is the primary determinant of real EUR/USD medium-term swings, and currently shows that the pair is not undervalued.”

“Like the Fed, it’s hard to imagine the ECB would want to radically change its hawkish rhetoric at this stage. But unlike the Fed, tightening by the ECB is not helping its domestic currency, and we see EUR/USD staying offered into the 0.9540 September lows this week.”

The Eurozone Sentix Investor Confidence index deteriorated to -38.3 in October from -31.8 in September vs. -34.7 expected. The index fell to its lowest level since March 2020, signaling a  deep recession.

The current situation in the eurozone dropped to -35.5 points in October from -26.5 in September, the lowest since August 2020.

An expectations index to -41.0 from -37.0, hitting its lowest value since December 2008.

Key takeaways

“The ongoing uncertainties about the gas and energy situation in winter have not diminished due to the attack on the Nordstream pipelines."

" In addition to the economic worries, there is now also an increasing probability of an escalation of the military conflict in Ukraine. Globally, there is little reason for hope.”

EUR/USD reaction 

The shared currency remains depressed following the poor Eurozone Sentix data. EUR/USD is trading at 0.9687, down 0.54% on the day.

• Silver extends its recent retracement slide from a multi-week high touched last Tuesday.
• A convincing break below the $19.50 support should pave the way for additional losses.
• A sustained strength beyond the $20.40 region is needed to negate any bearish outlook.

Silver remains under some selling pressure on Monday and extends last week's pullback from the $21.25 area or the highest level since late June. The white metal maintains its offered tone through the early part of the European session and drops to a one-week low, around the $19.70-$19.65 region in the last hour.

The XAG/USD is currently placed just below the 38.2% Fibonacci retracement level of the recent recovery from the YTD low, though has managed to hold above the 100-period SMA on the 4-hour chart. The latter, currently around the mid-$19.00s should now act as a key pivotal point. A sustained break below will be seen as a fresh trigger for bearish traders and pave the way for additional losses.

The subsequent downfall has the potential to drag the XAG/USD towards the 61.8% Fibo. level, around the $19.20 region. This is closely followed by the $19.00 mark, which if broken decisively will suggest that the corrective bounce has run out of steam and pave the way for additional losses. Spot prices could then accelerate the fall towards the $18.60 intermediate support en route to the $18.35 region and the $18.00 round figure.

On the flip side, the $20.00 psychological mark, coincides with the 38.2% Fibo. level, now seems to keep a lid on any intraday move-up. Any subsequent move up could attract some sellers and remain capped near the 23.6% Fibo. level, around the $20.40 region. Sustained strength beyond will negate any near-term negative bias and lift the XAG/USD to the $20.80-$20.85 area en route to the $21.00 mark and the monthly high, around the $21.25 region.

Silver 4-hour chart

Key levels to watch

USD/KRW has breached its long-term channel. This move raises thoughts of a potential move to 1,597/1,600, in the opinion of analysts at Credit Suisse.

Current correction seen as a temporary pause

“USD/KRW has seen a major breakout above its long-term channel in August, which sets the market on course for an accelerated move higher. Whilst the current correction is seen as a temporary pause after RSI has reached oversold levels across all time frames, our core USD/KRW view remains bullish.”

“We think further ascent to the 78.6% retracement of the 2009/2014 uptrend at 1,471 is likely to follow. Should we also see a direct break higher here, this would raise a serious prospect of eventually reaching 1,597/1,600 – the 2009 high.”

Economists at ING continue to favour a stronger dollar this week. In their view, the US Dollar Index (DXY) could retest the 114.76 September high.

Main narratives point at stronger dollar

“US markets are closed for a national holiday today, so we could see a quieter than usual start of the week in markets. Moving on, we remain bullish on the dollar, as the underlying narrative of a hawkish Fed – paired with lingering geopolitical and energy prices concerns – should keep risk sentiment weak and safe-haven flows into the greenback strong.”

“A re-test of the 114.76 September high in DXY is our base case over the next few days.”

• EUR/USD suffers the firmer momentum in the dollar around 0.9700.
• The greenback navigates in multi-session highs amidst risk-off mood.
• ECB Lane will speak later along with Fed’s Evans and Brainard.

Investors’ pessimism around the European currency grabs extra steam and forces EUR/USD to confront the 0.9700 region at the beginning of the week.

EUR/USD looks to risk trends

EUR/USD extends the bearish move for the fourth consecutive day and puts the 0.9700 neighbourhood to the test against the backdrop of further strength in the dollar following another solid print from Nonfarm Payrolls last Friday.

Indeed, the preference for the greenback lifts the USD Index (DXY) to fresh 2-week highs past the 113.00 mark amidst unabated conviction that the fed could raise rates by 75 bps at its November 2 meeting.

The knee-jerk in the pair comes in tandem with a corrective decline in the German 10-year bund yields following three consecutive daily drops.

Nothing scheduled data wise in Euroland other than a speech by ECB Board member P.Lane. Across the pond, the speeches by Fed’s Evans and Brainard will be the only events in the calendar.

What to look for around EUR

EUR/USD accelerates its losses and challenges the key support in the 0.9700 zone on Monday.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. Following latest results from key economic indicators, the latter is expected to extend further amidst the ongoing resilience of the US economy.

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 sour sentiment around the euro

Key events in the euro area this week: EMU Industrial Production, ECB Lagarde (Wednesday) – Germany Final Inflation Rate (Thursday) – EMU Balance of Trade (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 0.43% at 0.9698 and faces the immediate support at 0.9535 (2022 low September 28) ahead of 0.9411 (weekly low June 17 2002) and finally 0.9386 (weekly low June 10 2002). On the upside, the surpass of 0.9999 (weekly high October 4) would target 1.0003 (55-day SMA) en route to 1.0050 (weekly high September 20).

USD/CNY has only temporarily breached the key highs at 7.1580/7.1844. Nevertheless, analysts at Credit Suisse stay bullish for 7.4220.

Cluster of key supports located at 6.9053/6.8728

“We look for an eventual solid close above 7.1844 to provide a foundation for a deeper ascent to the 61.8% retracement at 7.4220, though we note that only a convincing break above here would raise a prospect of a stronger upmove to the 78.6% retracement at 7.7978.”

“There is a cluster of key supports at the 55-day average, potential uptrend and cluster of retracement levels including the 38.2% retracement of the 2022 upmove, which all coincide at 6.9053/6.8728. A closing break below here would cast serious doubt over the core bullish uptrend, however, a break below the August lows at 6.7232 is needed to point towards a potential top.”

• The index pushes higher and surpasses the 113.00 mark.
• US money markets are closed due to the Columbus Day holiday.
• FOMC’s Evans, Brainard will speak later in the NA session.

The greenback, when tracked by the USD Index (DXY), maintains the bid bias well and sound for yet another session and trespasses the 113.00 barrier on Monday.

USD Index cautious ahead of CPI

The index advances for the fourth consecutive session at the beginning of the week in a context favourable to the risk-off trade, while market participants continue to digest Friday’s release of US Nonfarm Payrolls (+263K).

In the meantime, investors keep favouring the dollar amidst firmer speculation of a large rate hike at the next Fed event on November 2. This view has been bolstered further by recent solid results from some US fundamentals as well as the persevering hawkish message from Fed rate-setters.

Nothing scheduled in the US docket on Monday should leave the attention to speeches by Chicago Fed C.Evans (2023 voter, centrist) and Vice Chair L.Brainard (permanent voter, dove).

What to look for around USD

The index rises to fresh multi-session highs on the resumption of dollar strength in the wake of the solid results from the US labour market.

In the meantime, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues to prop up the underlying positive tone in the index.

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

Key events in the US this week: MBA Mortgage Applications, Producer Prices, FOMC Minutes (Wednesday) – Inflation Rate, Initial Jobless Claims (Thursday) – Retail Sales, Flash Michigan Consumer Sentiment, Business Inventories (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.25% at 113.02 and faces the next resistance at 114.76 (2022 high September 28) seconded by 115.00 (round level) and then 115.32 (May 2002 high). On the other hand, a breach of 110.05 (weekly low October 4) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).

• GBP/USD gains some positive traction after the BoE announces additional support measures.
• Concerns about the UK government’s fiscal plans, recession fears could act as a headwind.
• Aggressive Fed rate hike bets, the risk-off mood underpins the USD and should cap gains.

The GBP/USD pair stalls its recent sharp pullback from the vicinity of the 1.1500 psychological mark and attracts some buying on the first day of a new week. Spot prices edge higher through the early European session and climb back above the 1.1100 mark, though lack bullish conviction.

The Bank of England announces the launch of the Temporary Expanded Collateral Repo Facility (TECRF) to support market functioning. This, in turn, provides a modest lift to the British pound and assists the GBP/USD pair to rebound over 50 pips from the 1.1050 area, or a one-week low touched last Friday. That said, any meaningful upside still seems elusive amid concerns about the UK government's fiscal policy and recession fears.

The US dollar, on the other hand, remains firm amid firming expectations that the Federal Reserve will stick to its aggressive rate hiking cycle to tame inflation. In fact, the markets are pricing in over 80% chances of another supersized 75 bps Fed rate hike move for the fourth consecutive meeting in November. The bets were reaffirmed by the recent hawkish comments by several Fed officials and Friday's upbeat US jobs data.

Apart from this, the prevalent risk-off environment continues to act as a tailwind for the safe-haven greenback and contribute to capping gains for the GBP/USD pair, at least for the time being. The market sentiment remains fragile amid worries about economic headwinds stemming from rapidly rising borrowing costs and geopolitical risks. This, along with US-China trade jitters, tempers investors' appetite for riskier assets.

In the latest development, the White House unveiled export controls cutting off Chinese companies from certain semiconductor chips made with US equipment. Market participants turned cautious amid worries that any retaliation from China will worsen trade ties between the world's two largest economies and have deeper economic implications. This should continue to underpin the USD and keep a lid on the GBP/USD pair.

There isn't any major market-moving economic data due for release on Monday. Furthermore, relatively thin trading volumes on the back of the US back holiday in observance of Columbus Day warrants some caution before placing bullish bets around the GBP/USD pair. Hence, it will be prudent to wait for strong follow-through buying in order to confirm that spot prices have formed a near-term bottom around the 1.1050 area.

Technical levels to watch

Fiscal developments remain key for sterling. Economists at ING expect the GBP/USD to edge lower toward 1.1000 as downside risks remain high.

Eyes on Truss' reconciliation effort

“UK Prime Minister Liz Truss is set to attempt a reconciliation with the different groups of the Conservative Party. Markets will keep a close eye on whether this will lead Truss to backtrack on some of her other fiscal views (like a windfall tax on energy firms). Barring truly encouraging news on that front, sterling still looks on a slippery slope.” 

“Combining our view for a stronger dollar, we expect cable to easily slide through the 1.1000 support very soon, and to stay on a downward trend into the new year.”

“Tomorrow’s jobs data will be the highlight of the week. We expect the unemployment rate to notch a little higher again, but for now, the Bank of England will keep viewing this through the lens of worker shortages. We expect a 100 bps hike in November.”

Today, an expert commission is expected to publish details about measures to ease the impact of high gas prices proposed by the German government. Nonetheless, the euro is set to remain under pressure as common action across Europe is what matters, economists at Commerzbank report.

EU-conflict about aid measures 

“Any measures which might dampen the economic effect of high energy costs this winter can support the euro.”

“What matters for the single currency is not just one single member state deciding on effective aid measures, but that there are support measures in place across the entire currency area. Against this background, it seems problematical that on an EU-level there seems to be a conflict regarding what measures to implement.” 

“The threat of the energy crisis is likely to continue putting pressure on the euro.”

• Gold prices have sensed demand around $1,685.00 as DXY has faced hurdles around 113.00.
• The risk-off sentiment is still intact as S&P500 has extended its losses.
• The US headline CPI may decline to 8.1% while the core CPI would scale up to 6.5%.

Gold price (XAU/USD) has defended the downside break of the rangebound structure formed in a narrow range of $1,685.30-1,689.33 in the early European session. Value bets on the gold prices have been followed by the struggling US dollar index (DXY) around the round-level resistance of 113.00.

The risk-off sentiment is still intact as S&P500 has extended its losses. It is worth noting that US markets will be closed on Monday on account of Columbus Day. In spite of that, S&P 500 futures have followed the pessimism witnessed on Friday.

The yellow metal will continue to remain on tenterhooks as firmer US Nonfarm Payrolls (NFP) has given a green signal to the Federal Reserve (Fed) to continue hiking interest rates with bigger figures. This has infused fresh confidence in the Fed to keep up their ongoing pace of hiking interest rates to bring price stability in the economy.

Going forward, the release of the US Consumer Price Index (CPI) data will be of utmost importance. As per the estimates, the headline inflation rate will decline to 8.1% while the core CPI that excludes oil and food prices will shore up to 6.5%.

Gold technical analysis

On an hourly scale, gold prices have surrendered the 38.2% Fibonacci retracement (placed from September 28 low at $1,614.85 to October 4 high at $1,729.58) of $1,685.50. The precious metal has dropped below the 200-Exponential Moving Average (EMA) at $1,692.18, which has turned the major trend to the downside.

Also, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which adds to the downside filters.

Gold hourly chart

EUR/SEK has formed a large bullish triangle. With this bullish pattern in place, analysts at Credit Suisse expect the pair to move higher toward 11.3650. 

Move above 10.9799 to expose 11.0436

“EUR/SEK has recently confirmed a large bullish triangle continuation pattern, which we think likely sets the market up for a significant move higher over the next few months.”

“We look for an eventual move above 10.9799 to expose the 78.6% retracement of the 2020/21 decline at 11.0436. Thereafter, should we see a convincing break here as well, we would see no reason not to look for a further ascent to the 2020 high at 11.3650.”

• NZD/USD remains pressured around one-week low, prints three-day downtrend.
• Weekly support line challenges intraday sellers ahead of the two-year low.
• Bearish MACD signals, sustained trading below the key SMAs keep sellers hopeful.
• Buyers need validation from monthly high to retake control.

NZD/USD sellers attack a one-week-old support line near 0.5590 early Monday morning in Europe. In doing so, the Kiwi pair drops for the third consecutive day while declining to the lowest levels since September 30.

Given the quote’s sustained trading below the 100-SMA and the 50-SMA, as well as the bearish MACD signals, the NZD/USD prices are likely to conquer the 0.5590 immediate support.

Following that, the recently flashed multi-month low near 0.5565 could gain the bear’s attention.

If the NZD/USD prices remain weak past 0.5565, a downward trajectory towards the March 2020 bottom surrounding 0.5470 and then to the 61.8% Fibonacci Expansion (FE) of September-October moves, near 0.5445, can’t be ruled out.

Alternatively, the 50-SMA and the 100-SMA guard the NZD/USD pair’s immediate recovery around 0.5685 and 0.5755 in that order.

Even if the quote rises past 0.5755, it needs to cross the monthly high of 0.5815 to convince the buyers.

Overall, NZD/USD is all set to refresh the multi-month low marked in September.

NZD/USD: Four-hour chart

Trend: Further weakness expected

• GBP/JPY struggles to capitalize on its modest intraday uptick to the 161.55 region.
• Concerns about the UK government’s fiscal plans, recession fears weigh on the GBP.
• The risk-off mood benefits the safe-haven JPY and contributes to the intraday slide.

The GBP/JPY cross surrenders its modest intraday gains and drops to a one-week low, below the 161.00 round-figure mark during the early European session.

Investors remain concerned about the UK government's fiscal policy, which continues to undermine the British pound amid looming recession risks and acts as a headwind for the GBP/JPY cross. In fact, UK Prime Minister Liz Truss last week defended the tax-cut plan and said that cutting taxes is the right thing to do morally and economically. This could derail the Bank of England's efforts to contain high inflation and force it to turn more hawkish, creating headwinds for the economy.

Apart from this, the prevalent risk-off environment benefits the Japanese yen's relative safe-haven status and further contributes to capping the GBP/JPY cross. The market sentiment remains fragile amid growing worries about a deeper global economic downturn and geopolitical risks, which is evident from a weaker tone around the equity markets. That said, thin trading volumes on the back of a holiday in Japan help limit the downside for the GBP/JPY cross, at least for the time being.

Moreover, a big divergence in the monetary policy stance adopted by the Bank of Japan and other major central banks should keep a lid on any meaningful upside for the JPY. This, in turn, warrants caution before positioning for an extension of the recent pullback from a three-week high, around the 165.70 area touched last Wednesday. In the absence of any major market-moving economic releases on Monday, the broader risk sentiment will be looked upon for some impetus around the GBP/JPY cross.

Technical levels to watch

Here is what you need to know on Monday, October 10:

Investors seek refuge early Monday and risk-sensitive assets struggle to find demand. After closing the previous week on a firm footing on the upbeat US September jobs report, the US Dollar Index (DXY( edges higher toward 113.00. Reflecting the risk-averse market environment, US stock index futures trade in negative territory. US bond markets will be closed in observance of the Columbus Day holiday in the US and trading action could remain subdued in the second half of the day. The European economic docket will feature the Sentix Investor Confidence data for October.

The US Bureau of Labor Statistics reported Friday that Nonfarm Payrolls rose by 263,000 in September. This reading came in higher than the market expectation for an increase of 250,000. Additionally, the publication showed that the Unemployment Rate declined to 3.5% from 3.7% in August. The benchmark 10-year US Treasury bond yield gained more than 1% and advanced to the 3.9% area after the data and the greenback continued to outperform its rivals.

Russian President Vladimir Putin said over the weekend that the attack on the bridge over the Kerch Strait in Crimea was an act of terrorism by Ukraine. In the early European morning, reports of explosions in Kyiv caused by Russian missile strikes forced markets to look for safe alternatives. Meanwhile, Chinese authorities have reportedly decided to partially shut down Changning and Putuo districts in Shanghai due to coronavirus control and prevention.

EUR/USD stays under modest bearish pressure on Monday and continues to stretch lower toward 0.9700. European Central Bank (ECB) policymaker and the Bank of France's head Francois Villeroy de Galhau said that it would take the ECB to bring inflation back to the 2% target in two to three years. 

GBP/USD trades in a narrow range below 1.1100 early Monday following last Friday's steep decline. The Bank of England announced on Monday that it will launch a temporary expanded collateral repo facility to support market functioning but the development doesn't seem to be having a significant impact on the British pound's performance against its rivals.

USD/JPY climbed to its highest level since the Bank of Japan's intervention at 145.66 during the Asian session but quickly erased its gains. The pair was last seen trading flat on the day at 145.30.

Gold faced renewed technical selling pressure with a drop below $1,700 and extended its slide below $1,690. 

Bitcoin fluctuates in a narrow range below as it failed to stage a rebound over the weekend. Ethereum is having a hard time making a decisive move in either direction and moving up and down at around $1,300.

The Canadian dollar (CAD) has weakened to levels not seen since the pandemic. Paradoxically, the loonie could recover on slowing US economy, economists at Standard Chartered report.

Bank of Canada is likely to start easing in Q4-2023

“We now expect BoC to hike 50 bps in Oct, 25 bps in Dec, taking the end-2022 policy rate to 4% (3.5% prior). We also now expect a 25 bps hike in Jan 2023, and a 25 bps cut in Q4, ending 2023 at 4% (3.5% prior). We see 50 bps of additional cuts in 2024, with the year-end policy rate unchanged at 3.5%.”

“Most of the CAD weakness is due to the ramping up of market risk aversion, in our view. Paradoxically, any indication that the US economy is slowing would likely improve the risk-taking environment and support the CAD, despite the Canadian economy’s exposure to a US slump.”

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

- EUR/USD: EUR amounts        

• 0.9720-25 300m
• 0.9740-50 486m
• 0.9845-55 455m
• 0.9775-85 577m
• 0.9800-10 1.72b
• 0.9845-55 1.12b
• 0.9875 556m
• 0.9950 709m
• 1.0020-35 792m
• 1.0045-50 2.6b

- USD/JPY: USD amounts                     

• 143.15-20 576m
• 145.00 732m
• 145.75 290m
• 147.35 779m

- USD/CHF: USD amounts        

• 0.9900 300m

- AUD/USD: AUD amounts  

• 0.6450 375m
• 0.6560 631m

- EUR/JPY: EUR amounts

• 144.00 848m

AUD/USD remains in a choppy but sustained downtrend since early 2021. The pair is expected to edge towards 0.6041, in the view of analysts at Credit Suisse. 

Under pressure whilst below 0.7019

“With the broader risk-off environment looking set to remain in place for the upcoming months, our view is to look for a further setback towards the next key support zone at 0.6041 – the 78.6% retracement and the low from April 2020. However, a strong breach below here would make a case for a fall all the way to the 2020 low at 0.5506 in due course.”

“We look for the trendline from early June at 0.7019 to ideally stay intact to maintain the pressure lower.”

• AUD/USD remains pressured at fresh 30-month low amid risk-off mood.
• Escalating fears from the Russia-Ukraine tension, Sino-American tussles weigh on prices.
• RBA vs. Fed divergence joins downbeat Aussie data to keep bears hopeful.
• US/China CPI, FOMC Minutes will be important for near-term directions.

AUD/USD stands on slippery grounds as it drop to the fresh low since April 2020, around 0.6320 heading into Monday’s European session. In doing so, the Aussie pair justifies its risk-barometer status while leading the G10 currency pairs towards the south.

Recently, the BBC came out with the news suggesting multiple large explosions hit Kyiv, marking it the first tragic event in months. It’s worth noting that the missiles also destroyed Ukrainian President Volodymyr Zelensky's office. The latest escalation in the geopolitical tussles could be linked to the weekend’s explosion that destroyed a part of the bridge in Crimea which is crucial for Russia's war supplies.

Elsewhere, China’s return to the market after a week-long holiday fails to renew the risk appetite. That said, the latest Sino-American tussles over Taiwan and risk-negative headlines from North Korea also weigh on the sentiment, as well as the AUD/USD prices.

Above all, the Reserve Bank of Australia’s (RBA) dovish rate hike and the intensifying hawkish Fed bets are the key cause of the AUD/USD pair’s downturn. The expectations of the Fed’s aggression strengthened after the US jobs report for September showed that the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions, as well as weighing on the market’s mood, was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior. Following that, the CME’s FedWatch tool signals the 78% chance for the US central bank’s 75 bps rate hike in November.

While portraying the mood, the S&P 500 Futures dropped for the fourth consecutive day while poking the monthly low near 3,630, down 0.45% intraday at the latest. That said, the US 10- Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90%.

Looking forward, this week’s annual meetings of the International Monetary Fund (IMF) and the World Bank (WB), as well as updates on Russian President Vladimir Putin’s emergency meeting, on Monday, could entertain the pair traders ahead of the US inflation data and the Fed minutes.

Technical analysis

A clear U-turn from the five-month-old previous support line, around 0.6535 by the press time, directs AUD/USD towards the March 2020 high near 0.6215.

European Central Bank (ECB) policymaker and the Bank of France head Francois Villeroy de Galhau expressed his take on the bloc’s inflation outlook while speaking on France Culture radio on Monday.

Key quotes

“ECB engaged in bringing down inflation to 2 pct aim in "two to three years" from now.”

“Right inflation target is around 2%.”

“We are far from reaching the 2% aim in eurozone.”

“Monetary policy measures take time before having a full effect, which is why it will take 2 to 3 years to bring inflation back down to target.”

“Inflation expectations are key, but it is positive they still are close to our target.”

Market reaction

EUR/USD is shrugging off the above comments, down 0.18% on the day at 0.9722, as of writing.

Strong data supports the status quo. Therefore, economists at Commerzbank expect the US dollar to remain strong as the Federal Reserve is set to retain a hawkish stance.

Nothing to stop dollar-strength

“The market is therefore now expecting that the Fed will hike its rates significantly over the coming months and will then keep them at these levels for a longer period.”

“The US economy and/or US inflation would probably have to weaken significantly over a short period of time for the Fed to sound less hawkish, a development that seems rather unlikely. That means there is little to prevent dollar strength at present.”

• Oil prices have dragged below $91.00 on downbeat Caixin Services PMI data.
• Firmer US NFP are likely to weigh pressure on the oil prices ahead.
• The impact of the OPEC production cut could be limited as many members have already failed in providing discussed quota.

West Texas Intermediate (WTI), futures on NYMEX, have declined to near $90.70 in the early European session as downbeat growth prospects have underpinned the risk-off market profile. The oil prices have dropped after facing sheer barricades of around $92.00.

The oil prices have shifted into a correction mode as weaker Caixin Services PMI data released last week is signaling a decline in demand for oil. The Caixin Services PPMI data landed at 49.3, significantly lower than the prior release of 55.0. It is worth noting that China is the largest importer of oil and a serious decline in oil demand from the dragon economy would have a significant impact on oil.

For September, the Caixin Manufacturing PMI data also dragged firmly, therefore an overall decline in Chinese economic activities is impacting the oil prices.

Adding to that, the firmer US Nonfarm payrolls (NFP) data has started weighing pressure on the black gold. An upbeat US labor market data has bolstered the chances of a bigger rate hike by the Federal Reserve (Fed). Solid economic fundamentals remain highly supportive substance for a rate hike consideration and out of that tight labor market is critical for tightening monetary policy.

On the supply side, last week’s production cuts announcement by OPEC+ pushed the oil prices into a bullish trajectory. The oil cartel announced a drop of 2 million barrels per day (bps) which is the biggest production cut since the Covid-19 pandemic. Well, the majority of the OPEC members have already failed to produce the discussed quota, therefore the impact could be lower than expected.

Economists at Rabobank retain a bullish USD view and maintain their forecast of a move lower to EUR/USD 0.95 on a one-month view. A move below this level, however, is not ruled out.

Severe risks to financial stability in Europe

“Europe could be facing ‘severe risks to financial stability’ according to a key regulator. This warning comes on the back of a slew of reports highlighting the impact of high energy costs on German industry. In our view, the EUR is not yet fully priced for the impact of Europe’s energy crisis.”

“We maintain our forecast of a move lower to EUR/USD 0.95 on a one-month view and expect the currency pair to remain at these levels, or lower, potentially for some months.” 

“In our view, further European Central Bank rate hikes will not be sufficient to prevent the EUR falling further against the mighty USD.” 

“Despite the emergence of fragilities in the global economic, further aggressive Fed rate hikes look set to be announced which is set to underpin the strength of the greenback.”

The Malaysian ringgit is nearing its closing low against the US dollar of 4.7125, reached in January 1998. Economists at ANZ Bank expect the MYR to remain under pressure into next year. 

Ringgit a hostage to rampant dollar

“There are some supportive factors for the MYR. Elevated oil prices are helping Malaysia maintain strong trade surpluses. We see oil prices pushing back toward $100/bbl in the near-term, which is positive for MYR. In addition, Malaysia has managed to attract portfolio inflows this year, which bucked the regional trend of large outflows.”

“Given our view that the fed funds rate will reach a peak of 5.00% by Q2 2023, while the BNM will tighten more slowly to a terminal rate of 3.50% in the OPR, we expect the MYR to be under pressure into next year.”

“Domestic factors, such as the budget, Malaysia’s growth resilience and the prospect of an early election, are unlikely to have a material bearing on the MYR. In the current environment, it is all about the USD.”

• EUR/GBP prints the first daily negative in five, grinds lower of late.
• Escalating fears of Eurozone recession, mixed political headlines from BOE keep sellers hopeful.
• BOE’s Bailey will face a tough task during his trip to Washington.
• Russia responds to Crimean bridge explosion by blowing Ukrainian President’s office.

EUR/GBP fails to extend the four-day uptrend as it stays depressed near 0.8785 heading into Monday’s European session. In doing so, the cross-currency pair justifies the escalating fears of the Eurozone’s recession while trying to take positives from the mixed headlines from Britain.

As per the latest update, the Bank of England (BOE) launches multiple intermediate measures to unleash liquidity into the UK market. Among the key measures discussed, the alterations in the repo facility will be important and can help the “Old Lady”, as the BOE is often called.

Elsewhere, the fears of EU recession amplified after Russia’s reaction to the Crimean bridge explosion. Recently, the BBC came out with the news suggesting multiple large explosions hit Kyiv, marking it the first tragic event in months. It’s worth noting that the missiles also destroyed Ukrainian President Volodymyr Zelensky's office.

While the UK is likely benefiting from the bloc’s fears of a pause in the European Central Bank’s (ECB) hawkish move, doubts over the BOE’s ability to tame the financial crisis triggered by chancellor Kwasi Kwarteng’s September 23 fiscal announcements can keep the EUR/GBP buyers hopeful. Furthermore, political pessimism in Britain also propels the cross-currency pair.

Moving on, the aforementioned risk catalysts and the UK’s employment data can entertain the EUR/GBP traders ahead of Friday’s speech of BOE Governor Andrew Bailey. If Bailey fails to defend his latest surprises, the EUR/GBP may have further upside to track.

Technical analysis

EUR/GBP retreats from the one-month-old support-turned-resistance line, around 0.8815 by the press time, as it directs bears towards June’s peak surrounding 0.8720.

The NZD/USD pair has slipped below the 0.56 mark. Economists at ANZ Bank note that the kiwi lacks positive attention at present.

Local factors are simply not featuring

“Local factors are simply not featuring, and anecdotally, NZ’s current account deficit is attracting more unwanted attention.”

“In a world where US interest rates are leading the way higher, the NZD needs positive rather than negative attention, and that seems to be lacking at present.”

“Support 0.5470/0.5565 Resistance 0.5820/0.6000/0.6160.”

See – NZD/USD: Unlikely to return to 0.60 in 2022, seen at 0.56 by year-end – BofA

The Bank of England (BOE) announced in a statement on Monday, additional measures to support market functioning.

Additional takeaways

Market reaction

The pound is finding some support from the BOE’s announcement, as GBP/USD bounces off daily lows near 1.1050. The spot was last seen trading at 1.1077, down 0.05% on the day.

EUR/USD is expected to see consolidation around 0.9606/9592. However, the pair is expected to resume its decline towards 0.9331/03 and potentially under the 0.90 level, economists at Credit Suisse report.

EUR/USD points to a potential consolidation phase

“A lengthier consolidation/pause is expected, but our view remains to view such a phase as temporary only and we maintain our core and long-held bearish view for a sustained move below 0.9592 in due course.”

“Resistance is seen at 1.0000/1.0051 which we look to try and cap the recovery. Above the 1.0198 September high though is needed to raise the prospect of a deeper but still corrective rally and lengthier consolidation, with resistance seen next at 1.0341/69.”

“Post a consolidation phase, we look for an eventual sustained move below 0.9592 in due course with support then seen next at 0.9331/03, and potentially as far as Fibonacci projection support at 0.9000/0.8905.”

Gold price is at five-day lows below $1,700. XAU/USD looks to test the horizontal 21-Daily Moving Average (DMA) at $1,679 as the Relative Strength Index (RSI) pierces back below the 50.00 level, FXStreet’s Dhwani Mehta reports.

Recapturing $1,700 is critical to attempting any recovery

“The next stop for sellers is now seen at the horizontal 21 DMA at $1,679, below which intermittent support near $1,660 will come into play.”

“The 14-day RSI has gradually pierced through the midline for the downside, opening doors for more declines.”

“Recapturing the $1,700 threshold is critical to attempting any recovery. The next upside target is seen around the rising trendline support turned resistance at $1,707. The bearish 50DMA at $1,721 could restrict the additional rebound in the bullion.”

Citing witness accounts., Reuters reports on Monday, Ukraine’s President Volodymyr Zelensky's office was destroyed by a missile strike.

In this explosion in Kyiv, clouds of black smoke can be seen rising from buildings in city's centre, witnesses report.

Mayor Vitali Klitschko said: “Several explosions in the Shevchenskivskyi district - in the center of the capital.” “Details later.”

Also read: Crimea bridge blast: Russian Presi. Putin accuses Ukraine, calls it terrorism

Market reaction

Risk sentiment is taking a fresh hit, as losses in the S&P 500 futures exceed 0.50% so far. The US dollar index jumps to test 113.00, up 0.13% on the day.

• USD/CAD is preparing for a break above 1.3750 as DXY has refreshed its day’s high at 112.94.
• The tight US labor market has filled the Fed with confidence for announcing a bigger rate hike in November.
• The loonie bulls have failed to capitalize on better-than-projected Canada employment data.

The USD/CAD pair is aiming to demolish the back-and-forth moves structure that remained in a narrow range of 1.3720-1.3740 in the early European session. The asset is preparing for an impulsive rally following the footprints of the US dollar index (DXY). The DXY has refreshed its day’s high at 112.94On a broader note, the asset is oscillating around the weekly hurdle of 1.3750 and may remain in the bullish arena amid negative market sentiment.

The release of the upbeat US Nonfarm Payrolls (NFP) data on Friday has pumped the odds of a 75 basis point (bps) rate hike by the Federal Reserve (Fed). The upbeat economic catalyst has terrified investors, which has resulted in a bearish performance by S&P500. Also, the 10-year US Treasury yields have reached near 3.90%.

A tight labor market has provided confidence to the Fed to announce a bigger rate hike unhesitatingly. A fourth consecutive 75 bps rate hike announcement by the Fed will push the interest rates to 3.75-4%, close to the targeted rate of 4.4%, as discussed in September’s dot plot.

Going forward, the US Consumer Price Index (CPI) data will remain in limelight. Previously, the headline CPI dropped to 8.3%, however, the core CPI was escalated. It is expected that weaker gasoline prices will keep the headline CPI in check, therefore, the spotlight will remain on the core CPI. As per the consensus, the economic data is expected to improve to 6.5% from the prior release of 6.3%.

Meanwhile, loonie bulls have failed to capitalize on better-than-projected employment data. The Net Change in Employment landed at 21.1k, higher than the projections of 20k. Also, the Unemployment Rate declined to 5.2% from the expectations and the prior release of 5.4%.

On the oil front, the announcement of the production cuts by OPEC+ has titled the short-term trend towards the north. Apart from that, the reopening of China after a golden week holiday is promising that the demand for oil will pick up as Chinese manufacturing activities were shut down during the holiday period.  It is worth noting that Canada is a leading oil exporter to the US and higher fund inflows will strengthen its fiscal balance sheet.

• EUR/USD takes offers to refresh intraday low during the four-day downtrend.
• U-turn from 50-DMA, clear break of 10-DMA favor sellers.
• Impending bear cross on MACD, downbeat RSI add strength to the downside bias.
• Bearish channel keeps sellers hopeful of witnessing fresh multi-year bottom.

EUR/USD drops to a fresh one-week low around 0.9720 heading into Monday’s European session. In doing so, the major currency pair extends the previous week’s pullback from the 50-DMA while also respecting Friday’s downside break of the 10-DMA.

Additionally favoring the EUR/USD sellers is the impending bear cross of the MACD, as well as the downbeat RSI (14), not oversold.

With this, the quote is likely to decline further toward the yearly low marked during the last month around 0.9535. On their way, the EUR/USD bears may take a breather around 0.9680.

If the prices remain weak past 0.9535, the lower line of the downward sloping bearish chart pattern, namely the trend channel, could lure the bears around 0.9480.

On the contrary, the 10-DMA hurdle surrounding 0.9790 restricts the quote’s immediate upside ahead of highlighting the 50-DMA resistance of 0.9985.

Following that, the 1.0000 psychological magnet and the upper line of the stated channel, close to 1.0050, will be crucial to determine the trend change.

EUR/USD: Daily chart

Trend: Further downside expected

Considering advanced prints from CME Group for natural gas futures markets, open interest shrank for the second straight session on Friday, this time by around 1.3K contracts. Volume, instead, rose for the second consecutive session, now by around 71.3K contracts.

Natural Gas remains underpinned by the $6.50 region

Friday’s downtick in prices of the natural gas was amidst diminishing open interest, which is supportive for a rebound in the very near term. That said, the commodity should stick to the current consolidative phase for the time being and with decent support around the $6.50 zone per MMBtu.

According to preliminary readings from CME Group for crude oil futures markets, traders added 706 contracts to their open interest positions on Friday, reaching the fourth daily build in a row. In the same line, volume resumed the uptrend and went up by around 485.5K contracts.

WTI now targets the 200-day SMA near $98.00

Prices of the barrel of the WTI extended the sharp rebound on Friday amidst rising open interest and volume. That said, the door appears open to further gains and with the next target of note at the 200-day SMA around the $98.00 mark.

• USD/TRY grinds near the all-time high during a sluggish start to the key week.
• Turkish President Erdogan pledged to keep cutting rates as long as he is in power.
• Hawkish Fed bets, firmer US data also favor the pair buyers.
• Off in the US, light calendar elsewhere probe buyers.

USD/TRY seesaws around 18.60 during early Monday morning in Europe as the fears of more rate cuts from Turkey contrasts with the hawkish Fed bets. That said, holidays in the US, Canada and Japan restricts the Turkish lira (TRY) pair’s immediate upside moves.

Turkish President Tayyip Erdogan vowed on Saturday that the central bank would continue to cut its policy interest rates every month for as long as he stayed in power, after it surprised markets by cutting rates twice in the last two months, per Reuters.

It’s worth noting that the record high inflation in Turkiye pushes the Central Bank of the Republic of Türkiye (CBRT) towards rate hikes but the policymakers’ resistance for the same weighs on the TRY prices of late.

On the contrary, the US Dollar Index (DXY) struggles around a one-week high after rising for the last three consecutive days. In doing so, the greenback gauge pauses the previous week’s reversal of the 20-year high, marked late in September.

Unlike the Turkish policymakers, the Fed members keep favoring the rate hikes even at the cost of a short-term economic slowdown. Also fueling the hawkish Fed bets is the latest US jobs report for September. On Friday, the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions, as well as weighing on the market’s mood, was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior. Following that, the CME’s FedWatch tool signals the 78% chance for the US central bank’s 75 bps rate hike in November.

In addition to the Fed-inspired bids, the DXY also cheers the risk-off mood amid pessimism surrounding the economic slowdown due to the Russia-Ukraine and the Sino-American tussles.

Against this backdrop, the Wall Street benchmarks closed in the red while the S&P 500 Futures dropped for the fourth consecutive day while poking the monthly low near 3,630, down 0.40% intraday at the latest. That said, the US 10- Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90%.

Looking forward, Turkey has second-tier economics like Industrial Production and Unemployment Rate up for publishing but Wednesday’s Federal Open Market Committee (FOMC) Minutes and Thursday’s US Consumer Price Index (CPI) will be crucial for short-term directions. That said, the bulls are likely to keep the reins as the CBRT diverges from the Fed when it comes the monetary policy actions.

Technical analysis

Unless breaking the 10-DMA level surrounding 18.55, not even the short-term USD/TRY sellers might risk taking entries.

CME Group’s flash data for gold futures markets note open interest rose for the second session in a row on Friday, this time by just 756 contracts. Volume followed suit and went up by around 18.8K contracts after three daily drops in a row.

Gold remains capped by $1,730

Friday’s negative price action in gold prices was on the back of increasing open interest and volume, allowing for the continuation of the downtrend in the very near term. In the meantime, the yellow metal risks extra weakness while below recent peaks in the $1,730 region.

• The risk-off market tone has brought a sell-off in Asian indices.
• US markets will remain closed on account of Columbus Day.
• Escalating Japan-North Korea tensions may buzz longer on North Korean Kim’s suspicious comments.

Markets in the Asian domain are displaying a weak performance following the footprints of weaker S&P500 recorded in Friday. Also, the latter index futures have continued its sluggish performance on Monday. Firmer US Nonfarm Payrolls (NFP) data and geopolitical tensions between Japan and North Korea have strengthened the negative market sentiment, which has forced the market participants to bank on sell-off.

At the press time, Japan’s Nikkei225 dropped 0.71%, ChinaA50 tumbled 1.10% and Hang Seng nosedived 2.44%.

Escalating Japan-North Korea tensions amid the recurring firing of ballistic missiles by Kim Jong-un region around Pyongyang without prior notice of any equipment has strengthened the case of demolishing harmony in Japan. Including two missile launches on Sunday, counting has increased to seven. Adding to that, the suspicious commentary from the North Korean leader has also intensified the risk of escalating tensions further.

North Korean leading Kim stated that their administration need not have a dialogue with the economy and the former will continue to strengthen its nuclear operations ahead, as reported by Reuters.

Meanwhile, Chinese equities are facing a sell-off after the conclusion of the Golden Week Holiday. A long week holiday is responsible for the suspension of economic activities, which will display its impact in the coming weeks. A major impact will be seen on Chinese Manufacturing PMI data, which is been discounting by investors.

The US dollar index (DXY) is struggling to cross the immediate hurdle of 112.80 and broadly displaying a sideways movement as less activity is expected from the US markets due to the extended weekend.

On the oil front, oil prices have corrected to near $90.70 after facing barricades at around $92.00. The impact of mega production cuts by OPEC+ has pushed the oil process into a bullish trajectory. Going forward, bets over the extent of the rate hike by the Federal Reserve (Fed) will decide the direction of the oil prices as a higher rate hike by the Fed will trim the overall demand, and henceforth the demand for oil.

• USD/JPY remains mildly bid around fortnight high, up for the fourth consecutive day.
• RSI conditions challenge bulls but sustained break of 12-day-old resistance signals further upside.
• Two-month-old ascending trend line restricts short-term downside, 100-SMA appears immediate support.

USD/JPY holds onto the bullish bias for the fourth consecutive day even as it grinds near 145.50 during early Monday in Europe. In doing so, the yen pair remains mildly bid near the two-week high, marked during the Asian session.

The yen pair’s bullish bias takes clues from the clear upside break of a descending trend line from September 22, now support around 144.90.

Also challenging the USD/JPY bears is the pair’s sustained trading beyond the 100-SMA, close to 144.15 by the press time, as well as an upward-sloping support line from early August, near 143.75 as we write.

It should be noted, however, that the nearly overbought RSI conditions challenge the USD/JPY buyers as they approach the 24-year high marked during the last week, around 145.90.

Following that, an ascending resistance line from September 07, near 146.90, will be in focus.

Overall, USD/JPY remains on the bull’s radar but there prevail a little upside room.

USD/JPY: Four-hour chart

Trend: Further upside expected

Economist at UOB Group Lee Sue Ann sees the Bank of Korea (BoK) hiking rates by 25 bps at its meeting later this week.

Key Quotes

“We are keeping our forecast for BOK to continue raising the base rate by 25bps per meeting in Oct and Nov to bring the base rate to 3.00% by end4Q22. Thereafter, we expect the BOK to stay on hold through 2023.”

“However, BOK could do more should the inflation trajectory stay higher than expected.”

• Copper price picks up bids to snap two-day downtrend, rebounds from one-week low.
• Headlines from China, PBOC’s softer fix join mixed news on inventories to challenge metal bears.
• Off in the US, Japan and Canada also probe the sellers even as economic slowdown fears underpin bearish bias.
• US inflation, Fed Minutes will be crucial for clear directions.

Although solid US jobs report propelled the hawkish Fed bets and keep the copper bears hopeful, the extended holidays in the US, Japan and Canada allow the metal sellers to take a breather during Monday’s sluggish Asian session. Also favoring the corrective pullback could be the mixed headlines from China and inventory updates for the industrial metal.

That said, copper price on the COMEX rises 0.78% to $3.4032 during early Monday morning in Europe while snapping a two-day downtrend near the one-week low.

The SMM News quotes the latest copper inventory data from the London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE) to mention that the LME copper inventory fell to a new low of 102,000 mt in more than five months on September 16 while SHFE copper inventory fell to a new low in more than eight months.

On the other hand, mainland China reported zero covid cases for the second day in a row and favored the corrective pullback in the metal prices. Further, the People’s Bank of China’s (PBOC) lower USD/CNY fix of 7.0992, versus the market’s expectations of 7.1215 and the 7.1211 previous close, also underpin the metal’s rebound.

On the same line could be the news from Chile, the world's top producer of the metal, suggesting that it announced the permanent closure of copper mining stopes related to a giant sinkhole in the northern part of the country, per Reuters.

Even so, the CME’s FedWatch tool signals the 78% chance for the US central bank’s 75 bps rate hike in November, which in turn weigh on the metal prices, especially amid the recession fears. The increased hawkish bias for the Fed could be linked to Friday’s upbeat US jobs report, as well as the Fed policymakers’ rejection to respect the recession woes while terming the task of cooling inflation as the top priority.

Looking forward, the full markets’ return and updates from China can entertain copper traders, as well as the annual meetings of the International Monetary Fund (IMF) and the World Bank (WB), not to forget updates on Russian President Vladimir Putin’s emergency meeting.  However, major attention will be given to the Federal Open Market Committee (FOMC) Minutes and Thursday’s US Consumer Price Index (CPI). That said, a likely softer print of the US inflation isn’t expected to ward off downside fears for the metal.

• GBP/USD is eyeing more weakness below 1.1050 as DXY has rebounded on the risk-off impulse.
• Firmer US NFP data has strengthened the case of a 75 bps rate hike by the Fed.
• Headline US inflation is seen lower at 8.1% vs. the prior release of 8.3%.

The GBP/USD pair has sensed selling pressure while attempting to cross the round-level hurdle of 1.1100 in the Tokyo session. The cable is eyeing more weakness below 1.1050 as the risk-off impulse is gaining traction.

US markets are closed on Monday and on account of Columbus Day while S&P500 has continued its downside movement. The US dollar index (DXY) has recovered a majority of its losses recorded in early Tokyo and has reclaimed the 112.80 hurdle. It is highly likely that a depressed market mood will drive the DXY to the round-level hurdle of 113.00.

The US NFP-infused optimism will keep the DXY in the grip of bulls for a while. On Friday, the US Bureau of Labor Statistics reported that the economy generated fresh 263k jobs in September, higher than the projections of 250k. Also, the Unemployment Rate scaled down to 3.5%. A firmer US employment data has bolstered the case of a fourth consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed).

This week, the show-stopper event will be the US Consumer Price Index (CPI) data, which is due on Thursday. As per the estimates, the headline inflation will land at 8.1%, lower than the prior release of 8.3%. Thanks to the weaker gasoline prices which are likely responsible for lower consensus for the plain-vanilla inflation rate.

On the UK front, investors' focus has shifted to employment data. The Claimant Count Change is expected to decline by 11.4k vs. an increment of 6.3k. While the ILO Unemployment Rate is seen steady at 3.6%. As price pressures are at elevated levels in the UK economy, therefore, the Average Earnings data will also remain in focus. The economic data excluding bonuses is seen higher by 10 basis points (bps) to 5.3%.

• Gold price prints four-day downtrend while extending pullback from 50-DMA.
• Risk-aversion, increasing odds of Fed’s 75 bps rate hikes keeps XAU/USD sellers hopeful.
• Holiday in the US, Japan and Canada could challenge intraday moves.
• US CPI, FOMC Minutes may fail to stop the bears as firmer yields favor DXY bulls.

Gold price (XAU/USD) remains on the back foot around a one-week low, down for the fourth consecutive day to around $1,690 during early Monday morning in Europe. In doing so, the bullion probes the two-week rebound from the yearly low amid a sluggish day due to the off in the US, Japan and Canada.

Even so, hawkish Fed bets and risk-aversion keeps the XAU/USD bears hopeful. That said, the CME’s FedWatch tool signals the 78% chance for the US central bank’s 75 bps rate hike in November.

Upbeat expectations from the US central bank part ways from the market’s recent expectations of a pause in the rate hike trajectory amid an economic slowdown. The reason could be linked to the firmer US jobs report for September, as well as hawkish Fedspeak.

Furthermore, mixed updates surrounding China and geopolitical fears emanating from Moscow and Beijing also exert downside pressure on the XAU/USD prices. China’s downbeat PMIs for September join fears of escalating Sino-American tussles to drown the gold prices, due to Beijing’s status as one of the key commodity users. However, recently improving covid conditions in the dragon nation joins the People’s Bank of China’s (PBOC) pause in the USD/CNY fix increase to challenging the gold buyers. It should be noted that Russian President Vladimir Putin’s dislike for the Crimean bridge explosion also challenges the sentiment and weigh on the quote.

Amid these plays, the Wall Street benchmarks closed in the red while the S&P 500 Futures dropped for the fourth consecutive day while poking the monthly low near 3,630, down 0.40% intraday at the latest. That said, the US 10- Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90%.

Moving on, annual meetings of the International Monetary Fund (IMF) and the World Bank (WB), as well as updates on Russian President Vladimir Putin’s emergency meeting, on Monday, could entertain gold traders. However, major attention will be given to the Federal Open Market Committee (FOMC) Minutes and Thursday’s US Consumer Price Index (CPI). That said, a likely softer print of the US inflation isn’t expected to ward off downside fears for the metal.

Technical analysis

Gold price extends the previous week’s pullback from the 50-DMA towards the 20-DMA support near $1,680. The RSI retreat also adds strength to the XAU/USD downside.

However, the metal’s downside past $1,680 hinges on its sustained break of the $1,655-50 support zone. Following that, the lower line of a four-month-old bearish channel, around the $1,600 threshold will be in focus.

Alternatively, a clear upside break of the 50-DMA hurdle, around $1,720 by the press time, needs to cross the stated channel’s top-line, close to $1,735 at the latest, to recall the gold buyers.

Overall, the metal prices are likely to remain bearish unless providing a daily closing beyond $1,735.

Gold: Daily chart

Trend: Bearish

• AUD/USD is extending its five-day losing streak as China returns.
• Broad USD recovery and risk-aversion keep sellers alive
• The downside bias remains intact after a bear flag was confirmed last week.

AUD/USD is coming under fresh bearish pressures over the last hour, having failed to sustain the renewed upside, as risk-aversion remains at full steam in Asia.

The US dollar is picking up a fresh bid on a fresh risk-off wave, as investors remain on the edge amidst fresh Russia-Ukraine tensions, China’s services sector contraction and hopes for aggressive Fed rate hikes after Friday’s US Nonfarm Payrolls outpaced estimates.

Markets witnessed a brief reprieve on flat opening on the Chinese stock indices, which helped the aussie to recover ground to near 0.6380. Although the uptick was quickly faded, as Chinese stocks tracked their Asian counterparts lower while the S&P 500 futures lost 0.32% on the day.

Pre-US inflation release anxiety also keeps the dollar bulls supported amid holiday-thinned light trading. The US markets are partially closed on Monday, in observance of Columbus Day.

From a short-term technical perspective, the pair remains exposed to further downside risks after it confirmed a bear flag formation on the daily sticks. The pair closed last Thursday below the rising trendline support, then at 0.6421.

The 14-day Relative Strength Index (RSI) is inching towards the oversold territory, suggesting that there is more room for the downside.

A breach of the 0.6300 support could trigger a sharp sell-off towards 0.6000 – the psychological level. Ahead of that, the 0.6250 figure could come to buyers’ rescue.  

AUD/USD: Daily chart

On the flip side, bulls need to clear the intraday highs of 0.6380 in order to recapture the 0.6400 level.

Further up, the rising trendline support now turned resistance at 0.6445 will be a tough nut to crack for aussie bulls.

AUD/USD: Additional levels to consider

A blast occurred on Saturday on the bridge over the Kerch Strait in Crimea, which is a major supply route for Moscow's forces in southern Ukraine.

In response, Russian President Vladimir Putin accused Ukraine of orchestrating that attack and called it an act of terrorism.

Key quotes

"There is no doubt. This is an act of terrorism aimed at destroying critically important civilian infrastructure,"

"This was devised, carried out and ordered by the Ukrainian special services."

Putin is scheduled to hold a meeting of his security council on Monday.

Meanwhile, Russia’s Security Council Deputy Chairman Dmitry Medvedev said, "Russia can only respond to this crime by directly killing terrorists, as is the custom elsewhere in the world. This is what Russian citizens expect.”

Market reaction

The market’s risk perception remains negative at the start of the week, with Chinese traders returning and digesting the country’s Services sector contraction. Investors also trading with cautioin amid aggressive Fed rate hike bets and pre-US inflation anxiety. The S&P 500 futures are down 0.32% on the day while the US dollar index is losing 0.10% so far, trading at 112.70, as of writing.

• EUR/USD remains directionless at one-week low, retreats from intraday high of late.
• DXY eases amid the US holiday but fears of EU recession, dovish ECB bets challenge the pair buyers.
• US CPI, FOMC Minutes will be crucial for near-term directions but bears are likely to keep the reins.

EUR/USD bears take a breather around mid-0.9700s, following a three-day downtrend, as an extended holiday in the US probes the sellers amid a sluggish Monday. Also likely to have put a floor under the prices could be the cautious mood ahead of this week’s Federal Open Market Committee (FOMC) Minutes and the US Consumer Price Index (CPI) for September.

That said, the US Dollar Index (DXY) struggles around a one-week high after rising for the last three consecutive days. In doing so, the greenback gauge pauses the previous week’s reversal of the 20-year high, marked late in September.

While the US holiday probed the DXY bulls, China’s return and the market’s chatters over the global central banks’ likely pause in the rate hike trajectory, ex-Fed, seemed to have also probed the EUR/USD bears of late.

It’s worth noting that Friday’s US jobs report bolstered the hawkish Fed bets while the Reserve Bank of Australia’s (RBA) lesser-than-forecast rate hike and the European Central Bank’s (ECB) Monetary Policy Meeting accounts challenged the rate hike expectations elsewhere.

The US jobs report for September showed that the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions, as well as weighing on the market’s mood, was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior. Following that, the CME’s FedWatch tool signals the 78% chance for the US central bank’s 75 bps rate hike in November.

On the other hand, the ECB Monetary Policy Meeting Accounts mentioned that some officials preferred a wider rate hike of 50 bps, versus the 75 bps announced. Also likely to have helped the EUR/USD bears could be the downbeat prints of the Eurozone Retail Sales and German statistics, not to forget the fears of economic slowdown in the bloc due to the looming energy crisis. It should be noted that the old continent announced fresh sanctions on Russian oil during the last week and amplified the energy fears whereas the latest explosion on the Crimean bridge adds strength to the geopolitical fears.

Against this backdrop, the S&P 500 Futures dropped for the fourth consecutive day while poking the monthly low near 3,630, down 0.40% intraday at the latest. That said, the US 10- Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90%.

Looking forward, this week’s annual meetings of the International Monetary Fund (IMF) and the World Bank (WB), as well as updates on Russian President Vladimir Putin’s emergency meeting, on Monday, could entertain the pair traders ahead of the US inflation data and the Fed minutes. However, the bears are likely to keep the reins as the US economy has fewer challenges as compared to the oil continent.

Technical analysis

EUR/USD portrays the sixth pullback from the 50-DMA hurdle, around 0.9990 at the latest, which in turn joins the bearish MACD signals to direct sellers towards the yearly low of 0.9535 before highlighting the September 2001 top near 0.6335.

The Kremlin came out with a statement on Sunday, praising OPEC and its allies (OPEC+) for successfully countering America’s opposition to cutting oil production.

Key quotes

“The US is trying to manipulate with its oil reserves. Such a game won't yield any good outcome.”

“The US has begun to lose its cool as a result of OPEC+ decision to reduce oil production.”

“Working within OPEC+ framework levels out the mess US is creating in the global energy market.”

On the other side, US Treasury Secretary Janet Yellen said that the OPEC+ oil production cut was “unhelpful and unwise” for the global economy, particularly emerging markets already struggling with high energy prices, per the Financial Times (FT).

She added that “we’re very worried about developing countries and the problems they face.” Please use the sharing tools found via the share button at the top or side of articles.
“I think we’re going to exchange views on whether our countries are addressing these problems, and try to consider whether our collective reaction adds up to something that is sensible, and the best we can do, in that difficult environment,” Yellen added.

Related reads

• Crude Oil to hit 92.92 - 93.51 key resistance zone [Video]
• WTI crude oil pares OPEC+ inspired gains near $91.50 amid firmer US dollar

Taiwanese President Tsai Ing-Wen said on Monday that “the status quo of peace and stability in the Taiwan Strait has been threatened by China's expansion of its military intimidations, diplomatic pressure, trade restrictions, and attempts to obliterate Taiwan's sovereignty.”

Additional quotes

“We are letting the world know that Taiwan will be responsible for providing for its own self-defense.”

“There is no place for compromise on the need to protect our national sovereignty and our free and democratic way of life.”

“I want China to understand that engaging in armed conflict is not in anyway an option for our two sides.”

“We anticipate the gradual return of beneficial and regulated cross-strait interpersonal interactions, which will reduce tensions in the Taiwan Strait.”

Market reaction

Risk sentiment remains undeterred by these above headlines, as the S&P 500 futures recover losses during the mid-Asian session.

• USD/CHF jostles with an eight-day-old horizontal hurdle, probes three-day uptrend.
• Nearly overbought RSI, holidays in the key markets challenge upside momentum.
• Weekly support line, 200-SMA add to the downside filters.
• Bulls can aim for monthly ascending trend line on successful break of 0.9950.

USD/CHF struggles to extend the three-day uptrend around 0.9950 during Monday’s sluggish Asian session. That said, the Swiss currency (CHF) pair’s latest inaction could be linked to the inability to cross an important upside hurdle amid holidays in the US, Japan and Canada.

However, the pair’s sustained trading beyond the 200-SMA, as well as the bullish MACD signals, keep the USD/CHF pair buyers hopeful of overcoming the 0.9950-55 horizontal hurdle.

Even so, the nearly overbought RSI conditions and the recent swing high near 0.9965 could challenge the bulls before directing them to an upward-sloping resistance line from early September, close to 1.0035 by the press time.

It’s worth noting that the tops marked during June and May, close to 1.0050 and 1.0065 in that order, could also probe the USD/CHF pair’s upside momentum.

Alternatively, pullback moves may aim for the one-week-old support line, near the 0.9800 threshold, but the 200-SMA level surrounding 0.9750 could restrict the quote’s further downside.

If the USD/CHF bears conquer the 0.9750 SMA support, the odds of witnessing an extended fall toward September’s low near 0.9480 can’t be ruled out.

USD/CHF: Four-hour chart

Trend: Bullish

• Gold bears are chipping away at the downside and eye a break of last week's lows. 
• The US dollar remains in the hands of the bulls at the start of the week. 
• US CPI will be a critical event for the gold price. 

The price of gold has been under pressure at the start of the week due to a robust US dollar in the open, edging to fresh highs vs. its counterparts, with a strong US labour market reinforcing bets on higher interest rates as traders braced for data expected to show stubbornly high inflation. At the time of writing, the gold price has scored a low of $1,691.89 on the day so far, losing a high of $1,699.91.

Nonfarm payrolls climbed 263,000, above the consensus estimate for an addition of 250,000 jobs. The service sector added 244,000 jobs, driven by gains in education and health services and leisure and hospitality.  The Unemployment Rate fell to 3.5% in September from 3.7% in August, compared with calls for the rate to remain unchanged. The labour force participation rate slipped 0.1 percentage point to 62.3%.

 This goes against their battle to restore demand-supply-side balance in the labour market in the face of inflation, meaning that strong rate hikes are a given for the foreseeable future and this is a headwind for gold prices vs. a flattening curve. This will make for another critical week for the days ahead with plenty of US calendar events, including the minutes f the prior Fed meeting, US inflation data and Retail Sales.

Gold weighed by risk-off

Futures pricing suggests traders see a nearly 90% chance of a 75 basis point rate hike in the United States next month and more than 150 bps of tightening by May. As a result, US stocks dropped on Friday. The Dow Jones Industrial Average collapsed by more than 600 points, sliding 2.11%, while the S&P 500 lost 2.8% and the Nasdaq Composite IXIC lopped off 3.8% in value as investors bet that the Fed's inflation fight will continue apace. The MSCI world equity index,  which tracks shares in 45 nations, was down 2.45%. 

In some respects, this is a positive for gold in that investors will seek out the yellow metal for its safe haven status, although despite ongoing geopolitical tension, given that inflation's rising persistence suggests the Fed is unlikely to stop hiking preemptively, the bears continue to run on that instead. 

 ''A prolonged period of restrictive rates suggests traders should ignore gold's siren calls, as a sustained downtrend will likely prevail, while quantitative tightening continues to drive real rates higher,'' analysts at TD Securities argued. ''Indeed, a constant flow of hawkish Fedspeak has seen the upside momentum in gold ease in recent days. And, with an important jobs report this morning and inflation data next week, there are plenty of catalysts which could see the focus shift back toward hawkish interest rate policy.''

China risk supports USD

Meanwhile, Chinese markets reopen after a week-long holiday. The Communist Party's 20th National Congress opens on Sunday and is expected to reaffirm Xi Jinping's leadership. A stubbornly weak yuan environment is an additional bullish factor for the US dollar while China's economy struggles under the weight of ongoing COVID outbreaks and lockdowns.

We saw more evidence of that in the weekend's Caixin Services Purchasing Managers' Index (PMI) for September 2022 which came in lower at 49.3 from 55.0 in August, taking it back into contraction. We have also seen China official services PMI miss the mark at 50.6 (expected 52.0, prior 52.6) and China Caixin / Markit Manufacturing PMI for September was disappointing at 48.1 (expected 49.5, prior 49.5). This all should fall into the hands of the greenback, especially with the number of geopolitical risks thrown into the mix. 

North Korea is rearing its ugly head again with news on the weekend that it had been conducting nuclear operation training, as per Reuters reporting that has cited North Korea's KCNA news agency reporting this on Monday. The nation fired two ballistic missiles early on Sunday, authorities in neighbouring countries said, the seventh such launch by Pyongyang in recent days that added to widespread alarm in Washington and its allies in Tokyo and Seoul.

On the flip side, ''USD upside will be harder to achieve at this point in large part because the MOF/BOJ seem intent on squashing USDJPY vol,'' analysts at TD Securities argued. ''So far, that has been successful. Currently, they sit on about $1tn of reserves, so they have some ammo to engage in this operation. We think a move above 145 risks yen intervention again and that could introduce some USD drag into the complex, albeit temporarily. 140/145 is fair for USDJPY at this time.''

For the week ahead, the US inflation data will be a key event. The US Consumer Price Index likely stayed strong in September, with the series registering another large 0.5% MoM gain, analysts at TD Securities argued. ''Shelter inflation likely remained strong, though we look for used vehicle prices to retreat sharply. Importantly, gas prices likely brought additional relief for the headline series again, declining by about 5% MoM. Our MoM forecasts imply 8.2%/6.6% YoY for total/core prices.''

Gold technical analysis

The gold price is on the verge of a significant breakout below $1,690 and the bulls will need to show up in the day ahead or face strong opposition and breakout traders moving in with eyes on $1,675.

However, as per the 15-min chart, the bulls could push the price up through the trendline resistance for the last attempt at the bear's commitments at $1,700. While the peak formations are up, there will be liquidity above the highs as well.

• USD/CNH snaps three-day uptrend amid a sluggish start to the key week.
• China returns to the market after a one-week holiday but US enjoys Columbus Day off.
• Risk-aversion, hawkish Fed bets underpin US dollar ahead of FOMC Minutes, US CPI.
• China’s Caixin Services PMI marked the first contraction since May but PBOC moves probe the pair buyers.

USD/CNH takes offers to renew the intraday low near 7.1180 as markets in Beijing open after a week-long holiday period on Monday. In doing so, the offshore Chinese yuan (CNH) pair prints the first daily loss while consolidating the recent upside momentum amid the off in the US, Japan and Canada.

In addition to the market’s paring of recent moves during the sluggish start, upbeat news from China also contributed to the USD/CNH pair’s pullback.

That said, mainland China reported zero covid cases for the second day in a row. Further, the People’s Bank of China’s (PBOC) lower USD/CNY fix of 7.0992, versus the market’s expectations of 7.1215 and the 7.1211 previous close, also exerts downside pressure on the USD/CNH prices.

Alternatively, China’s Caixin Services PMI for September dropped to 49.3 from 55.0 prior, marking the first contraction since May, during the weekend.

On the same line is the market’s rush for risk safety amid the hawkish Fed bets and the fears of recession. That said, the CME’s FedWatch tool signals the 78% chance for the US central bank’s 75 bps rate hike in November.

The hawkish Fed bets got a boost on Friday after that the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior.

It should be noted, however, that the market chatters about the recession woes could probe the hawkish central banks seem to challenge the USD/CNH bulls of late.

Amid these plays, the S&P 500 Futures dropped for the fourth consecutive day while poking the monthly low near 3,630, down 0.40% intraday at the latest. That said, the US 10- Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90%.

Looking forward, Consumer Price Index (CPI) data from the US and China, up for publishing on Thursday and Friday respectively, will be crucial for the USD/CNH pair traders to watch for clear directions. However, the bulls are likely to keep reins as the Federal Open Market Committee (FOMC) Minutes may unveil the hawkish hopes of the policymakers.

Technical analysis

Unless breaking a two-month-old ascending support line, at 7.0650 by the press time, USD/CNH bulls remain hopeful.

• EUR/JPY has advanced to near 141.80 as geopolitical tensions have escalated.
• Till now, North Korea has fired seven ballistic missiles near Japan Pyongyang.
• European consumers see inflation at 5% in the next 12 months.

 The EUR/JPY pair rebounded from below 141.50 in the early Tokyo session and now has extended gains to near 141.70. The cross is picking significant bids amid escalating geopolitical tensions between Japan and North Korea. Broadly, the asset witnessed a steep fall after dropping below the cushion of 142.50 last week.

The risk sentiment is turning positive a bit but caution is still intact. The continuous firing of ballistic missiles by North Korea around the Japan region without prior notice of training or equipment testing has already termed the military action as an issue of breaching the harmony of Japan.

On Sunday, North Korea fired two ballistic missiles, making it a total of seven, launched around Pyongyang. The military event by North Korea forced Japan, South Korea, and the US to conduct their own military drills in response to military activities from the Kim Yong-un region.

Meanwhile, the statement from North Korean leading Kim stated that their administration need not have a dialogue with the economy and the former will continue to strengthen its nuclear operations ahead, as reported by Reuters.

On the Eurozone front, the latest study published by the European Central Bank (ECB) on Friday said, “surging consumer demand across the eurozone is playing an increasing role in excessive inflation.” However, European consumers see inflation in the next 12 months at 5%.

Apart from that, subdued German Retail Sales data still grips a hangover on the trading bloc. The annual Retail Sales declined by 4.3% but remained better than the expectations of a decline of 5.1%. While the monthly catalyst declined by 1.3% than the projections of a drop by 1%.

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.0992 vs last close 7.1211.

About the fix

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

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

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

• USD/CAD holds onto Friday’s downbeat performance inside a bearish chart pattern.
• Bullish MACD signals, sustained trading beyond the key SMAs keeps buyers hopeful.
• Sellers need validation from monthly low to retake control.

USD/CAD prints mild losses around 1.3730, keeping Friday’s downbeat performance intact amid Monday’s sluggish Asian session. In doing so, the Loonie pair seesaws around the resistance line of a three-day-old ascending triangle formation.

Even so, the bullish MACD signals and the pair’s successful trading beyond the key moving averages keep the USD/CAD buyers hopeful.

That said, the 50-SMA adds strength to the triangle’s support line surrounding 1.3680, a break of which will confirm the bearish chart pattern.

However, the 100-SMA and the latest swing low, respectively around 1.3570 and 1.3500, could challenge the USD/CAD bears before giving them control.

Following that, the downside move won’t hesitate to aim for the 61.8% Fibonacci retracement of the pair’s September 13-30 upside, around 1.3290.

Meanwhile, a clear upside break of the 1.3760 hurdle will defy the bearish triangle and propel the USD/CAD prices toward the monthly high surrounding 1.3840.

Should the pair buyers cross the 1.3840 resistance, the 61.8% Fibonacci Expansion (FE) of September 14 to October 04 moves, around 1.3930, will be in focus.

USD/CAD: Four-hour chart

Trend: Further upside expected

• AUD/USD has sensed buying interest below 0.6350, however, the downside looks likely.
• The upbeat US NFP has strengthened the odds of a 75 bps rate hike by the Fed.
• Due to weaker gasoline prices, the headline US CPI may decline to 8.1%.

The AUD/USD pair has rebounded after slipping below the immediate support of 0.6350 in the Asian session. The outlook of the asset doesn’t seem bullish as the market mood is still in a bad shape. Friday’s upbeat US Nonfarm Payrolls (NFP) data extended the US dollar index (DXY)’s recovery and sent the S&P500 into the grip of beats.

In Tokyo, the DXY has crossed the previous week’s high at around 112.88 and is looking to add more gains amid soaring hawkish Federal Reserve (Fed) policy bets. On Friday, the US NFP released at 263k vs. the expectations of 250k. This has bolstered the odds of a fourth consecutive 75 basis point (bps) interest rate hike. Firmer economic fundamentals and a tight labor market are always crucial for the central bank to announce rate hikes unhesitatingly.

Escalating odds of a 75 bps rate hike have strengthened yields. The 10-year US Treasury yields reached 3.9% and displayed a four-day winning streak.

Going forward, investors will focus on the US Consumer Price Index (CPI) data, which will release on Thursday. As per the preliminary estimates, the headline inflation will drag to 8.1% vs. the prior release of 8.5%. While the core CPI that excluded food and energy prices will improve to 6.5% vs. the prior release of 6.3%. It looks like accelerating interest rates by the Fed are not impacting much, however, weaker US gasoline prices have started impacting the headline price pressures.

Meanwhile, the aussie bulls are awaiting Consumer Inflation Expectations data, which will release later this week. The economic data is seen higher at 5.8% vs. the prior release of 5.4%. This may force the Reserve Bank of Australia (RBA). RBA Governor Philip Lowe escalated its Official Cash Rate (OCR) by 25 bps to 2.6% and is aiming to push it to the targeted figure of 3.8%.

• NZD bulls eye a run to test 0.5640/50 territories for the day ahead.
• First, the bulls need to clear 0.5625 or face resistance from the bears ahead of this week's key US data and FOMC minutes.

NZD/USD is correcting from a 30-month low at the start of the week, trading higher by some 0.2% at the time of writing in holiday thin market conditions. NZD/USD has travelled from a low of 0.5592 to a high of 0.5616 so far. 

The mixed US data in the Nonfarm Payrolls was overall bullish for the greenback and US yields and a thorn in the side for the Federal Reserve as it battles with inflation headwinds aheaf of this week's US Consumer Price Index data and US Retail Sales. The bird was lower on the release of the data and moved in on a test below 0.5600. However, it has popped higher at the start of the week to tackle resistance up ahead as the charts below illustrate.

Meanwhile, trader will also be keen to see the minutes from the prior Fed meeting. ''The September dot plot revealed a higher-than-expected Fed Funds terminal rate of 4.625%, with a fairly even dot distribution around this level,'' analysts at TD Securities said. ''The question is how much of this was reflected in the deliberations at the Sep meeting. The tone of these deliberations likely was more hawkish given core CPI inflation trends, upsetting the current dovish pivot markets narrative.''

''Friday night saw the Kiwi drift back down towards 0.56 as market expectations for Fed hikes rose, giving the USD a boost,'' analysts at ANZ Bank explained in a note at the start of Monday.

''We say mixed because while the data beat expectations and the Unemployment Rate fell, the pace of jobs creation fell and monthly earnings growth came in as expected. The USD DXY is now around 2½% higher than it was late last Tuesday, and all eyes are now on US CPI data later this week.''

''Local factors are simply not featuring, and anecdotally, NZ’s current account deficit is attracting more unwanted attention. In a world where US interest rates are leading the way higher, the NZD needs positive rather than negative attention, and that seems to be lacking at present.''

NZD/USD techncial analysis

The price is attempting to slide out of the resistance of the dynamic bearish trendline that was formed on the back of the NFP data on Friday. A break there opens the risk of a correction into 0.5640/50 territories for the day ahead. First, the bulls need to clear 0.5625 to put a firm grip on the baton:

• Market sentiment remains sour amid fears of Fed’s aggression despite economic slowdown.
• S&P 500 Futures trace Wall Street’s losses, off in Japan, the US restrict bond market moves.
• Fed Minutes, US CPI will be crucial for near-term directions as risk-off mood prevails.

Risk profile remains weak during early Monday despite the holidays in the US, Japan and Canada. The sour sentiment could be linked to the recently firmer expectations of the Fed’s 75 bps rate hike and geopolitical woes surrounding Russia. Also keeping the bears hopeful are the fears of economic slowdown and cautious mood ahead of this week’s key US inflation data and the Fed minutes.

While portraying the mood, the S&P 500 Futures dropped for the fourth consecutive day while poking the monthly low near 3,630, down 0.60% intraday at the latest. That said, the US 10- Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90%.

Friday’s jobs report for September showed that the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions, as well as weighing on the market’s mood, was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior.

Considering the firmer US data and hawkish Fedspeak, the market expectations of witnessing a 0.75% rate hike in the next Federal Open Market Committee (FOMC) became stronger of late despite growing fears of economic slowdown.

Recently, the escalation in the Russia-Ukraine tussles, following an explosion that destroyed a part of the bridge in Crimea which is crucial for Russia's war supplies, also contributed to the market’s sour sentiment. On the same line could be China’s downbeat PMIs. During the weekend, China’s Caixin Services PMI for September dropped to 49.3 from 55.0 prior. With this, the private activity gauge marked the first contraction since May.

Amid these plays, the US Dollar Index (DXY) remains mildly bid near 112.80 during the four-day uptrend that reverses the previous pullback from the 20-year high. The same weigh on the prices of commodities but the holidays in the key markets challenge the momentum traders.

Moving on, Wednesday’s Federal Open Market Committee (FOMC) Minutes and Thursday’s US Consumer Price Index (CPI) will be crucial for short-term directions.

Also read: Gold Weekly Forecast: XAU/USD remains sensitive to US yields as focus shifts to CPI

• GBP/USD remains pressured around one-week low, down for the fourth consecutive day.
• Bullish chart formation, nearly oversold RSI (14) challenge bears.
• Buyers need sustained break of 200-SMA to keep the reins.

GBP/USD bears take a breather around 1.1070 during Monday’s Asian session, probing the three-day downtrend inside an immediate falling wedge bullish chart formation.

It should be noted, however, that the bearish MACD signal and the quote’s successful break of the previous day's support line from September 26, as well as a clear U-turn from the 200-SMA, keeps the sellers hopeful.

Even so, the downside break of a three-day-old falling wedge’s lower line, around 1.1020, becomes necessary for the bears to keep reins.

Following that, a downward trajectory towards 1.0800 and the previous monthly low near 1.0340 will lure the GBP/USD bears.

On the contrary, a clear upside break of the stated wedge’s upper line, close to 1.1130, will confirm the bullish chart formation and propel the GBP/USD prices towards the previous monthly peak near 1.1740.

In a case where the Cable pair rises past 1.1740, July’s low near 1.1760 and late August swing high around 1.1900 could challenge the pair buyers before giving them control.

Overall, GBP/USD is likely to remain pressured but the downside room appears limited.

GBP/USD: Four-hour chart

Trend: Limited downside expected

• EUR/USD bears eye a run to test 0.9700 territory.
• The euro remains under pressure as the US dollar picks up an early bid. 

The US dollar remains in favour of the bulls at the start of the week as the following hourly DXY chart illustrates:

The price of EUR/USD will all depend on the outcome of the US Consumer Price Index for the main event of this week. For the time being, the euro might find some relief but it needs to break up out of the trendline resistance that has formed on the back of Nonfarm Payrolls Friday.

EUR/USD H1 chart

The Support of the late September business is playing its role, so far. However, any pullbacks above the dynamics resistance could come into resistance below the NFP highs which could result in the High of the Week (HoW) as illustrated on the chart above. A downside continuation, thereafter, could be on the cards as per the following daily chart:

EUR/USD daily chart

The daily chart shows the price descending in the bearish channel without any signs of deceleration. The M-formation is however a reversion pattern and the neckline, at some stage, would be expected to come back under pressure to the upside neat 0.9800. However, it would appear that 0.9700 is at the front of the queue in that regard. 

• USD/JPY prints four-day uptrend as buyers attack the multi-year high marked in September.
• US 10-year Treasury yields rose for the eighth consecutive week on firmer US jobs report, hawkish Fed bets.
• BOJ intervention, challenges for hawkish central banks fail to tame the bulls.
• US CPI, FOMC Minutes will be crucial to determine further upside of the yen pair.

USD/JPY remains on the front foot around 145.50, poking the 24-year high marked in late September during Monday’s Asian session. The yen pair’s latest gains could be linked to the US dollar’s broad upside even as the holiday in Japan and the US challenge the momentum traders.

That said, the US Dollar Index (DXY) rose during the last three days while reversing the previous weekly pullback from the 20-year high as markets priced in the 75 basis points (bps) of a rate hike from the Fed. Behind the hawkish Fed bets could be the firmer US jobs report and upbeat comments from the policymakers that suggest further rate increases before the pause.

The DXY cheered Friday’s jobs report for September as the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also adding strength to the greenback gauge was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior.

Other than the hawkish Fed bets, fears of recession and the escalating geopolitical tussles between Russia and Ukraine also propel the market US Treasury yields, as well as the USD/JPY prices. It’s worth noting that the US 10-year Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90% at the latest. The firmer yields weighed on Wall Street and recently on the S&P 500 Futures.

It should be noted that the Bank of Japan’s (BOJ) frequent bond-buying fails to challenge the USD/JPY sellers as the Japanese central bank continues to defend the easy money policy, contrary to the hawkish Fedspeak.

Moving on, today’s holiday in the US and Japan could offer limited momentum to the USD/JPY buyers but the upside moves are likely to prevail amid the market’s rush toward risk safety. Even so, Wednesday’s Federal Open Market Committee (FOMC) Minutes and Thursday’s US Consumer Price Index (CPI) will be crucial for short-term directions.

Technical analysis

A two-week-old ascending trend line joins the recent multi-year top to highlight the 145.90-95 as the key hurdle for the USD/JPY bulls to watch.

• GBP/JPY has surrendered the 161.00 cushion amid the risk-off market mood.
• Pound bulls will respond relatively better after the release of the UK employment data.
• The Japanese yen is holding itself despite rising geopolitical tensions.

The GBP/JPY pair is oscillating below the round-level cushion of 161.00 in the early Tokyo session as the risk-averse market mood has brought a sell-off for the risk-sensitive assets. The cross has witnessed a steep fall after failing to sustain above the 162.00 hurdle and is expected to continue to remain on the edge ahead of the US employment data.

As per the consensus, the UK Office for National Statistics will report the Claimant Count Change data with a decline of 11.4k vs. the prior addition of a 6.3k. While the Unemployment Rate will land unchanged at 3.6%. The catalyst which will be worth scrutiny is the Average Earnings data, which is seen higher at 5.3% vs. the prior release of 5.2%.

Price pressures in the UK economy have not witnessed a peak yet due to the unavailability of exhaustion signals. And, in order to offset the impact of higher payouts due to inflation-adjusted necessities and durable goods, households need higher paychecks. Stagnant growth in the labor cost data is a reason for worry for the Bank of England policymakers.

On Friday, Deputy Governor Dave Ramsden warned that UK's energy support package represents a very significant fiscal intervention, which can be thought of as a shock, as reported by Reuters.

Meanwhile, yen bulls are performing relatively better despite the escalating geopolitical tensions between Japan and North Korea. The statement from North Korean leader Kim stated that their administration need not have a dialogue with the enemy and the former will continue to strengthen its nuclear operations ahead. In response to North Korean military activities, Japan, South Korea, and the US have performed military drills.

• USD/CHF grinds higher at eight-day top amid sluggish session.
• Firmer US data, hawkish Fedspeak propel DXY ahead of Fed Minutes, US CPI.
• Escalating geopolitical, recession fears also underpin US dollar’s safe-haven demand.
• Buyers need confirmation of 75 bps rate hike from FOMC Minutes to keep the reins.

USD/CHF seesaws near 0.9950 during Monday’s inactive Asian session, after a three-day uptrend. That said, the holidays in the US, Japan and Canada restrict the pair’s immediate moves. However, fears of recession and aggressive Fed rate hikes keep the buyers hopeful around one-week high.

The US dollar’s strength is the key force behind the pair’s recent up-moves. That said, the US Dollar Index (DXY) rose during the last three days while reversing the previous weekly pullback from the 20-year high as markets priced in the 75 basis points (bps) of a rate hike from the Fed. Behind the hawkish Fed bets could be the firmer US jobs report and upbeat comments from the policymakers that suggest further rate increases before the pause.

The DXY cheered Friday’s jobs report for September as the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also adding strength to the greenback gauge was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior.

Elsewhere, the recent escalation in the Russia-Ukraine tussles, following an explosion that destroyed a part of the bridge in Crimea which is crucial for Russia's war supplies, also propelled the market’s rush to risk safety and favored the US dollar.

On the contrary, concerns that the recession woes could probe the global central banks from hiking the rates at a faster pace challenge the USD/CHF bulls. On the same line could be the cautious sentiment ahead of this week’s Federal Open Market Committee (FOMC) Minutes, US Consumer Price Index (CPI) and a speech from the Swiss National Bank (SNB) Chairman Thomas Jordan.

Given the hawkish concerns from the Fed and the risk aversion wave, the USD/CHF prices are likely to remain firmer. However, upbeat comments from SNB’s Jordan could trigger the pair’s pullback.

Technical analysis

The higher low and higher high formation join upbeat RSI (14) and bullish MACD signals to suggest a clear upside break of the 0.9965 key hurdle that holds the gate for the USD/CHF pair’s further advances.

• WTI keeps Friday’s pullback from six-week high, dribbles around intraday low of late.
• US criticism of OPEC+ move joins downbeat China data, hawkish Fed bets to probe oil bulls.
• Escalating geopolitical tensions and challenges for rate hikes from the global central banks favor bulls.
• IMF, World Bank meetings could entertain oil traders, US inflation, Fed minutes will be crucial to justify the latest pullback.

WTI crude oil holds lower ground near $91.50 as risk-aversion joins the hawkish Fed bets to propel the US dollar. However, a holiday in the US, Canada and Japan restricts the black gold’s immediate moves during Monday’s Asian session.

Other than the extended weekend in the major markets, downbeat PMI data from China and the criticism of the latest move of the Organization of the Petroleum Exporting Countries and allies including Russia, known collectively as OPEC+, also probe the oil buyers.

US Treasury Secretary Janet Yellen said, per the Financial Times (FT), the move by Opec+ to cut oil production was “unhelpful and unwise” for the global economy, particularly emerging markets already struggling with high energy prices.

During the weekend, China’s Caixin Services PMI for September dropped to 49.3 from 55.0 prior. With this, the private activity gauge marked the first contraction since May.

Furthermore, Friday’s strong US jobs report propelled the odds of the 75 basis points (bps) rate hike from the Fed, which in turn weighed on the oil prices. The latest US jobs report for September showed that the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior.

Even so, the recent explosion on the Crimea bridge and the European sanctions on Russia’s oil exports keep the commodity buyers hopeful.

Moving on, this week’s annual meetings of the World Bank (WB) and the International Monetary Fund (IMF) in Washington will be crucial as the global financial leaders will discuss geopolitical tensions and inflation pressure, as well as central bank moves. Also important will be Wednesday’s Federal Open Market Committee (FOMC) Minutes and Thursday’s US Consumer Price Index (CPI).

It should be noted that WTI crude oil prices are near the short-term key resistances amid supply crunch fears and hence any positive news could easily propel the quote.

Technical analysis

100-day EMA and a three-month-old resistance line, respectively around $92.20 and $92.70, challenge the WTI crude oil buyers. That said, the RSI retreat hints at a short-term pullback toward revisiting the $90.00 threshold.

• The greenback bulls are on the verge of delivering a break of the Inverted Flag.
• A defend of a bull cross by the 20-and 50-EMAs has added to the downside filters.
• The RSI (14) has shifted into the bearish range of 20.00-40.00, signals more weakness ahead.

The NZD/USD pair has stepped below the critical support of 0.5600 in the early Asian session as soaring risk-off bets have forced the market participants to ditch the risk-perceived assets. The asset has delivered a downside break of the minor consolidation in a 0.5597-0.5611 range and is expected to remain in the tenterhooks ahead.

The comments from North Korean leader Kim Jong-un, reported by KCNA news agency, that he doesn’t need to have a dialogue with the enemy and will continue to strengthen its nuclear operations ahead have escalated geopolitical tensions.

On an hourly scale, the asset is on the verge of a break of the inverted flag chart pattern. The continuation pattern delivers a downside wave after a breakdown of the mark-up inventory distribution phase.

It is worth noting that the 20-and 50-period Exponential Moving Averages (EMAs) have defended the occurrence of a bullish cross at around 0.5729, which indicates the strength of the greenback bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which signals that the downside momentum has been activated.

The kiwi bulls could display more weakness if the asset drops below September’s low at 0.5565. An occurrence of the same will drag the asset toward the psychological support and March 2020 low at 0.5500 and 0.5469 respectively.

On the flip side, a decisive break above September 29 high at 0.5752 will send the asset toward the round-level resistance at 0.5800, followed by September 22 high at 0.5888.

NZD/USD hourly chart

• AUD/JPY holds lower ground at weekly bottom, stays pressured for the fifth consecutive week.
• A clear U-turn from 50-DMA, downside break of the five-month-old support line keeps sellers hopeful.
• 200-DMA, August month’s low lure bears unless the quote remains below 94.70.

AUD/JPY remains on the back foot at the eight-day low, near 92.35 amid Monday’s Asian session, as sellers keep reins during the fifth consecutive week.

In doing so, the bears cheer the previous week’s pullback from the 50-DMA, as well as a clear downside break of the upward-sloping trend line from May, amid bearish MACD signals and the RSI.

With this, the bears are all set to poke the previous monthly low surrounding 92.10 before challenging July’s bottom near 91.40.

However, the 200-DMA and the lows marked in August, respectively near 90.70 and 90.50 in that order, could challenge the AUD/JPY bears afterward.

In a case where the pair sellers break the 90.50 support, the 90.00 psychological magnet may test the further downside.

Alternatively, the support-turned-resistance line, around 93.25, guards the AUD/JPY pair’s immediate recovery moves ahead of the 50-DMA level of 94.70.

Following that, late September’s swing high near 96.55 and June’s peak of 96.88 may probe the bulls before directing them to the recently flashed multi-month top of 98.60.

AUD/JPY: Daily chart

Trend: Further downside expected