• USD/CHF is expected to witness more losses below 0.9920 as momentum loss kicks in.

• A steep rise in core CPI data already indicated a subdued demand for US Durable Goods.

• This week, the release of the ZEW Survey- Expectations will be of utmost importance.

The USD/CHF pair has slipped to near 0.9928 after failing to sustain above the critical hurdle of 0.9950 in the late New York session. The asset is auctioning in a minor inventory adjustment process and is expected to extend its correction further, however, the upside remains favored amid broader strength in the US dollar index (DXY).

On Monday, the asset witnessed a juggernaut rally after delivering an upside break of the consolidation formed in a tad wider range of 0.9757-0.9850. Investors shielded themselves behind the safe-haven asset as the risk profile turned vulnerable. Russia-linked negative sentiment has renewed fears of terrorism and chances of a nuclear attack.

Going forward, the DXY will dance to the tunes of the US Durable Goods Orders data. Considering the market consensus, the economic data will decline by 1.1% vs. The prior decline of 0.1%. Soaring prices for durable products have trimmed advance orders for the economic data.

One could understand from the fact that the core Consumer Price Index (CPI) remained upbeat for August. The core inflation rate reading was 6.3%, higher than the estimates of 6.1% and the prior release of 5.9%. Therefore, higher prices for durable goods have postponed their purchases.

Also, escalating interest rates from the Federal Reserve (Fed) are resulting in higher credit obligations to households, which have also forced them to ditch current purchases for durable goods.

Meanwhile, the Swiss franc investors are awaiting the release of the ZEW Survey- Expectations, which indicates the business conditions, employment conditions, and day-to-day business activities. The sentiment data is expected to improve to -48.5 vs. The prior release of -56.3. An occurrence of the same will support the Swiss franc.

• GBP/USD resumes downside towards the all-time low after a corrective bounce.
• BOE refrains from early intervention, UK government rules out scope for canceling mini-budget.
• Pessimism in the UK contrasts with the hawkish Fedspeak, firmer yields to favor US dollar.
• Bears can keep reins and can dig deeper, US Durable Goods Orders, CB Consumer Confidence eyed.

GBP/USD fades bounce off the all-time low marked on Monday, easing to 1.0670 during the early Asian session on Tuesday, as pessimism surrounding the UK remains intact. Also exerting downside pressure on the Cable pair is the hawkish Fedspeak ahead of the week’s key US data.

Be it the newly formed British government or the Bank of England (BOE), both disappointed the GBP/USD traders the previous day by turning down the hopes of meddling to defend the British Pound (GBP).

When asked whether the government is planning to change the measures set out in the mini-budget, British Prime Minister Lis Truss' spokesman responded by simply saying "no," as reported by Reuters. The diplomat also mentioned that it is important that BOE independence remains while adding that we don’t comment on interest rates.

On the other hand, the BOE stated that they are monitoring developments in financial markets very closely in light of the significant repricing of the financial assets. The BoE further noted that they welcome the government’s commitment to sustainable economic growth and the role of the Office for Budget Responsibility.

Elsewhere, The UK Times stated that Labour has surged to its largest poll lead over the Conservatives in more than two decades, with voters turning against (UK Chancellor) Kwasi Kwarteng’s tax-cutting budget. A YouGov poll for The Times today puts Labour 17 points clear of the Tories — a level of support not seen since Tony Blair won his landslide victory in 2001.

On the other hand, Chicago Fed National Activity Index weakened to 0.0 in August versus 0.09 market expectations and an upwardly revised prior reading of 0.29. Even so, Boston Fed President Susan Collins said, per Reuters, “Getting inflation down will require slower employment growth, somewhat higher unemployment rate”. Following that, Cleveland Fed President Loretta Mester said on Monday that if there is an error to be made, better that the Fed do too much than to do too little.

Amid these plays, the yields rally as the traders sought premium to hold riskier assets while the equities dropped, which in turn helped the US dollar to remain firmer.

Moving on, headlines from the UK will be crucial for the short-term direction of the GBP/USD pair. However, major attention could be given to the US CB Consumer Confidence for September and Durable Goods Orders for August will be crucial to watch for intraday guidance. That said, the bears are likely to keep the reins and may dominate further if the scheduled US data offers a positive surprise.

Also read: US Consumer Confidence Preview: Near-term relief or more risk aversion?

Technical analysis

Unless crossing a previous support line from May, around 1.1270-80 by the press time, GBP/USD remains vulnerable to dropping towards the record low.

• On Monday, the NZD/USD plunged to levels last seen on March 2020.
• Risk aversion is the game’s name, due to increased recession jitters, alongside UK’s tax cuts, adding to inflationary pressures.
• NZD/USD traders eye Durable Good Orders, New Home Sales, Consumer Confidence, and Fed Chief Jerome Powell.

On Monday, the NZD/USD plunged more than 1% or 107 pips, as risk aversion hit the markets, with global equities trading in the red, amidst growing concerns of a worldwide recession, following a week of 500 bps of tightening by central banks. Additionally, tax cuts in the UK added to the country’s inflationary pressures, despite the ongoing tightening cycle by the Bank of England (BoE). As the Asian Pacific session begins, the NZD/USD is trading at 0.5635, slightly down by 0.01%.

NZD/USD fell towards the 0.5420s on risk-off impulse

The lack of economic data kept investors leaning towards market sentiment and US dollar dynamics. Last week’s 75 bps by the Fed, and expectations of the Federal funds rate (FFR) to finish at around 4-4.4% levels, augmented appetite for the safe-haven US dollar. Consequently, US Treasury bond yields rose, with the short-end of the curve, namely 2s and 5s, breaching the 4% threshold, while the US 10-year T-bond yield climbed towards 3.93%.

In the meantime, the US Dollar Index refreshed two-decade highs at around 114.53, a headwind for the NZD/USD, which began trading on Monday at 0.5740 and reached a daily high of 0.5754 before plummeting toward the daily low at 0.5625.

Elsewhere, Fed officials crossed newswires on Monday. The Boston Fed President Susan Collins expressed that further tightening is needed to temper inflation and emphasized that the unemployment rate should rise to achieve the Fed goal. Echoing her comments was Cleveland’s Fed President Loretta Mester, alongside Atlanta’s Fed President Raphael Bostic

What to watch

On Tuesday, the US economic docket will feature Durable Goods Orders, Consumer Confidence, New Home Sales, and further Fed speaking, led by Chair Jerome Powell.

The New Zealand calendar is empty, leaving traders adrift to US dollar dynamics.

NZD/USD Key Technical Levels

• AUD/USD pauses two-day downtrend at 28-month low, paring losses of late.
• Risk-off mood joined firmer yields to weigh on the pair.
• Panic selling of the GBPUSD, calls for central bank intervention contributed to the sour sentiment.
• Bears are likely to keep reins amid light calendar, corrective bounce can’t be ruled out.

AUD/USD justified its risk-barometer status as markets panicked on Monday before traders lick their wounds near 0.6460 during Tuesday’s early Asian session. The quote’s latest weakness could be linked to the broad pessimism amid the GBP/USD pair’s plunge that raised concerns over multiple central bank interventions.

GBP/USD slumped to an all-time low on Monday amid the market’s scathing rejection to the new tax-cut measures, fearing more burden on the monetary policymakers and fiscal budget. The same triggered speculations that the Bank of England (BOE) needs to intervene to defend the domestic currency, allowing the cable to pare some losses. However, the British central bank refrained from any immediate moves and renewed the selling of the Cable.

At home, the People’s Bank of China’s (PBOC) updates surrounding the increase in the Forex reserves tried to defend the AUD/USD buyers recently but failed amid the risk-off mood.

The sour sentiment pushed market players to demand a premium and pushed the Treasury yields towards the north, which in turn joined the hawkish Fedspeak to propel the US dollar and weigh on the AUD/USD prices. Also portraying the risk-aversion was the downbeat performance of the global equities, tracked by Wall Street.

On Monday, Chicago Fed National Activity Index weakened to 0.0 in August versus 0.09 market expectations and an upwardly revised prior reading of 0.29. Even so, Boston Fed President Susan Collins said, per Reuters, “Getting inflation down will require slower employment growth, somewhat higher unemployment rate”. Following that, Cleveland Fed President Loretta Mester said on Monday that if there is an error to be made, better that the Fed do too much than to do too little.

That said, AUD/USD traders are likely to witness hardship in extending the latest rebound amid economic fears. With that in mind, today’s US CB Consumer Confidence for September and Durable Goods Orders for August will be crucial to watch for immediate directions.

Also read: US Consumer Confidence Preview: Near-term relief or more risk aversion?

Technical analysis

Despite the latest pause in the downside, a clear break of the four-month-old bearish channel’s support line, now resistance around 0.6500, keeps AUD/USD bears hopeful of visiting the 78.6% Fibonacci Expansion (FE) of April-August moves, near 0.6360.

• EUR/USD has turned sideways around 0.9610 as the focus shifts to US Durable Goods Orders data.

• Costly durable goods and accelerating interest rates have trimmed consensus for US economic data.

• ECB Lagarde’s speech will provide cues for likely monetary policy action ahead.

The EUR/USD pair is displaying back-and-forth moves in a narrow range of 0.9600-0.9627 in the early Tokyo session. The asset has turned sideways as investors are awaiting the release of the US Durable Goods Orders data. Earlier, the asset displayed a responsive buying action after dropping to near 0.9550 on Monday. The asset witnessed a steep fall on negative market sentiment, which forced the market participants to dump risk-perceived currencies further.

As per the preliminary estimates, the US Durable Goods Orders are expected to decline by 1.1% against the prior decline of 0.1%. As the price rise index for core products is scaling higher, households have ditched their purchases and are spending in seldom on essentials. Inflation-adjusted payouts and subdued earnings have forced them to alter their expenditure pattern.

Apart from them, accelerating interest rates are compelling households to postpone their spending on durable goods. Payment for durable goods on credit is attracting extremely higher interest obligations. Therefore, the economic data seems grim ahead.

On the Eurozone front, investors are awaiting cues on likely monetary policy action will be provided from the European Central Bank (ECB) President Christine Lagarde’s speech. The situation of the inflation rate is vulnerable in the Eurozone, therefore ‘hawkish’ guidance is highly expected.

On Monday, ECB Governing Council member and German central bank head Joachim Nagel said that decisive rate hikes are needed amid rising risks of inflation expectations getting de-anchored. Nagel favored a decisive action to bring down the inflation rate to 2%.

• Gold continues to bleed out with a focus on a break below $1,600.
• The US dollar is pulling in the flows as markets move strongly risk averse. 

Gold is sliding into fresh lows after being held back by the bears below $1,650 on corrections on Monday. The yellow metal dropped to the lowest in more than two years while the US dollar extends its bull cycle on recession fears and rising interest rates. US bond yields have also moved up and are reaching their highest in more than a decade.

The ICE dollar index has touched 114.53, the highest since 2002 while the yields on the US 10-year note have rallied to their highest since 2008 at around 3.93%. The rise comes following the Federal Reserve's 75 basis point hike in interest rates and the promise of further increases as the central bank looks to quell inflation. This has been a weight for gold since it offers no interest to investors in the search for yield. 

''An added concern for the US Treasury market is that should a round of coordinated FX market intervention to weaken the USD occur, it would probably involve sales of US Treasuries by foreign central banks,'' analysts at ANZ Bank said.

Meanwhile, Wall Street fell deeper into a bear market at the start of this week with the S&P 500 and Dow closing lower as investors fretted that the Federal Reserve's aggressive campaign against inflation. With the Fed signaling last Wednesday that high-interest rates could last through 2023, the S&P 500 has relinquished the last of its gains made in a summer rally. The Dow is now down 20.5% from its record high close on Jan. 4. 

''We see the potential for continued outflows from money managers and ETF holdings to weigh on prices moving forward, which ultimately raises the probability of a pending capitulation from the small number of family offices and proprietary trading shops that hold complacent length in gold,'' analysts at TD Securities said.

''In this context, while prices are certainly weak, precious metals' price action could still have further to fall as the restrictive rates regime is set to last for longer. Given that the momentum in underlying inflation trends is persistently inconsistent with the Fed's target, we have changed our terminal rate forecast from 4.25-4.50% to 4.75-5.00%, with not only a 75bp hike in November and 50bp in December but also 25bp rate increases in February and March.''

Gold technical analysis

As per the start of the week's pre-open analysis, Gold, Chart of the Week: XAU/USD thrown to the bears at the edge of the abyss, the price has continued to bleed out having broken key structures. $1,600 is calling with a focus on $1,575.

• WTI is falling close to 4% on Monday on recession fears.
• Fed policymakers emphasized the need for further rate increases as inflation remains stickier.
• The US Dollar Index extended its gains and recorded a fresh 20-year high at 114.53, a headwind for oil prices.

On Monday, the US crude oil benchmark, also known as WTI (Western Texas Intermediate), drops for the second straight day after sliding from above the $80 per barrel figure to the mid $70-$80s range. At the time of writing, WTI is exchanging hands at $76.31 per barrel, down by 3.63%.

Oil prices fell on emerging recession fears

Worries about a global economic slowdown are mounting, as energy prices have shown. Last week’s 75 bps rate hike by the Fed, alongside another 425 bps of worldwide central banks, fueled worries of a recession. Therefore, WTI remains defensive, as lower demand implies lower prices.

Sources cited by Reuters said, “With more and more central banks being forced to take extraordinary measures no matter the cost to the economy, demand is going to take a hit which could help rebalance the oil market.”

Another factor weighing US crude oil prices is the rapid rise of the greenback. The US Dollar Index, a gauge of the buck’s value vs. a basket of six currencies, edges up 0.98% at 114.128, a headwind for oil and US dollar-denominated commodities.

Elsewhere, Fed officials crossed newswires on Monday. The Boston Fed President Susan Collins expressed that further tightening is needed to temper inflation and emphasized that the unemployment rate should rise to achieve the Fed goal. Echoing her comments was Cleveland’s Fed President Loretta Mester, alongside Atlanta’s Fed President Raphael Bostic.

Oil traders’ attention turns to further US economic to be released ahead of the Organization of the Petroleum Exporting Countries (OPEC)  and allies reunion, to be hosted on October 5. The US calendar will feature durable good orders, consumer confidence, and further Fed speaking, led by Fed Chair Jerome Powell, on Tuesday.

WTI Daily Chart

WTI Key Technical Levels

• In the overnight session, the GBP/JPY tumbled near 4.50% on concerns over the UK budget.
• The GBP/JPY pierced the 20 and 50-Week EMAs, hoovering around the 100-Week EMA.
• GBP/JPY Price Analysis: Shifted bearish biased, as it broke below the 200-EMA, eyeing a re-test of the YTD low around 148.00.

The GBP/JPY drops as the New York session is about to finish, though recovered after printing a fresh one-year low at around 148.63, on Increasing concerns that the UK’s new budget would likely add to the country’s inflationary pressures amidst the Bank of England’s tightening cycle to quell inflation from double-digit levels. At the time of writing, the GBP/JPY is trading at 154.56, still below its opening price.

GBP/JPY Price Analysis: Technical outlook

The GBP/JPY weekly chart portrays the cross tumbled below the 20, 50, and 100-Week EMAs, though the pair trimmed some of its losses and is back above the 154.80 mark. Oscillators, mainly the Relative Strength Index (RSI), shifted negatively, showing the Japanese FX intervention’s impact alongside the UK’s slowing economic outlook. If the GBP/JPY registers a decisive break below the 100-WEMA at 153.52, that could pave the way for further losses. Otherwise, expect the cross-currency to stay range-bound in the 153.50-158.56 range.

From a daily chart perspective, the GBP/JPY shifted bearish biased once sellers hurdled the 200-day EMA, which, at the time of typing, stands at 160.27, opening the door for further losses. GBP/JPY traders should be aware that the Relative Strength Index (RSI) plunged to oversold levels at 24, which could impede sellers from taking action. Indeed, once the RSI exits from those levels, traders should expect a resumption of the downtrend, targeting the fresh YTD low at 148.53, which could extend towards the September 2020 cycle high of 142.70.

GBP/JPY Key Technical Levels

Cleveland Fed President Loretta Mester said on Monday that if there is an error to be made, better that the Fed do too much than to do too little.

"When there is uncertainty, it can be better for policymakers to act more aggressively because aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming about," Mester said in remarks prepared for delivery to the Massachusetts Institute of Technology.

Key notes

Mester said she would be "very cautious" about assessing inflation, and would need to see several months of declines in month-to-month readings to be convinced it had peaked.

Mester said she will "guard against being complacent" on long-term inflation expectations that have recently dropped a bit but may not, she said, be as well-anchored as hoped and could rise again.Policymakers faced with uncertainty over inflation expectations should risk setting policy too tight rather than too loose, she said. 

"Research indicates that erroneously assuming that longer-term inflation expectations are well anchored at the level consistent with price stability when, in fact, they are not is a more costly error for the economy than assuming they are not well-anchored when they actually are," Mester said.

"Further increases in our policy rate will be needed," Mester said.

"In order to put inflation on a sustained downward trajectory to 2%, monetary policy will need to be in a restrictive stance, with real interest rates moving into positive territory and remaining there for some time."

Swiss National Bank's Ms Andréa M Maechler has crossed the wires saying that raising interest rates was intended to send a clear signal that the SNB is determined to bring down inflation.

Key comments

• We see a weakening in the swiss economy but no recession.   
• Declines comment on possible further interest rate moves.  
• Potential losses by central bank do not influence monetary policy.
• Recent rise in swiss franc has helped dampen inflation.
• Now is not the time to reduce central bank's balance sheet. 
• Central bank ready to buy foreign currencies if franc too strong, buy francs if currency is too weak.
• A set level for franc exchange rate is not important, it is the impact the exchange rate has on inflation.

Meanwhile, USD/CHF is higher by some 1.25% as the US dollar extends its bullish cycle to fresh highs on Monday in the DXY to 114.58.

What you need to take care of on Tuesday, September 27:

The dollar maintained its bullish momentum and soared at the beginning of the week, pushing major pairs into fresh multi-year lows. A scarce macroeconomic calendar exacerbated risk-related trading as worldwide central bankers insisted on battling inflation at any cost.

The GBP/USD pair sunk to a record low of 1.0317 and now trades around 1.0690, still down on the day. The Bank of England was expected to step in, helping the pair recover, although it did not. In fact, Governor Andrew Bailey repeated they would not hesitate to alter interest rates as necessary to return inflation to the 2% target sustainably in the medium term, adding they are “closely monitoring” financial markets developments.  Nevertheless, he added that the latest developments would be fully assessed at their next scheduled meeting.

EUR/USD trades near a fresh two-decade low of 0.9549 as the EU sees no light at the end of the tunnel. European Central Bank President Christine Lagarde offered a speech and said that they may need to take additional measures to deal with inflation.

Commodity-linked currencies were also under strong selling pressure. AUD/USD bottomed at 0.6437 while USD/CAD surged to 1.3807. The USD/CHF pair was also up, reaching 0.9965. The USD/JPY finished the day up at 144.55.

Spot gold plunged at trades around $1,625 a troy ounce, while crude oil prices were also sharply down, with WTI now trading at $76.60 a barrel, nearing this year low at $74.25.

Global stocks closed in the red amid panic selling. The FTSE was the exception, helped by the plummeting Sterling. It added measly 2 points.

US Durable Goods Orders and CB Consumer Confidence are taking center stage on Tuesday.

 Bitcoin Price Prediction: Investors need to prepare for volatile breakout

• GBP/USD bulls attempting to recover from massive losses.
• US dollar has hit a new 20-year top of 114.58 amid heavy volatility. 

GBP/USD is down by over 1.5% on the day, but trading at 1.0698, it is well away from the lows of 1.0356 that were scored earlier in the session and rests between there and the day's high of 1.0931. We have seen a record low in the pair on the back of a renewed selloff in British gilts and concerns about high-interest rates that have continued to put pressure on the global financial system.

In particular, markets took fright at British finance minister Kwasi Kwarteng announcing the scrapping of the top rate of income tax and canceling a planned rise in corporate taxes. The reaction to the proposed plan is a real concern and adds uncertainty to the economy. Additionally, US dollar strength is weighing heavily on the FX space with the dollar index, which tracks the greenback against six peers - hitting a new 20-year top of 114.58 in early trade.

The drop in the pound is also leading to speculation the Bank of England will have to hold an emergency meeting to raise rates. The Bank of England said on Monday it would not hesitate to change interest rates and was monitoring markets "very closely".

 "The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets," Bank of England Governor Andrew Bailey said. "The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit." The Treasury and central bank statements came towards the end of a day of turmoil for Britain's currency and debt with the British 10-year government bond prices now on track for their biggest slump in any calendar month since at least 1957.

The Reserve Bank of New Zealand's governor Adrian Orr has crossed the wires saying New Zealand's tightening cycle is very mature and has stated that there is still a little bit more to do in terms of tightening.

More to come

• USD/CAD holds in bullish territory with the US dollar spiking to fresh bull cycle highs.
• Market volatility has dented the high beta CAD in the face of weaker oil prices.

At 1.3770. USD/CAD is up over 1.3% on the day as the pair tries to hold on to near the highs of the day at 1.3808 following a surge from the day's low of 1.3559. It has been a strong day for US bond yields with sky-high volatility in global currency markets that has seen the US dollar extending its gains to 114.52 as per the DXY index.

Investors continued to fret about the Federal Reserve's aggressive policy tightening and its impact on the US economy which has seen a sell-off across financial markets and a bid into the greenback. This also added an extra layer of volatility to markets worried about a global recession amid soaring prices. The CBOE Volatility index, hovered near three-month highs while the US 10-year Treasury yield is rising again on Monday, hitting 3.9020%, which is a fresh high back to April 2010. 

''CAD is not immune to this deterioration in conditions,'' analysts at TD Securities said. ''We were bearish the CAD for fundamental reasons as the debt servicing problem should start to manifest and create a data domino over the balance of the year, while worsening global growth meant that the currency would also be on the defensive.''

''With oil prices in retreat as global demand wanes, CAD will continue to struggle. If you did not like the CAD a week ago, there is more reason to despise it further. We are now entering the FOMO stage of USD/CAD.''

The price of oil, one of Canada's major exports, clawed back some recent losses as market participants awaited for details on new sanctions on Russia. However, oil had fallen to new eight-month lows as recession worries continue to dominate trading while the US dollar continues to strengthen. West Texas Intermediate crude is still down by over 3.4% on the day to $76.63.

In domestic data, wholesale trade rose 0.8% in August from July, largely driven by higher sales in the food, beverage and tobacco subsector, a preliminary estimate from Statistics Canada showed. Meanwhile, more than a third of customers in the Canadian province of Nova Scotia were without power on Monday, two days after powerful storm Fiona battered the east coast of the country.

• Silver price plummets more than 2.50% due to overall US dollar strength.
• US Treasury bond yields rise, a headwind for the white metal.
• Silver Price Analysis: Once it falls below $18.00, a test of the YTD lows at $17.56 is on the cards.

Silver price slides to fresh three-week lows below $19.00, as US Treasury bond yields are rising sharply, with the US 10-year T-note rate hitting 3.90%, for the first time since April 2010, when the benchmark note fell from the 4% threshold. At the time of writing, XAG/USD exchanges hands at $18.35, below its opening price by 2.51%.

Risk aversion keeps global equities in the red, courtesy of the past week’s 500 bps of central bank interest rate increases as recession fears grow. Global bond yields are rising as the bond sell-off continues. US Treasury yields in the short end of the curve rose above 4%, while the US 10-year benchmark rate hit a daily high of around 3.90%.

XAG/USD plunges on high US T-bond yields

Money market futures are discounting a 75 bps rate hike at the Fed’s November meeting, a headwind for the white metal. In the meantime, Fed officials led by Atlanta’s Fed President Bostic and  Boston Susan Collins crossed news wires.

On Sunday, Raphael Bostic commented that he believes the Fed can temper inflation without triggering substantial job market losses. He reassured that inflation is “too high,” emphasizing the need to control it.

During the last hour, Bostic crossed wires, acknowledging that events in the UK might put additional stress on Europe and the US in the already tense financial markets. In the meantime, the newest President of the Boston Fed, Susan Collins, commented that the unemployment rate needs to increase so that the US central bank can achieve its inflation goal. She added that she would like “clear and convincing signs” that inflation is cooling and that achieving a soft landing “while challenging, is achievable.”

Even though, Collins said, “a significant economic or geopolitical event could push our economy into a recession as policy tightens further.”

Elsewhere, the US Dollar Index, a measure of the buck’s performance vs. six rivals, edges higher by almost 1%, at 114.159, weighing on the US dollar-denominated silver.

From a technical perspective, it’s worth noting that XAG/USD tumbled below the 20-day EMA of $18.83, exacerbating a fall towards the $18.30s area. Furthermore, the Relative Strength Index (RSI). Shifted negatively, signaling that sellers are gathering momentum. Therefore, if XAG/USD breaks below the $18.00 figure, we could expect a re-test of the YTD lows at around $17.56 in the near- term.

Silver Daily Chart

Silver Key Technical Levels

• The USD/JPY bounces off the 143.00 regions and is back above 144.50 after last week’s BoJ FX intervention.
• Following the Japanese intervention in the FX space, the USD/JPY recovered some 3%.
• Near term, the USD/JPY might re-test the 145.00 area, despite increasing concerns of being the BoJ’s line in the sand, opening the door for another FX intervention,

The USD/JPY is recovering some ground after last week’s BoJ FX intervention that bolstered the Japanese yen from trading at around 145.00 price levels towards the 140.34 area. Nevertheless, USD/JPY traders are again lifting the spot price towards the 145.00 mark, as the USD/JPY trades at around 144.66, above its opening price at the time of writing.

USD/JPY Price Analysis: Technical outlook

The USD/JPY remains upward biased after dipping towards the 140.00 region. Worth noting that following the BoJ intervention in the markets, the Relative Strength Index (RSI) edged lower. However, at the time of typing, RSI crossed above its 7-day RSI SMA, suggesting that buyers are gathering momentum as the major hits the 144.00 thresholds.

Short term, the 4-hour scale portrays the USD/JPY strength, with the major clearing the R2 daily pivot at 144.52. Furthermore, after diving towards oversold conditions, oscillators, mainly the Relative Strength Index (RSI), are back in positive territory.

Suppose the USD/JPY clears the 144.99 area, that could pave the way for another FX intervention by Japanese authorities. If it does not, the next USD/JPY resistance would be the September 21 daily high at 145.39, followed by the R3 daily pivot at 145.63.

On the other hand, failure at  145.00 could send the major sliding towards the S1 daily pivot at 143.95. Break below will expose the confluence of the 20 and 50-EMAs around 143.34/36, followed by the daily pivot at 142.85.

USD/JPY Key Technical Levels

• Bank of England is monitoring developments in financial markets.
• Pound remains under pressure, still looking for support.
• GBP/USD back under 1.0700, heads for record low close.

The GBP/USD pair is at the lowest level since the European session following a statement from the Bank of England and also amid risk aversion. Cable is back into negative territory trading around 1.0660, down almost 200 pips from Friday’s close.

On Asian hours the pound suffered a historic drop to 1.0315, a record low and then rebounded 600 pips. The recovery lost momentum and GBP/USD is back under pressure.

The dramatic depreciation of the pound weighed on global market sentiment on Monday and also prompted a statement from the Bank of England. The central bank said it is monitoring development in financial markets very closely and welcomed government’s commitment to sustainable economic growth. The comments did not help the pound which lost momentum afterwards.

Equity markets also turned to the downside during the last hours also affecting the pound, that has become more sensitive to risk aversion. In Wall Street the Dow Jones is falling by 1.05% and the Nasdaq 0.43%.

Technical levels

• AUD/USD registers two-straight days of consecutive losses, down by 1,2% on Monday.
• Risk aversion sparked by central bank tightening and UK tax cuts shifted sentiment sour; consequently, the greenback is rising.
• Fed officials continue to emphasize that inflation is “too high.”

The AUD/USD is dropping almost 1%, due to a strong US Dollar, amidst flows seeking the safety of the greenback, which rises against most G8 currencies due to concerns that worldwide central banks tightening, could trigger a recession.

The AUD/USD began trading at around 0.6515 before hitting the day’s high at 0.6537. But as sentiment continued sour, the major fell toward a fresh two-year low at about 0.64426, breaking below the May 20, 2020 low of 0.6452. At the time of writing, the AUD/USD is trading at 0.6444 below its opening price.

AUD/USD stumble to fresh 2-year lows on a buoyant US dollar

Worldwide recession fears have augmented since the US Federal Reserve hiked rates by 75 bps last week. That said, alongside speculation that the UK’s economy keeps the Bank of England’s (BoE) under pressure, it sent the pound towards a fresh YTD low. At the same time, most G8 currencies followed suit, weakening against the already strong US dollar.

 A light US economic calendar revealed the Chicago National Activity Index for August, which decelerated to 0. In the meantime, some Fed speakers are crossing news wires.

On Sunday, Atlanta’s Fed President Raphael Bostic commented that he believes the Fed can bring inflation without substantial losses in the labor market, given the current economic slowdown. He reassures that inflation s “too high,” adding that the US central bank needs to do all it can to control it.

Earlier, the Boston Fed’s President Sussan Collins said that the unemployment rate needs to get higher for the Fed to achieve its inflation objective. Collins added that she would like “clear and convincing signs” that inflation is cooling while saying that “a significant economic or geopolitical event could push our economy into a recession as policy tightens further.”

Analysts at Westpac lowered the AUD/USD exchange rate target from 0.6900 to 0.6500. “That means that over the remainder of 2022, there will be periods when the AUD will trade below the USD0.65 level given the high volatility in currency markets to date.”

AUD/USD Key Technical Levels

• USD/MXN is breaking a range to the upside, looking to more gains.
• Next target seen around 20.45 and then 20.70.
• Decline back below 20.20 should weaken the US dollar.

The USD/MXN is breaking above a range that held since mid-August. As long as the pair remains above 20.25 the outlook is bullish. The next target may be seen at 20.45 and above the next barrier emerges around 20.70.  As of writing, it trades at fresh two-month highs at 20.37.

Basically, most technical indicators are pointing to the upside, offering bullish signs. RSI is up, not yet in overbought territory.

The bullish tone is strong. During the session, the pair pulled back many times to the 20.20/25 zone but held above. A consolidation below would alleviate the pressure and could even suggest a potential short-term top.

USD/MXN daily chart

European Central Bank (ECB) Governing Council member and German central bank head Joachim Nagel said on Monday that decisive rate hikes are needed amid rising risks of inflation expectations getting de-anchored.

"The risk that long-term expectations get de-anchored remains high," Nagel explained. "Further decisive action is required to bring the inflation rate down to 2% in the medium term."

Market reaction

The EUR/USD pair showed no immediate reaction to these comments and it was last seen losing 0.7% on the day at 0.9625.

• US Dollar is solid as markets fail to stage recovery.
• EUR/USD is hovering around 0.9620, far from the daily highs.
• Dollar overbought but not offering signs of a correction.  

The EUR/USD is moving toward 0.9600 after the recovers from fresh multi-year lows faded. The euro could not hold above 0.9700 and started to decline as stocks in Wall Street printed fresh session lows.

Risk aversion prevails across financial markets supporting the dollar. In the US, the Dow Jones is down 0.61% and the S&P 500 declines by 0.40%. The Nasdaq is up 0.20%. Crude oil is erasing gains and metals are back into negative territory.

Economic data released in the US showed a decline in the Chicago Fed National Activity Index dropped more than expected to 0 from 0.08%. Earlier, IFO reported a decline in Sentiment Index in September.

The dollar remains firm across the board amid Fed rate hike expectations and risk aversion. The euro found some support from the rally in EUR/GBP that climbed to two-year highs.

Still looking to the downside

The recovery of the EUR/USD was short-lived and is approaching 0.9600. Below attention would turn to the cycle low at 0.9549. Despite oversold readings across charts, the negative momentum is solid with the pair still looking for support.

On the upside, if the euro consolidates above 0.9700 it could gain support from a more sustainable rebound in the very short term. The next strong resistance is seen at 0.9805.

Technical levels

In a statement published on Monday, the Bank of England (BoE) said that they are monitoring developments in financial markets very closely in light of the significant repricing of the financial assets.

The BoE further noted that they welcome the government’s commitment to sustainable economic growth and to the role of the Office for Budget Responsibility.

"The role of monetary policy is to ensure that demand does not get ahead of supply in a way that leads to more inflation over the medium term," the BoE said. "As the MPC has made clear, it will make a full assessment at its next scheduled meeting of the impact on demand and inflation from the government’s announcements, and the fall in sterling."

Market reaction

With the initial reaction, the GBP/USD pair fell sharply and was last seen trading at 1.0686, where it was down 1.5% on a daily basis.

• Gold price edges down but above the YTD low in the Asian session, around $1626.40.
• Risk aversion keeps traders’ flows toward the greenback, weighing on the yellow metal.
• Gold Price Analysis: In the near term could test the $1650 mark.

The gold price and the precious metals continue to be battered by dismal market sentiment, with US equities extending their losses and rising US T-bond yields, now with 2s and 5s, above the 4% threshold, while the 10-year gains almost seven bps, a headwind for the non-yielding metal. At the time of writing, XAU/USD is trading at $1640 a troy ounce, below its opening price by 0.09%.

Sentiment remains depressed. Worldwide recession worries, spurred by Fed’s aggressive tightening, alongside stickier than estimated inflation readings, keeps investors assessing if the economy may tap into a recession or not. In the meantime, the greenback remains in the driver’s seat, as the US Dollar Index has shown rising 0.40%, sitting at 113.585.

Meanwhile, the gold price dropped and hit a fresh 2-year low during the Asian session at around $1626.40, but it recovered some ground, falling short of hitting a daily high at $1650. With the lack of US economic data, with just the Chicago National Activity Index for August dropping to the 0 levels, Fed speakers began crossing newswires.

Atlanta’s Fed President Raphael Bostic said that he still believes the Fed can tame inflation without substantial losses in the labor market, given the current economic slowdown. He reassures that inflation s “too high,” adding that the US central bank needs to do all it can to control it.

Of late, the new Boston Fed’s President Sussan Collins said that for the Fed to achieve its inflation target, the unemployment rate needs to get higher without causing a spike in layoffs. She added that she would like “clear and convincing signs” that inflation is falling. She said, “a significant economic or geopolitical event could push our economy into a recession as policy tightens further.”

What to watch

The US economic docket will feature Durable Good Orders, Building Permits, Consumer Confidence and New Home Sales on Tuesday. Also, more Fed speakers would cross wires, led by Regional Fed Presidents Logan, Mester, Evans, Bullard and Daly.

Gold Price Analysis (XAU/USD): Technical outlook

From a daily chart perspective, XAU/USD remains downward biased, even though RSI shifted to oversold conditions. Breaking below the bottom trendline of a descending wedge at $1650 exacerbated the fall towards new YTD lows. In the one-hour scale, XAU/USD made a base nearby the S1 daily pivot at $1630, bouncing toward the current spot price, reclaiming the 20-EMA. Therefore, a re-test of the $1650 is on the cards.

"It's quite likely inflation is near peaking, or has peaked already," Boston Fed President Susan Collins said on Monday, per Reuters.

Additional takeaways

"Fed's credibility is key part of why medium and longer-term inflation expectations remain well anchored."

"It's part of why we have to move expeditiously on rates, to maintain that credibility."

"My outlook is for much slower growth in 2022."

"We'll also have slower economic growth next year as well."

"That is part of what is needed to get inflation back down, as well as a modest increase in unemployment, but there are many uncertainties."

Market reaction

The US Dollar Index was last seen rising 0.42% on the day at 113.50 following these comments.

Boston Fed President Susan Collins said on Monday that their priority is to bring inflation down and argued waiting to do that would only make it harder, as reported by Reuters.

"A softish landing is challenging but some aspects of the current economy favor it," Collins added but also acknowledged that there are risks on both sides.

Market reaction

These comments don't seem to be impacting the dollar's performance against its major rivals in a significant way. As of writing, the US Dollar Index was up 0.35% on the day at 113.43.

• GBP/USD recovers early lost ground to an all-time low, though lacks follow-through.
• Bulls struggle to find acceptance above the 38.2% Fibo. level of the monthly downfall.
• The formation of a bearish flag pattern also warrants some caution for bullish traders.

The GBP/USD pair builds on its solid intraday recovery move from an all-time low and hits a fresh daily peak, around the 1.0930 region during the early North American session. Spot prices, however, retreat a few pips from highs and now seem to have stabilised around the 1.0900 round figure.

Expectations that the Bank of England will step in to stall the recent free-fall in the British pound triggered the initial leg of an intraday short-covering move around the GBP/USD pair. The US dollar, on the other hand, surrenders its early gains to a fresh two-decade high and offers additional support to the major.

From a technical perspective, the GBP/USD pair is seen struggling to find acceptance above the 38.2% Fibonacci retracement level of the steep decline from the monthly peak touched on September 13. Furthermore, the intraday recovery has been along an ascending channel, which constitutes the formation of a bearish flag pattern.

Meanwhile, oscillators on the daily chart are still holding deep in the oversold territory and warrant some caution. This makes it prudent to wait for a convincing break below the ascending channel support, currently around the 1.0765-1.0770 region, before positioning for the resumption of the recent depreciating move.

On the flip side, the 1.0900 mark now seems to act as an immediate hurdle ahead of the daily swing high, around the 1.0930 region. Any further recovery is likely to confront stiff resistance near the top end of the ascending channel, currently around the 1.0975 zone. This is followed by the 1.1000 mark, which if cleared decisively will suggest that the GBP/USD pair has formed a near-term bottom.

GBP/USD 1-hour chart

Key levels to watch

"Getting inflation down will require slower employment growth, somewhat higher unemployment rate," Boston Fed President Susan Collins said on Monda, as reported by Reuters.

Additional takeaways

"Goal of a more modest economic slowdown is challenging but achievable."

"Important to see clear and convincing signs inflation is falling."

"My policy decisions will be guided by range of incoming data."

"Committed to getting inflation back down to 2%."

"Harder to bring down inflation if higher inflation expectations become entrenched."

"Price stability a precondition to achieving sustainable maximum employment."

"Inflation remains too high."

"US labor market is very hot."

"Some of the global supply chain issues are beginning to fade."

"There is uncertainty on when Ukraine war will end, pandemic inflation effects will fully abate."

"Demand clearly exceeds economy's productive capacity right now."

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen clinging to modest daily gains at 113.35.

Christine Lagarde, President of the European Central Bank (ECB), said on Monday that they will decide whether further policy action is needed once they reach the neutral rate, as reported by Reuters.

"We may have to take further measures if inflation is not at the target when rates reach neutral," Lagarde explained.

Market reaction

These comments don't seem to be having a significant impact on the shared currency's market valuation. As of writing, EUR/USD was trading at 0.9675, where it was down 0.2% on a daily basis.

• USD/TRY adds to Friday’s advance and clinches new record highs.
• The dollar remains well bid amidst the Fed’s tightening bias.
• Türkiye’s Capacity Utilization improved a tad in the current month.

The Turkish lira unsurprisingly extended its march southwards and pushed USD/TRY to fresh all-time tops around 14.85 at the beginning of the week.

USD/TRY: Next on the upside comes 18.5000

USD/TRY trades with gains for the second session in a row on Monday and saw its upside reinvigorated following another bout of solid demand for the greenback, which continue to hurt the risk complex and the EM FX galaxy.

Indeed, it has been all about the greenback since the Federal Reserve raised rates last week and Powell reinforced the hawkish rhetoric, all supportive of a tighter-for-longer stance from the central bank.

Data wise In Türkiye, Capacity Utilization improved to 77.4% in September (from 76.7%) and the Manufacturing Confidence receded to 99 (from 102.1) in the same period.

What to look for around TRY

USD/TRY picked up extra pace following another unexpected interest rate cut by the CBRT, while the persevering rally in the dollar also helped the pair to print record highs almost on a daily basis.

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 July and August), real interest rates remain entrenched well in negative territory and the political pressure to keep the CBRT biased towards low interest rates remains omnipresent.

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: Capacity Utilization, Manufacturing Confidence (Monday)- Economic Confidence Index (Thursday) – Trade Balance (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 0.20% at 18.4407 and faces the next hurdle at 18.4583 (all-time high September 26) followed by 19.00 (round level). On the downside, a break below 17.9798 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low

• USD/CAD retreats a few pips from its highest level since June 2020 touched earlier this Monday.
• The USD surrenders its intraday gains to a two-decade high and acts as a headwind for the pair.
• Aggressive Fed rate hike bets, rising US bond yields should limit any meaningful USD pullback.
• Bearish crude oil prices could undermine the loonie and supports prospects for additional gains.

The USD/CAD pair attracts some sellers in the vicinity of the 1.3700 mark and retreats a few pips from its highest level since June 2020 touched during the early North American session. The pair is now trading around the 1.3635-1.3630 region, still up over 0.30% for the day.

The US dollar surrenders a major part of its intraday gains to a two-decade high and turns out to be a key factor acting as a headwind for the USD/CAD pair. The USD pullback could be solely attributed to some profit-taking amid a solid recovery in the British pound and extremely overbought conditions.

That said, growing acceptance that the Fed will tighten its monetary policy at a faster pace should limit the USD corrective pullback. It is worth recalling that the Fed signalled last week that it will likely undertake more aggressive increases at its upcoming meetings to tame inflation.

The Fed's hawkish outlook pushes the yield on the rate-sensitive 2-year US government bond to a 15-year peak and the benchmark 10-year Treasury note to its highest level in 11 years. This, along with the prevalent risk-off environment, should continue to boost demand for the safe-haven greenback.

Apart from this, the underlying bearish sentiment surrounding crude oil prices, amid fears that a deeper global economic downturn will dent fuel demand, is seen undermining the commodity-linked loonie. This, in turn, supports prospects for a further near-term appreciating move for the USD/CAD pair.

In the absence of any major market-moving economic releases, either from the US or Canada, traders on Monday will take cues from speeches by influential FOMC members. This, along with the US bond yields and the broader risk sentiment, will influence the USD and provide impetus to the USD/CAD pair.

Technical levels to watch

Christine Lagarde, President of the European Central Bank (ECB), said on Monday that they expect the economic activity in the eurozone to slow substantially in the coming quarters, as reported by Reuters.

Additional takeaways

"As of the first quarter of 2023, we will start publishing climate-related information on our corporate bond holdings."

"The depreciation of the euro has also added to the build-up of inflationary pressures."

"The best contribution monetary policy can make to the euro area economy is to ensure price stability over the medium term."

"Signs of recent above-target revisions to some indicators of inflation expectations warrant continued monitoring."

"The risks to the inflation outlook are primarily on the upside."

"We expect to raise interest rates further over the next several meetings."

"The strong demand for services that came with the reopening of the economy is losing steam."

Market reaction

These comments were largely ignored by market participants and the EUR/USD pair was last seen losing 0.25% on the day at 0.9670.

Citing sources familiar with the matter, Bloomberg reported on Monday that the European Union could delay enforcing a price cap on Russian oil imports due to divisions within member states. 

Market reaction

This headline doesn't seem to be having a significant impact on crude oil prices. As of writing, the barrel of West Texas Intermediate (WTI), which touched its lowest level since January near $77, was trading at $78.85, where it was down 0.55% on a daily basis. Meanwhile, the barrel of Brent was last seen losing 0.6% on the day at $86.25.

FX Strategist Quek Ser Leang at UOB Group’s Global Economics & Markets Research notes USD/IDR could extend the advance to the 15,150 hurdle in the short-term horizon.

Key Quotes

“We expected USD/IDR to advance last week. We held the view that ‘the July’s peak of 15,033 is likely out of reach for now’. The anticipated advance exceeded our expectations as USD/IDR rose to 14,042 last Friday.”

“USD/IDR jumped higher upon opening today and appears to be on track for further gains. The next resistance is at 15,150 followed by 15,200. Support is at 15,050 followed by 15,000.”

According to Dane Cekov, Senior Macro & FX Strategist at Nordea Markets, a break below the 0.9500 mark for the EUR/USD pair will open the room for a move down to as low as 0.9000 mar.

Key Quotes:

“Europe has lately been the epicentre of a perfect storm in energy markets. The energy price shock has and will continue to impact the industrial sector, leading to a negative terms-of-trade shock for the Euro Zone. Goods that were previously produced in Europe will now have to be imported from countries elsewhere where energy prices have not risen as much as in Europe. Worsening terms of trade argue for a weaker Euro ahead.”

“It is extremely difficult for Europe and Germany in particular to diversify its gas supply quickly in the short-term. More LNG will come, but it will be costlier than the Russian gas Germany has been accustomed to and it will take time before the infrastructure is in place for significant volumes. More rainfall ahead will help European hydropower production – we need the weather gods to be benevolent with Europe with a wetter and warmer winter. Moreover, France needs to get its atomic power reactors back on track, this will also take time but should be resolved during next year. Some of the factors behind the energy crises should improve in the coming period, but the winter heating season is nearly upon Europe and the risks for energy rationing are hanging over Europe’s head.”

“Political fragmentation in Europe has increased with far-from-the-centre political parties winning elections – look at Italy and Sweden. The Euro is a political project and if EU’s politicians suddenly don’t get along, then we could see the Euro’s existence brought into question – similar to the case during the 2010 Euro crisis.”

• Chicago Fed National Activity Index declined to 0 in August.
• US Dollar Index trades in positive territory near 113.50.

The Federal Reserve Bank of Chicago's National Activity Index (CFNAI) declined to 0 in August from 0.29 in July. This reading came in weaker than the market expectation of 0.08.

According to the Chicago Fed, a zero value for the CFNAI is associated with the national economy expanding at its historical trend (average) rate of growth.

Market reaction

This data doesn't seem to be having a significant impact on the dollar's performance against its major rivals. As of writing, the US Dollar Index was up 0.45% on the day at 113.55.

• USD/JPY gains traction for the second straight day and seems poised to climb further.
• The Fed-BoJ policy divergence weighs on the JPY and continues to act as a tailwind.
• Sustained USD buying remains supportive of the move and reaffirms the positive bias.

The USD/JPY pair attracts some buying for the second successive day on Monday and maintains its bid tone through the mid-European session. The pair is currently hovering near the top end of its daily trading range, around the 144.20 region, up over 0.60% for the day.

The yen did get a strong boost last week after the Japanese government intervened to stem the rapid fall in the domestic currency. The initial market reaction, however, turned out to be short-lived amid a big divergence in the monetary policy stance adopted by the Bank of Japan and other major central banks. In fact, the BoJ has reaffirmed its commitment to ultra-low interest rates and vowed to keep purchasing bonds so that 10-year yields remain pinned at zero.

In contrast, the Federal Reserve signalled that it will likely undertake more aggressive rate increases at its upcoming meetings to combat stubbornly high inflation. This remains supportive of elevated US Treasury bond yields, widening the US-Japan rate differential and weighing on the JPY. Meanwhile, a more hawkish stance adopted by the US central bank continues to underpin the US dollar, which is seen as another factor pushing the USD/JPY pair higher on Monday.

That said, the prevalent risk-off environment offers some support to the safe-haven JPY and keeps a lid on any meaningful upside for the major, at least for the time being. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders and suggests that the path of least resistance for the USD/JPY pair is to the upside. Hence, some follow-through strength, back towards reclaiming the 145.00 psychological mark, remains a distinct possibility.

There isn't any major market-moving economic data due for release from the US on Monday. Traders, meanwhile, will take cues from speeches by influential FOMC members Boston Fed President Susan Collins, Atlanta Fed President Raphael Bostic and Dallas Fed President Lorie Logan. This, along with the US bond yields, will influence the USD. Apart from this, the broader market risk sentiment might produce short-term trading opportunities around the USD/JPY pair.

Technical levels to watch

Economists at Brown Brothers Harriman & Co. (BBH) maintain a bullish outlook for the US dollar amid the prevalent risk-off environment and last week's hawkish FOMC decision.

Key Quotes:

“Markets were already nervous last week as major central banks tightened aggressively but the huge fiscal policy mistake from the U.K. added further fuel to the fire.  MSCI World tumbled -5% in its worst week since mid-June and is adding to those losses today.  With global growth also slowing significantly, the backdrop for risk assets remains challenging.  We expect the dollar to continue strengthening in this environment even as Fed tightening expectations remain elevated.”

“WIRP suggests another 75 bp hike is almost fully priced in for November 2, as is a follow-up 50 bp hike December 14.  Elsewhere, the swaps market is pricing in a terminal rate of 4.75%.  As a result, U.S. rates continue to rise.  The 2-year yield traded near 4.35% today, the highest since 2007, while the 10-year yield traded near 3.82% Friday, the highest since 2010.  The real 10-year yield traded near 1.40% today, the highest since 2010.  This generalized increase in U.S. yields is likely to continue and will ultimately support the dollar.  Of note, the 3-month to 10-year curve remains positively sloped near 61 bp, the steepest since July, and so we are not yet ready to call for an imminent recession in the U.S.”

Economists at TD Securities note that the Fed's September meeting provided an even more hawkish policy message than markets were already anticipating.

Attention will be on PCE report for August

"As a result, we're now looking for additional rate hikes in Q1 2023 and, therefore, a higher terminal rate at 4.75%-5.00%."

"Following last week's FOMC meeting and the corresponding blackout period for communications, a number of Fed officials are slated to provide remarks throughout the week, which are likely to build upon the discussions held last week.

"In terms of the data, most of the attention will be on the PCE report for August. We are looking for core PCE prices to have gained speed again following a strong CPI report where core inflation surprised significantly to the upside at 0.6% m/m in August."

When asked whether the government is planning to change the measures set out in the mini-budget, British Prime Minister Lis Truss' spokesman responded by simply saying "no," as reported by Reuters.

Additional takeaways

"Finance minister has made it clear we don’t comment on market movements."

"Finance minister will come forward with a medium-term fiscal plan in coming months."

"Finance minister speaks regularly to the Governor of Bank of England (BoE), do not know when their next conversation will be."

"We have seen positive reaction from business groups to the fiscal statement."

"Inflation is something we are very conscious of, it is right we consider how best to control inflation."

"Important BoE independence remains, we don’t comment on interest rates."

Market reaction

Following these comments, the GBP/USD pair was last seen trading at 1.0740, where it was down 1% on a daily basis.

Extra upside could lift USD/MYR to the 4.62 level in the near term, according to FX Strategist Quek Ser Leang at UOB Group’s Global Economics & Markets Research.

Key Quotes

“While we expected USD/MYR to strengthen last week, we were of the view that ‘overbought short-term conditions could ‘limit’ gains to 4.5550’. We underestimated the upward momentum as USD/MYR easily took out 4.5550.”

“USD/MYR extended its sharp rise today and in view of the rapid upward acceleration, a break of 4.6000 would not be surprising. The next resistance is at 4.6200, followed by 4.6500. On the downside, the rising trend-line support at 4.5700 is likely strong enough to hold any pullback.”

• EUR/USD bounces off fresh cycle lows near 0.9550.
• Extra downside could revisit the 0.9411 level near term.

EUR/USD keeps the bearish note well in place and drops to new 2-decade lows near 0.9550, where some initial contention seems to have emerged.

Rising prospects for extra weakness in the European currency remain well on the table for the time being. That said, the loss of the 2022 low at 0.9552 (September 26) should leave the pair vulnerable to a challenge to the round level at 0.9500 prior to the weekly low at 0.9411 (June 17 2002).

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0685.

EUR/USD daily chart

FX Strategist Quek Ser Leang at UOB Group’s Global Economics & Markets Research suggests USD/THB could retest and surpass the 38.00 barrier in the near term.

Key Quotes

“Last Monday (19 Sep, spot at 36.25), we highlighted that USD/THB ‘could consolidate for a few days before heading higher to 37.20’. USD/THB rose above on 37.20 on Wednesday and continued to rise and today in Asia, it took out another strong resistance at 37.80.”

“The impulsive momentum suggests USD/THB is likely to rally further. A break of 38.00 seems likely and will shift the focus to 38.25. On the downside, 37.35 is a solid support and this level is unlikely to come under threat this week.”

• DXY surpasses the 114.00 mark and prints new cycle peaks.
• Immediately to the upside now comes the 115.00 hurdle.

DXY adds to the ongoing rally and climbs above the 114.00 barrier for the first time since May 2002.

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 7-month support line near 106.80. That said, occasional bouts of weakness could be deemed as buying opportunities with the immediate target now emerging at the round level at 115.00 ahead of the May 2002 high at 115.32.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 102.12.

DXY daily chart

Kit Juckes, Macro Strategist at Societe Generale, explains key aspects behind the GBP/USD pair's recent slump to an all-time low. The sterling has recorded its biggest monthly fall since the Brexit referendum result in 2016 and according to Kit, the major might struggle to stage a meaningful recovery until the US dollar rally runs out of steam.

Key Quotes:

“There is both a domestic and an international aspect to sterling’s weakness. The international backdrop is a combination of global inflationary pressures and US economic out-performance that supports the dollar as rates rise everywhere. The energy crisis, the US’ terms of trade advantage, Europe’s vulnerability to the war in Ukraine, all add to that. US rates are rising as the market reprices peak Fed Funds higher, and equities are being repriced lower. This has all the hallmarks of the start of the final stage of the dollar’s rally (a stage which has the capacity to be violent and volatile). “

“On the domestic front, the UK has a worse growth/inflation trade-off than most of its competitors, and a policy mix of fiscal profligacy and tight money, that is hurting confidence and encouraging dollar bulls to use sterling as the short side of a dollar long. I can’t remember the last time Far Eastern investors were so keen in discussing the UK economy and assets.”

“GBP/USD will struggle to stage a meaningful recovery until the dollar rally runs out of steam. I didn’t think we would go below GBP/USD 1.10, but sterling’s capacity for overshoot is well understood. The divergence between the Gilt/Treasury spread and GBP/USD (below) is even more dramatic now than it was in March 2020. That time, the Fed came to the rescue (for sterling and other currencies), but I’m not holding out any hope of easier Fed policy, and not much of any co-ordinated policy move to stop the dollar’s rise.”

Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group comment on the latest inflation figures in Malaysia.

Key Takeaways

“Consumer price index (CPI) increased for the fifth consecutive month by 4.7% y/y in Aug (Jul: +4.4%), coming in a tad lower than our estimate (4.8%) but matching Bloomberg consensus. It also marked the highest reading since Apr 2021, continuously lifted by costlier food & beverages, housing, utilities & other fuels, household equipment & appliances, recreation services & culture, and restaurants & hotels amid base effects.”

“We think that inflation may have peaked in this reporting month as the impact of price adjustments for various price-administered items and minimum wage hikes could have been fully reflected since May. However, the base effects will likely keep CPI growth above 4.0% for the rest of the year before decelerating towards the 2% level in 2023. This will bring full-year inflation to an average of 3.5% for 2022 (BNM est: 2.2%-3.2%, 2021: 2.5%) and 2.8% for 2023, barring any changes in domestic policy particularly the existing blanket fuel subsidies, electricity tariffs, and ceiling prices for staple food.”

“Notwithstanding forceful responses by most central banks to rein in inflation, we believe that BNM will tread more cautiously while monitoring the effects of cumulative 75bps rate hikes so far this year on the economy and inflation before deciding on the next move. Measures announced in the coming Budget 2023 particularly on subsidies could also steer the rate decision at the next monetary policy meeting on 2-3 Nov. We keep our view for BNM to hold policy rates at 2.50% for the rest of the year before resuming its rate hikes to 3.00% by mid-2023 should growth conditions hold up.”

• EUR/JPY manages to reverse an earlier steep drop to 137.30.
• Chances of a potential test of the 200-day SMA look on the rise.

EUR/JPY now regains ground lost and flirts with the positive territory following the strong pullback to the 137.30 region during early trade.

The continuation of the downtrend appears likely in the very near term, particularly against the backdrop of a weaker euro and the prospects for further FX intervention by the BoJ/MoF.

That said, a deeper pullback to the 200-day SMA, today at 135.61, should not be ruled out yet.

EUR/JPY daily chart

Economist at UOB Group Lee Sue Ann reviews the latest interest rate decision by the BoE.

Key Takeaways

“The Bank of England (BOE)’s Monetary Policy Committee (MPC), at its meeting in Sep, voted by a majority of 8-1 to increase the Bank Rate by 50bps to 2.25%, its seventh consecutive policy meeting since Dec that it has raised its key interest rate. Once again, the BOE warned that ‘policy is not on a pre-set path’, though it will act forcefully in response to persistent inflationary pressures. Notably, this is the first time since the great financial crisis, a three-way split was seen.”

“But with some more hawkish MPC members citing worries about rising short and medium term inflation expectations, we are now expecting the BOE to increase rates to 3.25% by year-end (50bps hikes at the Nov and Dec meetings), before taking its foot off the brakes in this current hiking cycle.”

“While financial markets are pricing a Bank Rate of close to 5% next year, we think that market expectations of rate hikes are overdone, and the latest split outcome within the MPC reinforces our view those expectations are unlikely to be met. We will, nonetheless, continue to monitor developments. The next monetary policy meeting is on 3 Nov.”

• GBP/USD stages a goodish intraday bounce from an all-time low touched earlier this Monday.
• Speculations for BoE intervention offer support to sterling and prompt intraday short-covering.
• A modest USD profit-taking slide from a fresh two-decade high contributes to the momentum.
• A combination of factors should keep a lid on any meaningful upside for the pair, at least for now.

The GBP/USD pair manages to recover a major part of its early lost ground to an all-time low and moves back to the 1.0700 mark during the first half of the European session. The attempted recovery, however, lacks follow-through buying and runs the risk of fizzling out rather quickly.

Speculations that the Bank of England will have to step in to stabilise the domestic currency helped the British pound to stall its free-fall following the new UK government's mini-budget on Friday. This, in turn, is leadsing to an intraday US dollar profit-taking slide from a fresh two-decade high, which further contributes to the GBP/USD pair's intraday recovery of over 400 pips from the 1.0330 area.

That said, a more hawkish stance adopted by the Fed, along with a further rise in the US Treasury bond yields and the prevalent risk-off mood, should help limit any meaningful USD corrective slide. In fact, the Fed last week delivered another supersized rate hike and signalled that it will likely undertake more aggressive increases at its upcoming meetings to combat stubbornly high inflation.

This, in turn, pushes the yield on the rate-sensitive 2-year US government bond to a 15-year peak and the benchmark 10-year Treasury note to its highest level in 11 years. Meanwhile, the rapidly rising borrowing costs, along with the risk of a further escalation in the Russia-Ukraine conflict, have been fueling concerns about a deeper global economic downturn and weighing on investors' sentiment.

The anti-risk flow is evident from a generally weaker tone around the equity markets, which could lend some support to the safe-haven greenback. Furthermore, the lack of confidence in the government’s ability to manage the ballooning debt might continue to act as a headwind for sterling. This, in turn, should keep a lid on any meaningful upside for the GBP/USD pair, at least for now.

Technical levels to watch

TD Securities economists announced that they have lifted the Reserve Bank of New Zealand's terminal OCR forecast to 4.5% from 4% previously.

We don't expect RBNZ rate cuts in 2023

"Offshore developments have not influenced our terminal OCR upgrade."

Activity has not taken a hit despite the rapid round of rate hikes, while financial conditions overall have probably eased. If the RBNZ is to get on top of inflation it needs wages growth to slow. A 4% terminal cash rate is unlikely to do the job.

The risks to our 4.50% terminal OCR are skewed to the upside. As such we don't expect RBNZ rate cuts in 2023."

Citing calculations made by Tokyo money market brokerage firms, Reuters reported on Monday that Japan's intervention in the foreign exchange market on September 22 is estimated to be around 3.6 trillion yen ($25 billion).

Japan's Ministry of Finance is expected to unveil the actual amount spent during the intervention on Friday.

"The uncertainty over Japan's economy is extremely high, we must keep the ultra-easy policy to support the economy," Bank of Japan (BoJ) Governor Harihuko Kuroda said earlier in the day. 

Market reaction

USD/JPY largely ignored this headline and was last seen trading at 143.80, where it was up 0.35% on a daily basis.

FX option expiries for September 26 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9500 391m
• 0.9550 201m
• 0.9650 246m
• 0.9700 327m
• 0.9720 627m
• 0.9800 594m

- USD/JPY: USD amounts                     

• 143.35-37 451m

- EUR/CHF: EUR amounts        

• 0.9450 400m
• 0.9600-10 280m
• 0.9650 250m

- AUD/USD: AUD amounts  

• 0.6550 1.1b
• 0.6725 464m

- USD/CAD: USD amounts       

• 1.3500 325m
• 1.3600 874m

• Gold reverses an intraday slide to its lowest level since April 2020 amid a modest USD pullback.
• Recession fears, a softer risk tone further extend some support to the safe-haven commodity.
• Bets for more aggressive Fed rate hikes to limit the USD downfall and cap gains for the metal.

Gold stages a goodish bounce from its lowest level since April 2020 touched earlier this Monday and climbs to a fresh daily high during the early European session. Bulls, however, struggle to capitalize on the move beyond the $1,650 level and remain at the mercy of the US dollar price dynamics.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, surrenders its early gains to a fresh two-decade high amid a recovery in the European currencies. This, in turn, assists the dollar-denominated gold to attract some buyers near the $1,626 region. Apart from this, the prevalent cautious market mood, amid worries about a deeper global economic downturn, turns out to be another factor offering support to the safe-haven precious metal.

The attempted recovery, however, lacks follow-through buying, warranting caution before positioning for any meaningful upside. The Fed last week delivered another supersized rate hike and signalled that it will likely undertake more aggressive increases at its upcoming meetings to tame inflation. A more hawkish stance adopted by the US central bank remains supportive of elevated US Treasury bond yields and should limit any meaningful USD corrective slide, at least for the time being.

The yield on the rate-sensitive 2-year US government bond stands tall near a 15-year high and the benchmark 10-year Treasury note hits the highest in 11 years. This might further contribute to keeping a lid on the non-yielding gold. In the absence of any relevant economic data from the US, traders will take cues from speeches by influential FOMC members. This, along with the US bond yields, the USD price dynamics and the broader risk sentiment might provide some impetus to gold.

Technical levels to watch

Economists at TD Securities note that the odds of an inter-meeting policy decision by the Bank of England (BoE) have risen sharply following the government's introduction of the "mini-budget" on Friday.

Tail risks of extreme policy moves have risen

"Postponing its Gilt sales programme or hiking Bank Rate seem the most likely options, above any verbal intervention."

"Tail risks of extreme policy moves, like the Treasury over-riding the BoE on rate decisions, have risen. Risks around the rate path profile have skewed sharply to the upside, and a double-digit Bank Rate now can't be completely ruled out."

"With the BoE already behind the curve, an emergency meeting or larger hikes won't do much besides a knee-jerk GBP bounce. The UK already ran one of the G10's highest current account deficits before the terms of trade shock, leaving GBP doubly exposed to capital flight and too little (real) yield pickup. Given lows seen in the trade-weighted broad GBP index over the past ten years, GBPUSD could stabilize around 1.045 in the months ahead, though the nature of the fiscal surprise suggests a risk of a further 15% decline in the currency before accounting for a confidence crisis. We continue to like European pairs lower against the JPY in the months ahead with GBP underperforming CHF and EUR."

"In my opinion, the European Central Bank (ECB) must maintain the basic principles of gradualism and flexibility as the problem it faces is different than that faced by the Fed in the US," ECB Governing Council member Yannis Stournaras said on Monday. 

"Inflation in Europe today comes from the side of supply and not demand," Stournaras added, as reported by Reuters. "To a great extent, it is due to imported natural gas from Russia, which has been instrumentalised."

Market reaction

The EUR/USD pair showed no immediate reaction to these remarks and was last seen trading virtually unchanged on the day slightly below 0.9700.

• GBP/JPY stages a solid intraday recovery from its lowest level since February 2021.
• Speculations for BoE intervention prompt intraday short-covering around sterling.
• A turnaround in the risk sentiment weighs the safe-haven JPY and offers support.

The GBP/JPY cross recovers a major part of its intraday slump to the lowest level since February 2021 and climbs back above mid-154.00s during the early European session.

Speculation that the Bank of England will step in to stabilise the domestic currency helps the British pound to stall its free-fall following the new UK government's mini-budget on Friday. This, along with a turnaround in the global risk sentiment, undermines the Japanese yen's relative safe-haven status and prompts aggressive short-covering around the GBP/JPY cross.

The JPY is also weighed down by a dovish stance adopted by the Bank of Japan in comparison to other major central banks. This is reaffirmed by the short-lived reaction to the intervention of Japanese authorities to stem the recent rapid fall in the JPY. Despite the supporting factors, any meaningful upside for the GBP/JPY cross remains elusive, warranting caution for bulls.

The most radical fiscal plan since 1972 could undermine the BoE’s goal to tame inflation amid looming recession risks. The UK Finance Minister Kwasi Kwarteng announced reductions in the top rate of income tax, national insurance, and stamp duty. This, along with the UK Prime Minister Liz Truss' plans to subsidize energy bills, threatens to stretch Britain's finances to their limits.

Investors are showing less confidence in the UK government’s ability to manage the ballooning debt, which might continue to act as a headwind for sterling. Adding to this, worries about a deeper global economic downturn and geopolitical risk should keep a lid on any optimistic move in the markets. This could lend support to the safe-haven JPY and cap the upside for the GBP/JPY cross.

Technical levels to watch

• German IFO sentiment indexes fell at a stronger pace than expected in September.
• EUR/USD trades below 0.9700 in the early European session.

The headline German IFO Business Climate Index fell to 84.3 in September from 88.5 in August, falling short of the market expectation of 87.1.

The Current Assessment Index dropped to 94.5 from 97.5 and the Expectations Index declined to 75.2 from 80.3. Both of these readings came in below analysts' estimates.

"A big minus on all fronts, almost all sectors of the economy are in the minus, the German economy is facing a recession." IFO economist told Reuters assessing the survey and noted that retail business expectations are at historic lows.

"Price expectations rose again, more than every second company looks to increase prices," the economist added. "Energy-intensive industries are particularly pessimistic about the winter".

Market reaction

The disappointing sentiment data don't seem to be having a significant impact on the shared currency's valuation. As of writing, EUR/USD was down 0.1% on the day at 0.9680.

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest interest rate decision by the BSP.

Key Takeaways

“Bangko Sentral ng Pilipinas (BSP) decided to escalate its inflation fight with a second back-to-back 50bps rate hike today (22 Sep), taking the overnight reverse repurchase (RRP) rate to 4.25%. The decision matched market expectations but came in more aggressive than we had anticipated. We attribute it to the impact of a more aggressive shift in US Fed’s hawkishness this morning (22 Sep), steeper depreciation in Peso (PHP) to an all-time low, and expected broadening of second-round effects on inflation from an approved fare hike for public transports that will take effect on 3 Oct.”

“The overall tone of the latest monetary policy statement (MPS) was largely unchanged compared to Aug’s statement, in which the central bank continues to highlight inflation as its primary concern, leaving the door open for more rate hikes and remains data dependent. BSP raised its full-year inflation projections again to 5.6% for this year (from Aug’s estimate of 5.4%, UOB est: 5.5%) and 4.1% for 2023 (from Aug’s estimate of 4.0%, UOB est: 4.5%), but trimmed its 2024 inflation forecast to 3.0% (from Aug’s estimate of 3.2%).”

“Given that the circumstances (i.e. Fed rate expectations, FX movement, and domestic policy changes) have changed dramatically from our assessment last month, we now think that BSP will need to respond more forcefully to these new developments. The cumulative 225bps interest rate increases so far this year, which fully unwound the 200bps cuts in 2020 with a tighter rate than prepandemic by 25bps, indicates that BSP is willing to tolerate a pullback in domestic growth as the necessary trade-off for bringing inflation back to target range. Thus, we raise our RRP rate projection to 5.00% by end-2022 (from 4.00% previously) with a 50bps hike in Nov and a 25bps hike in Dec. Thereafter, we stick to our view that BSP will press the rate pause button at 5.00% through 2023 until the global and domestic landscape warrants a change.”

Bank of Japan (BoJ) Governor Harihuko Kuroda said on Monday that the Japanese Ministry of Finance's intervention in the foreign exchange market was the appropriate move to address excess volatility, as reported by Reuters. 

"Recent yen declines were one-sided and rapid, so they were negative for the economy," Kuroda added. "The uncertainty over Japan's economy is extremely high, we must keep the ultra-easy policy to support the economy."

Market reaction

The USD/JPY pair edged slightly higher after these comments and was last rising 0.35% on the day at 143.82.

• AUD/USD bounces off its lowest level since May 2020 amid a modest intraday USD pullback.
• Recession fears, bets for aggressive Fed rate hikes to limit the USD losses and cap the major.
• Investors now look forward to speeches by FOMC members for short-term opportunities.

The AUD/USD pair stages a modest recovery from its lowest level since May 2020 set earlier this Monday, though lacks any follow-through buying. The pair seesaws between tepid gains/minor losses through the early European session and is currently placed just above the 0.6500 psychological mark.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, surrenders its intraday gains to a fresh two-decade high and offers some support to the AUD/USD pair. Speculations that the Bank of England will have to step in to stabilise the domestic currency helped the British pound to rebound swiftly following a two-day free fall. This, along with a turnaround in the risk sentiment, prompts some profit-taking around the safe-haven greenback and benefits the risk-sensitive aussie.

That said, growing worries about a deeper global economic downturn and the risk of a further escalation in the Russia-Ukraine conflict should keep a lid on any optimistic move in the markets. Apart from this, a more hawkish stance adopted by the Federal Reserve should limit any meaningful USD corrective pullback and cap the upside for the AUD/USD pair. It is worth recalling that the US central bank last week delivered another supersized rate hike and signalled large increases at its upcoming meetings to tame inflation.

The fundamental backdrop suggests that the path of least resistance for the AUD/USD pair is to the downside. This makes it prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom. In the absence of any relevant economic data from the US, traders on Monday will take cues from speeches by influential FOMC members. This, along with the US bond yields and the broader risk sentiment, might influence the USD and provide some impetus to the AUD/USD pair.

Technical levels to watch

• The index meets decent hurdle near the 114.50 zone.
• US 2-year yields climb to new multi-year peaks near 4.35%.
• Fedspeak, Chicago Fed Index next on tap later in the NA docket.

The greenback, in terms of the USD Index (DXY), meets some decent resistance in the 114.50 region, an area last seen in mid-May 2002.

USD Index stronger on Fed, yields

The index adds to Friday’s uptick and surpasses the 114.00 barrier as investors continue to gauge the prospects for the continuation of the tight stance from the Federal Reserve in the next months.

The move higher in the dollar comes in tandem with further upside in yields in the short-end of the curve – a barometer of Fed’s next steps when it comes to rate hikes - which approach the 4.35% area for the first time since August 2007.

Later in the NA session, the Chicago Fed National Activity Index will be the sole release along with speeches by Boston Fed S.Collins (centrist, voter), Atlanta Fed R.Bostic (2024 voter, centrist) and Cleveland Fed L.Mester (voter, hawk).

What to look for around USD

The upside bias in the dollar remains everything but exhausted and it has been fuelled further by the recent FOMC event and comments by Chair Powell. Despite current overbought levels, there seems to be scope for extra gains in the greenback in the short-term horizon.

Propping up the dollar’s underlying positive stance appears 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.

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: Chicago Fed National Activity Index (Monday) – Durable Goods Orders, House Price Index, New Home Sales (Tuesday) – MBA Mortgage Applications Advanced Trade Balance (Wednesday) – Final Q2 GDP Grow Rate, Initial Claims (Thursday) – PCE/Core PCE, Personal Income/Spending. Final Michigan Consumer Sentiment (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 over 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 advancing 0.22% at 113.25 and a breakout of 114.52 (2022 high September 26) would expose 115.00 (round level) and then 115.32 (May 2002 high). On the downside, the next contention aligns at 108.11 (55-day SMA) seconded by 107.68 (monthly low September 13) and finally 107.58 (weekly low August 26).

FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang suggest the next target for USD/CNH emerges at the 2020 high at 7.1960.

Key Quotes

24-hour view: “USD rose above last Friday’s high of 7.1472 during Asian hours. While the rapid rise appears to be overextended, the rally in USD is not showing signs of weakening. In other words, the risk is for further USD strength. That said, the 2020 high of 7.1960 is unlikely to come into view for today (there is another resistance at 7.1800). On the downside, 7.1210 is expected to hold any intraday pullback (minor support is at 7.1300).”

Next 1-3 weeks: “Our latest narrative was from last Thursday (22 Sep, spot at 7.0850). As indicated, USD is ready for the next up leg towards 7.1500, possibly to the 2020 high of 7.1960. USD breached 7.1500 during early Asian hours today. All eyes are on the 2020 high of 7.1960 now. A breach of the major and long-term resistance could lead to an upward acceleration. Overall, only a break of 7.0750 (‘strong support’ level was at 7.0400 last Friday) would indicate that the USD strength that started more than a week ago has come to an end.”

The European Central Bank's (ECB) future rate increases will depend on the incoming macroeconomic data, European Central Bank (ECB) Vice President Luis de Guindos, said on Monday.

"The ECB is carefully watching out for second-round effects and the bank is fully committed to 2% medium-term inflation target," de Guindos added and acknowledged that the third and fourth quarters point towards growth rates close to zero in eurozone.

Market reaction

There was no immediate market reaction to these comments and the EUR/USD pair was last seen trading flat on the day slightly below 0.9700.

• A combination of factors lifts USD/CAD to its highest level since June 2020 on Monday.
• Bearish oil prices undermine the loonie and offer support amid relentless USD buying.
• Investors look for Fedspeaks for some impetus and short-term trading opportunities.

The USD/CAD pair builds on last week's bullish breakout momentum and gains some follow-through traction on Monday. The momentum lifts spot prices to the highest level since June 2020, around the 1.3640 area during the early European session and is sponsored by a combination of factors.

Crude oil prices kick off the new week on a downbeat note and hit a fresh multi-month low amid worries that a deeper global economic downturn will hurt fuel demand. This, in turn, is seen undermining the commodity-linked loonie, which, along with relentless US dollar buying, continues to boost the USD/CAD pair.

The Fed last week delivered another supersized rate hike, as was widely anticipated, and signalled that it will likely undertake more aggressive increases at its upcoming meetings to cap inflation. The hawkish outlook remains supportive of elevated US Treasury bond yields and continues to lend support to the buck.

In fact, the yield on the rate-sensitive 2-year US government bond stands tall near a 15-year high and the benchmark 10-year Treasury hits its highest in 11 years. Apart from this, the prevalent risk-off environment is seen as another factor benefitting the safe-haven greenback and lending support to the USD/CAD pair.

The market sentiment remains fragile amid recession fears, which, along with geopolitical risk, take its toll on the global risk sentiment. The anti-risk flow is evident from a generally weaker tone around the equity markets, which favours the USD bulls and supports prospects for additional gains for the USD/CAD pair.

Market participants now look forward to speeches by influential FOMC members - Boston Fed President Susan Collins, Atlanta Fed President Raphael Bostic and Dallas Fed President Lorie Logan. This, along with the US bond yields and the broader risk sentiment, might influence the USD and provide some impetus to the USD/CAD pair. Traders will further take cues from oil price dynamics to grab short-term opportunities.

Technical levels to watch

• GBP/USD picks up bids to extend corrective bounce off the record low prices.
• UK Opposition Labour Finance Spokesperson Rachel Reeves teased unscheduled BOE rate hike.
• British military intelligence spots the start of Russia's partial mobilization of troops.
• Risk catalysts are important but BOE’s intervention could offer the much-needed bounce to the Cable.

GBP/USD consolidates the daily loss around the record low, picking up bids to 1.0660 heading into London open on Monday, amid talks of the Bank of England’s (BOE) rate hike.

As per the latest updates, GBP/USD traders price 150 basis points (bps) of the BOE rate hike by November. Also fueling the cable of late could be the comments from UK Opposition Labour Finance Spokesperson Rachel Reeves who said, “The fall in sterling puts pressure on the Bank of England to raise interest rates.” The shadow Chancellor also mentioned that She is incredibly worried about the market reaction to the mini-budget.

The Cable pair slumped to the all-time bottom earlier in the day amid fears that the UK’s fiscal package won’t be able to cure the British economic problems. On top of that, the Labour Party leader criticised the tax cut efforts and amplified the pair of the GBP/USD buyers.

Elsewhere, headlines suggesting Japan’s ban on goods related to chemical weapons to Russia and the European Crisis Response Working Group’s meeting to discuss the gravity of situations also weigh on the risk appetite and probe the GBP/USD bulls. It should be noted that the US warned of "catastrophic consequences" if Moscow were to use nuclear weapons in Ukraine and propelled the risk-off mood, as well as the US dollar, during the early day.

Amid these plays, S&P 500 Futures dropped near 0.80% and the US 10-year Treasury yields remain firmer the highest levels since 2010. Further, the US 02-year bond coupons refreshed the 15-year top to 4.30% at the latest.

Moving on, GBP/USD remains at the mercy of the BOE intervention and could plummet if the “Old Lady”, as the central bank is mostly known, disappoints the pair traders.

Technical analysis

GBP/USD buyers need validation from the year 2020 low near 1.1410 to justify the recovery moves.

Here is what you need to know on Monday, September 26:

The US Dollar Index picked up where it left off last week and surged to its highest level since May 2002 114.52 before retracing a portion of its daily rally in the early European morning. Risk aversion, hawkish Fed commentary and rising US Treasury bond yields play a role in the dollar's impressive performance. The IFO sentiment survey from Germany will be featured in the European economic docket ahead of the Chicago Fed National Activity Index and Dallas Fed Manufacturing Business Index data from the US. European Central Bank (ECB) president Christine Lagarde and several FOMC policymakers will also be delivering speeches on Monday.

Ahead of the weekend, US PMI figures revealed that the service sector's business activity recovered nicely in early September. Moreover, the Composite PMI rose sharply to 49.3 from 44.6 in July and the Manufacturing PMI edged higher to 51.8 from 51.1 in the same period.

In an interview with CBS on Sunday, Atlanta Fed President Raphael Bostic reiterated that inflation is too high and that they need to do all they can to bring it down. Bostic will be speaking again on Monday. Cleveland Federal Reserve Bank President Loretta Mester and Federal Reserve Bank of Dallas President Lorie Logan are scheduled to speak later in the day as well. Meanwhile, the benchmark 10-year US Treasury bond yield is up more than 2% on the day at 3.78%.

EUR/USD lost over 300 pips last week and slumped to its weakest level since June 2002 at 0.9570 during the Asian trading hours on Monday. The pair was last seen trading deep in negative territory near 0.9630.

GBP/USD hit a new all-time low of 1.0355 in the early Asian session. The Bank of England's disappointing 50 bps hike earlier in the week and the British government's plan to lower taxes and ramp up public borrowing triggered a relentless GBP selloff ahead of the weekend. Although the pair recovered above 1.0600 in the early European morning, it's still down over 2% on a daily basis. In the meantime, there is market speculation that the BoE could conduct an emergency meeting and raise its policy rate to limit the British pound's depreciation.

Rising US yields and the broad-based dollar strength allowed USD/JPY to continue to push higher toward 144.00 on Monday. Following last week's intervention in the fx markets, "there is no change to our stance that we will respond to market moves as needed,” Japanese Finance Minister Shunichi Suzuki reiterated on Monday. The data from Japan showed that the Jibun Bank Services PMI rose to 51.9 in early September from 49.5 in August and the Manufacturing PMI edged lower to 51 from 51.5.

Gold fell below $1,630 but managed to erase a large portion of its daily losses. The precious metal seems to be staying relatively resilient against the greenback despite rising yields as it manages to capture some of the safe-haven flows. At the time of press, XAU/USD was little changed on the day at $1,639.50.

Bitcoin lost over 2% over the weekend and broke below $19,000. BTC/USD was last seen trading modestly lower on the day at $1,8730. Ethereum stays on the backfoot early Monday and loses 1% on the day slightly below $1,300.

• EUR/USD drops to more than 20-year lows near 0.9550.
• The rally in the greenback appears unabated on Monday.
• Germany IFO, ECB Lagarde, Fedspeak next on tap later.

After bottoming out in the 0.9550 region, EUR/USD now manages to regain some poise and reclaim the area above 0.9600 the figure at the beginning of the week.

EUR/USD remains under pressure on dollar strength

EUR/USD enters the third consecutive week with losses so far, bouncing off levels last seen in mid-June 2002 around 0.9550 against the backdrop of the persistent upside bias in the greenback.

On the latter, the buying interest in the dollar gathered extra steam in the wake of the latest FOMC event, where the Fed raised rates by 75 bps and Chief Powell maintained the hawkish rhetoric.

In the domestic calendar, Germany’s Business Climate tracked by the IFO Institute will take centre stage later in the European morning along with speeches by ECB’s De Guindos, Panetta and Chair Lagarde.

Across the Atlantic, the Chicago Fed National Activity Index and speeches by FOMC’s Collins, Bostic and Mester are also due.

What to look for around EUR

EUR/USD remains under heavy pressure against the backdrop of the unabated rally in the greenback. The pair dropped to levels last seen in June 2002 around 0.9550, leaving the door open to the continuation of this trend in the very near term at least.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The latter has been exacerbated further following the latest rate hike by the Fed and the persevering hawkish message from Powell and the rest of his rate-setters peers.

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: Germany IFO Business Climate, ECB Lagarde (Monday) – ECB Lagarde (Tuesday) – Germany GfK Consumer Confidence, ECB Lagarde (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment, Germany Flash Inflation Rate (Thursday) – EU Emergency Energy Meeting, Germany Retail Sales, France, Italy, EMU Flash Inflation Rate, Germany Unemployment Change, Unemployment Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian post-elections developments. Fragmentation risks amidst the ECB’s normalization of its monetary conditions. 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 retreating 0.45% at 0.9642 and a breach of 0.9552 (2022 low September 26) would target 0.9411 (weekly low June 17 2002) en route to 0.9386 (weekly low June 10 2002). On the upside, initial hurdle comes at 1.0050 (weekly high September 20) followed by 1.0197 (monthly high September 12) and finally 1.0272 (100-day SMA).

• The shared currency bulls have defended an establishment below 61.8% Fibo.

• A sheer decline in the 20-EMA adds to the downside filters.

• The RSI (14) is oscillating in the bearish range of 20.00-40.00.

The EUR/JPY pair has turned sideways after a pullback move to near 138.63 in the early European session. Earlier, the asset witnessed a steep fall to near 137.50 but rebounded sharply;y and left a buying tail, which indicates a responsible buying market structure. On a broader note, the cross has remained in the grip of bears, therefore, a decent pullback move cannot be ruled out.

Observing the four-hour scale, it is visible that the cross has bounced back sharply after dropping below the 61.8% Fibonacci retracement (placed from August 2 low at 133.40 to September 12 high at 145.64) at 138.00.

The 20-period Exponential Moving Average (EMA) near 140.00 has displayed a vertical downside move, which indicates more weakness.

Also, the Relative Strength Index (RSI) (14) is oscillating in a bearish range of 20.00-40.00, which signals that the downside momentum is aggressive.

A slippage below Monday’s low at 137.39 will drag the cross towards the August 25 low at 136.02, followed by the August 16 low at 134.90.

On the flip side, the shared currency bulls will regain strength and will drive the asset higher if they manage to surpass 50% Fibo retracement at 139.56. This will drive the asset towards September 2 high at140.75 and September 14 low at 142.30.

EUR/JPY four-hour chart

• USD/JPY pares intraday gains as BOJ’s Kuroda discusses economic fears.
• BOJ’s Kuroda warns of uncertainty, risks to economic outlook but failed to provide clear directions on intervention.
• Firmer yields, risk-aversion keeps DXY on the front foot.
• Risk catalysts, Fedspeak will be important for fresh impulse, intervention news could weigh on prices.

USD/JPY retreats to 143.80 during the two-day uptrend to the initial Monday morning in Europe. The yen pair’s latest weakness could be linked to the mixed comments from Bank of Japan (BOJ) Governor Haruhiko Kuroda, especially amid the hopes of the market intervention and fears emanating from Russia.

BOJ’s Kuroda recently stated that the uncertainty over the economic outlook, particularly downside risks, heightening. The policymaker, however, also added, “Japan's economy picking up, likely to continue recovering.”

The yen pair cheered the market’s rush towards risk safety earlier in the day as a slump in the GBP/USD joined firmer US data and hawkish Fedspeak to propel the chatters over multiple central banks’ intervention to defend respective currencies. While the Bank of England’s (BOE) announcement is looming, the People’s Bank of China (PBOC) said it would raise the foreign exchange risk reserves for financial institutions when purchasing FX through currency forwards to 20% from the current zero, starting on Sept. 28.

Elsewhere, preliminary readings of Japan’s Jibun Bank Manufacturing and Services PMIs for September also failed to provide a clear picture of the Asian major. That said, the Jibun Bank Manufacturing PMI eased to 51.0 versus 51.1 expected and 51.5 prior while the Services counterpart rose to 51.9 from 49.3 market forecasts and 49.5 previous readings.

It should be noted that the weekend comments from the Fed policymakers praised the recently firmer US data and showed readiness to hike the rates. Also keeping the US dollar firmer were the fears emanating from Russia as the West braced for severe sanctions on Moscow’s warning to use nuclear weapons.

Amid these plays, S&P 500 Futures drop half a percent while the US 10-year Treasury yields add four basis points to 3.74% at the latest. It should be noted that the benchmark yields remain firmer at the highest levels since 2010 while the US 02-year bond coupons refreshed the 15-year top to 4.30% at the latest.

Looking forward, news surrounding central banks and Russia will be crucial for intraday traders. Should the market fears more meddling, the USD/JPY pair will have further upside. However, the BOJ’s action might probe the bulls.

Technical analysis

Unless printing a daily close below the 21-DMA level near 142.25, the USD/JPY bulls could keep poking the 13-day-old resistance line near 144.00. That said, a firmer RSI (14) favors the buyers.

• Japanese indices plunged as BOJ’s intervention forced a sell-off in export-oriented firms.

• The DXY is aiming to recapture 114.53 amid the risk-off market mood.

• Oil prices have dropped below $80.00 as global recession fears soar.

Markets in the Asian domain are displaying a wide divergence in performance as the Japanese equities are facing an intense sell-off amid the Bank of Japan (BOJ)’s intervention in the currency markets while Chinese equities are performing firmer despite the house arrest of the Chinese leader Xi Jinping.

At the press time, Japan’s Nikkei225 plummeted 2.55%, ChinaA50 jumped almost 1% while Hang Seng eased 0.20%.

An intervention in the currency markets by the BOJ has cleared that the economy is worried about the depreciating yen, which has forced investors to dump equities belonging to export-oriented firms and the tourism industry as their revenue will fall ahead. Meanwhile, Jibun Bank PMI numbers have failed to make any impact.

The Manufacturing PMI has trimmed to 51.0 against the expectations of 51.1 while the Services PMI has accelerated to 51.9 against the forecasts of 49.3.

Chinese indices are performing well despite the signs of political instability. The House arrest of Chinese leader Xi Jinping has underperined risk-off market mood.

The US dollar index (DXY) is facing barricades around 114.00, however, the odds are favoring recapturing the two-decade high of 114.52.

On the oil front, a fresh rate hike cycle by western central banks has bolstered the chances of a global recession. In order to corner the soaring price pressures, central banks are accelerating interest rates vigorously despite knowing the fact that their economic fundamentals are not supportive. Higher interest rates will for sure trim the overall demand and eventually the demand for oil.

USD/JPY is now expected to navigate within the 139.00-144.50 range in the next weeks, comment FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “USD traded between 141.75 and 143.46, much narrower than our expected range of 140.00/144.00. The underlying has improved somewhat and the bias for today is on the upside. However, a sustained rise above 144.50 is unlikely. Support is at 143.20 but only a breach of 142.80 would indicate the current mild upward pressure has eased.”

Next 1-3 weeks: “Our view from last Friday (23 Sep, spot 142.20) still stands. As highlighted, the recent USD strength has ended and USD could trade choppily between 139.00 and 144.50 for now. Looking ahead, USD has to close above 145.00 before another up leg is likely.”

Considering advanced prints from CME Group for natural gas futures markets, open interest reversed three daily pullbacks in a row and went up by around 3.2K contracts on Friday. Volume, instead, dropped by around 22.7K contracts after two consecutive daily builds.

Natural Gas: Next on the downside comes the 200-day SMA

Prices of the natural gas extended the leg lower at the end of last week in tandem with rising open interest. That said, extra losses remain well on the table and could now challenge the 200-day SMA at $6.45 per MMBtu in the near term.

Bank of Japan (BOJ) Governor Harihuko Kuroda crossed wires during early Monday morning in Europe, via Reuters, saying, “Japan's economy picking up, likely to continue recovering.”

More comments

USD/JPY retreats to 143.75

Following the news, the USD/JPY pair reverses from the intraday high near 144.26 to 143.67 at the latest.

• EUR/GBP retreats after refreshing two-year high, sluggish of late.
• Bulls need validation from the key Fibonacci retracement hurdle.
• Sellers could take risks unless the quote drops below 0.8715.
• Bullish bias fades amid overbought RSI, nearness to key resistances.

EUR/GBP struggles to extend the latest run-up to the highest levels since September 2020, retreating to 0.9133 heading into Monday’s European session. In doing so, the cross-currency pair justifies the overbought RSI (14), as well as the importance of the Fibonacci retracement levels of the March 2020 to March 2022 downturn.

That said, the quote’s latest pullback, however, needs validation from the 61.8% Fibonacci retracement level of the 0.9000 psychological magnet to extend the south-run.

Following that, the 50% Fibonacci retracement level near 0.8850 can entertain the EUR/GBP bears before directing them to the tops marked during April 2021 and June 2022, around 0.8720.

Alternatively, the EUR/GBP prices need a weekly closing beyond the 78.6% Fibonacci retracement level near 0.9215-20 to keep the buyers hopeful.

In that case, the late March 2020 high near 0.9390 could offer an intermediate halt during the run-up to the year 2020 peak surrounding the 0.9500 mark.

To sum up, EUR/GBP is likely to remain firmer but the short-term pullback can’t be ruled out.

EUR/GBP: Weekly chart

Trend: Pullback expected

AUD/USD remains under pressure and could attempt a deeper pullback to 0.6400, suggest FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “AUD plunged to 0.6512 last Friday before extending its decline during early Asian. The impulsive decline is likely to extend. That said, the next support at 0.6400 is likely out of reach for now (there is another support at 0.6460). Resistance is at 0.6530 followed by 0.6570.”

Next 1-3 weeks: “More than a week ago (14 Sep, spot at 0.6735), we indicated that the risk for AUD had shifted to the downside. As AUD dropped, in our latest narrative from last Thursday (22 Sep, spot at 0.6600), we highlighted that AUD is still weak and the focus is at 0.6500. AUD dropped below 0.6500 during early Asian hours today and we continue to expect AUD to weaken. The next level to watch is at 0.6400. The downside risk is intact as long as AUD does not move above 0.6620 (‘strong resistance’ level was at 0.6705 last Friday).”

CME Group’s flash data for crude oil futures markets saw traders add around 26.2K contracts to their open interest positions on Friday. In the same line, volume increased by around 84.7K contracts, reversing the previous daily retracement.

WTI: Decline could challenge 2022 lows near $74.00

The selling pressure around crude oil remained unabated on Friday amidst rising open interest and volume. Against that, prices of the WTI look poised to confront the YTD low at $74.30 per barrel (January 3) sooner rather than later.

In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, GBP/USD could slip back to the parity level in the short-term horizon.

Key Quotes

24-hour view: “The sudden and outsized drop in GBP last Friday came as a surprise. GBP continues to decline during early Asian hours as plunged briefly below the record low of 1.0400 before snapping back up. Despite the bounce, GBP is not out of the woods yet. That said, deeply oversold conditions suggest 1.0300 is likely out of reach for now. Resistance wise, 1.0810 is likely strong enough to hold any rebound (minor resistance is at 1.0700).”

Next 1-3 weeks: “Last Friday (23 Sep, spot at 1.1265), we indicated the odds for GBP to decline to 1.1150, 1.1100 have diminished. We clearly did not expect the manner in which GBP nose-dived to 1.0840. GBP continue to accelerate lower today as it took out the 1985 record low of 1.0520. In view of the impulsive downward acceleration, further decline to 1.0000 is not ruled out. On the upside, the ‘strong resistance’ at 1.1000 (level was at 1.1370 last Friday) would indicate that the weakness in GBP has stabilized.”

• Gold price fades bounce off 29-month low amid risk-aversion.
• GBP/USD slump, hawkish Fedspeak and Russia-inspired geopolitical fears weigh on prices.
• Sustained trading below the monthly pivot, middle Bollinger Band keeps sellers hopeful.

Gold price (XAU/USD) drops back towards the recently flashed two-year low near $1,626 as sour sentiment joins hawkish Fedspeak to propel the US Dollar Index. While Russia-linked geopolitical concerns are the headline challenge to the market, the recent slump in the multiple currencies versus the US dollar, especially the British Pound (GBP), also adds to the risk-off mood. Furthermore, firmer US PMIs and hawkish Fedspeak are the extra catalysts that favor the US dollar bulls and weigh on the bullion prices of late. However, this week’s speech from Fed Chairman Jerome Powell will be crucial for clear directions as traders sense a pullback in the greenback.

Also read: Gold Price Forecast: XAU/USD seems vulnerable to test sub-$1,600 levels

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price remains comfortably below the $1,645 support-turned-resistance confluence comprising the middle band of the hourly Bollinger and the pivot point one month S2.

That said, the previous day’s low and the SMA10 on 1H guards the quote’s immediate upside near the $1,640 mark.

It should also be noted that multiple hurdles beyond $1,645 could challenge the XAU/USD bulls. Among them, a convergence of the Fibonacci 38.2% on one-day and SMA10 on 4H offers a strong resistance near $1,655.

On the contrary, the pivot point one-day S1 joins the lower band of the hourly Bollinger to highlight $1,631 as the immediate support.

Following that, the previous low 4H joins the pivot point one week S1 constituting $1,627 as the key support.

Overall, gold is likely to remain weak unless staying successfully beyond $1,645.

Here is how it looks on the tool

About Technical Confluences Detector

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

• AUD/USD auctions around 0.6500 and is preparing for a make or break move.

• The House arrest of China’s Xi Jinping has soured the market mood.

• Demand for US Durable Goods Orders is likely to decline amid soaring core CPI.

The AUD/USD pair has turned sideways after declining to near the psychological support of 0.6500 in the Asian session. The asset has shifted into a short-term inventory adjustment process, which will result in a sheer move ahead.

In the early Tokyo session, the asset printed a fresh two-year low at 0.6487 and a less confident pullback pushed the asset above 0.6500, Now, the market participants have capitalized on a pullback and a firmer US dollar index (DXY) is supporting more weakness in the major.

The DXY has displayed a stellar performance as the firmer negative market sentiment forced investors to safeguard themselves behind the first. The asset is aiming to recapture its intraday high at 144.52. The House arrest of Chinese leader Xi Jinping has spooked the market sentiment as it has triggered political instability in the world’s second-largest economy. It has significantly weakened the Australian dollar as the antipodean is a leading trading partner of China.

This week, investors will keep an eye on US Durable Goods Orders data, which will release on Tuesday. As per the preliminary estimates, the economic data will decline by 1.1%. Earlier, the core Consumer Price Index (CPI) landed higher at 6.3%, higher than the estimates of 6.1% and the prior release of 5.9%. This has trimmed the demand for Durable Goods Orders.

On the Aussie front, investors are awaiting the release of the monthly Retail Sales data. A decline in the economic data in times when inflation is sky-rocketing in the Australian economy will indicate that the retail demand is pretty low.

Open interest in gold futures markets shrank by around 1.6K contracts on Friday after two consecutive daily pullbacks, according to preliminary readings from CME Group. Volume followed suit and rose for the fourth session in a row, this time by around 16.6K contracts.

Gold now looks to $1,600

Friday’s strong drop in gold prices below the $1,650 region was amidst rising open interest and volume, leaving the door open to the continuation of the leg lower and with the immediate target at the $1,600 mark per ounce troy.

The continuation of the downtrend could drag EUR/USD to the 0.9500 region in the next weeks, note FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We did not expect the outsized drop in EUR of 1.48% (NY close of 0.9690) last Friday (we were expecting range-trading). EUR plummeted briefly below 0.9600 during Asian hours before snapping back up. Despite the bounce, the weakness in EUR has not stabilized. In other words, EUR could weaken further even though 0.9500 is unlikely to come under threat for now. Resistance is at 0.9700 and 0.9740.”

Next 1-3 weeks: “We have held a negative EUR view for more than a week now. As EUR dropped, in our latest narrative from last Thursday (22 Sep, spot at 0.9830), we indicated that EUR is likely to continue to head lower in the coming days. We stated ‘the levels to watch are at 0.9770 and 0.9720’. On Friday (23 Sep), EUR sliced through both 0.9770 and 0.9720. EUR extended its decline during Asian hours today. The impulsive and outsized drop suggests EUR could continue to weaken, possibly to 0.9500. On the upside, a breach of 0.9810 (‘strong resistance’ level was at 0.9940 last Friday) would indicate that the current weakness in EUR has stabilized.”

• EUR/USD holds lower ground after refreshing 20-year bottom.
• Market sentiment remains sour after cable slumped to all-time low, Russia-inspired geopolitical woes spread.
• Hawkish Fedspeak, firmer US data versus downbeat EU figures also weigh on prices.
• ECB’s Lagarde, Germany IFO numbers and Italian politics eyed for intraday directions.

EUR/USD fades bounce off the recently flashed 20-year low of 0.9553, around 0.9630 heading into Monday’s European session, as bears keep reins amid a broad risk-off mood.

Fears of multiple central banks’ intervention and those emanating from Russia weigh on the market sentiment during early Monday. In addition to the risk-aversion, the downbeat activity numbers from the bloc, versus upbeat US statistics, also weigh on the EUR/USD prices.

After the GBP/USD pair’s slump to the record low, the Bank of England’s (BOE) intervention appears imminent. That said, the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) are on the other hand to defend their domestic currencies from weakening too much while keeping the monetary policy intact.

On the other hand, Friday’s first readings of the US S&P Global PMIs for September raised concerns about the firmer rate hikes by the US Federal Reserve (Fed) as the numbers were upbeat, as compared to softer figures for Europe. Following the data, Fed Chairman Jerome Powell, Vice Chair Lael Brainard and Atlanta Fed President Raphael Bostic all were mostly bullish and in favor of further rate hikes.

At home, German Services PMI dropped to the two-year low while its counterpart for Europe tested the lowest levels in 19 months. Overall, the first readings of September month S&P Global PMIs suggested that the European economy slipped further into contraction, hurt by soaring energy prices.

Elsewhere, the global ire towards Russia’s plan to deploy more troops around Ukraine also exerted downside pressure on the EUR/USD prices, via the US dollar strength. Recently, Japan bans chemical weapons-related goods to Russia, concerned by nuke threats, per Reuters.

Against this backdrop, S&P 500 Futures drop half a percent while the US 10-year Treasury yields add four basis points to 3.74% at the latest.

Looking forward, the risk-off mood could keep the EUR/USD prices pressured. However, comments from European Central Bank (ECB) President Christine Lagarde and sentiment numbers from Germany’s IFO institute could direct intraday moves. That said, the latest exit poll from Italy suggests that Giorgia Meloni is all set to become the nation’s first Prime Minister even as some in the region criticize her for certain approaches.

Technical analysis

Six-month-old bearish channel and sustained trading below the previous key support line from July, now resistance around 0.9830, keep the EUR/USD sellers hopeful.

• USD/CHF is eyeing a break above 0.9850 as a risk-off market mood soars.

• The DXY is expected to recapture a fresh two-decade high at 114.52 on upbeat PMI numbers.

• SNB’s 75 bps rate hike failed to support the Swiss franc bulls.

The USD/CHF pair is hovering around the immediate hurdle of 0.9860 in the Tokyo session as a pullback towards 0.9755 has concluded and upside momentum has resumed. The asset is preparing for a break above 0.9850 as the US dollar index (DXY) has rebounded firmly after a minute drop to near 113.62.

The DXY is expected to recapture its fresh two-decade high at 114.52 as the market mood is turning vulnerable to Russia’s nuclear attack warning and soaring odds of a global recession. In retaliation to western sanctions, Russian leader Vladimir Putin has warned of a nuclear attack, which has spooked the market sentiment and has forced market participants to channel liquidity into the DXY.

Apart from that, mixed PMI numbers from global countries have soared the odds of a global recession. A mix of higher inflation and accelerating interest rates is forcing institutional investors to drop their growth forecasts for western leaders. Meanwhile, S&P Global PMI numbers for the US economy remained firmer. The Manufacturing PMI landed at 51.8 vs. The consensus of 51.1. While, the Services PMI remained upbeat, the data released at 49.4, significantly higher than the estimates of 45.0.

On the Swiss franc front, a hawkish stance on interest rates by the Swiss National Bank (SNB) failed to support the Swiss franc bulls. SNB Chairman Thomas J. Jordan announced a rate hike by 75 basis points (bps). It is worth noting that the SNB organizes monetary policy once every quarter, therefore, the central bank has fewer chances of accelerating interest rates. So the rate hike should be a full percent rate hike.

• GBP/USD remains mostly inactive after declining to the all-time low.
• Doubts over UK’s fiscal stimulus to generate economic benefits, Russia-Ukraine woes led the bears.
• Hawkish Fedspeak, firmer US data also exerted downside pressure on the cable pair.
• Buyers could cheer BOE’s abrupt rate hike or bond-linked moves, if announced, at the record low.

GBP/USD resists extending downside at the record low near 1.0340, inactive around 1.0490 during early Monday morning in Europe. In doing so, the Cable pair sellers remain cautious amid hopes of the Bank of England’s (BOE) intervention after the markets punished the British fiscal.

Speculations that Liz Truss led the British government's economic plan will stretch the nation’s finances to the limit triggered the Cable pair’s slump to the record low earlier in the day. The pair’s slump joined other risk-negative catalysts and hawkish Fedspeak to propel the US Dollar Index (DXY), as well as weigh on the GBP/USD prices.

UK Finance Minister, also known as Chancellor, Kwasi Kwarteng announced record tax cuts funded by huge increases in British borrowing on Friday. During the weekend, Reuters reported that Keir Starmer, leader of Britain's Labour Party, pledged to reverse the abolition of the top rate of income tax, saying tax cuts for the wealthy wouldn't create economic growth as he made a pitch for power at his party's annual conference. Also weighed on the GBP/USD could be UK Chancellor Kwarteng’s resistance to blaming BOE Governor Andrew Bailey for the recent jump in inflation and economic fears for Britain.

Elsewhere, Friday’s first readings of the US S&P Global PMIs for September raised concerns about the firmer rate hikes by the US Federal Reserve (Fed) as the numbers were upbeat, as compared to softer figures for Europe. Following the data, Fed Chairman Jerome Powell, Vice Chair Lael Brainard and Atlanta Fed President Raphael Bostic all were mostly bullish and in favor of further rate hikes.

It’s worth noting that the global ire towards Russia’s plan to deploy more troops around Ukraine also exerted downside pressure on the GBP/USD prices, via the US dollar strength.

Amid these plays, S&P 500 Futures drop half a percent while the US 10-year Treasury yields add four basis points to 3.74% at the latest.

Looking forward, all eyes will be on the UK’s market open as the BOE is expected to respond to the GBP/USD slump. In absence of this, the quote won’t hesitate to refresh the all-time low.

Technical analysis

Despite the latest corrective bounce, mainly due to the oversold RSI, the GBP/USD bears keep reins unless the pair bounces back beyond the year 2020 low near 1.1410.

• GBP/JPY is expected to conclude its less-confident pullback ahead of BOJ Kuroda’s speech.

• BOJ Kuroda may discuss over the further path of intervention in the currency market.

• UK’s GDP is seen steady at -0.1% and 2.9% on a quarterly and yearly basis.

The GBP/JPY pair is displaying a short-lived pullback after dropping to near 148.00 in the Tokyo session. The less confident pullback has pushed the cross to near 152.00, however, the downside remains favored as an intervention of the Bank of Japan (BOJ) into the currency market has strengthened the Japanese yen against the pound.

The decision of an intervention in the currency markets came after the BOJ continued its dovish stance on interest rates. BOJ Governor Haruhiko Kuroda believes that the Japanese economy needs a cushion to offset the impact of the Covid-19 pandemic. The central bank intervened in the Fx moves as it believes that the current yen valuation provided by the market participants doesn’t justify the fundamentals.

Meanwhile, Japanese Finance Minister Shunichi Suzuki cited that “Recent one-sided and rapid yen moves are not desirable,” as per Reuters.

Japanese Chief Cabinet Secretary Hirokazu Matsuno is concerned about Russia’s nuclear warning and has decided to ban exports of chemical weapon-related goods to Russia as an additional sanction on Moscow’s action in Ukraine,”

Going forward, the speech from BOJ Governor Haruhiko Kuroda will be of utmost importance. Investors are expecting more insights into the path of intervention in the currency markets by the central bank to safeguard the depreciating yen.

On the UK front, a deepening energy crisis, soaring inflationary pressures, and rising interest rates without the support of economic fundamentals are weakening the pound bulls. It seems that the optimism generated by novel UK Prime Minister Liz Truss has started fading away.

Going forward, the UK Gross Domestic Product (GDP) data will remain in focus. The GDP data for the second quarter is expected to decline by 0.1% in line with the prior reading. Also, the annual GDP data will grow at a steady pace of 2.9%.

• WTI remains pressured around the lowest level since January 2022, keeps Friday’s weakness.
• Six-week-old support line, 78.6% Fibonacci retracement can test bears amid oversold RSI.
• Buyers need validation from falling wedge to retake control.

WTI takes offers to refresh the intraday low near $78.10 during Monday’s Asian session. In doing so, the black gold approaches the eight-month low marked on Friday.

However, the oversold RSI (14) and the lower line of a six-week-old falling wedge could challenge the bears at around $77.70.

Following that, the 78.6% Fibonacci retracement level of the black gold’s up-moves from late December 2021 to March 2022, around $76.60, will challenge the bears.

If at all the energy benchmark remains bearish past $76.60, the early December 2021 peak near $73.20 will be in focus.

Alternatively, recovery moves are likely elusive until the quote stays below the convergence of the 21-DMA and the stated wedge’s upper line, around $83.80.

Should the WTI crude oil buyers dominate past $83.80, the odds of witnessing the theoretical run-up towards the late August swing high around $97.30 can’t be ruled out.

To sum up, WTI bears appear tired but the downside room is limited, which in turn keeps buyers hopeful.

WTI crude oil: Daily chart

Trend: Limited downside expected

• USD/CAD is gearing up for a fresh rally and will continue its four-day winning streak.

• Higher core CPI has trimmed consensus for US Durable Goods Orders data.

• Oil prices have slipped below $80.00 on weaker growth projections.

The USD/CAD pair has truned sideways after printing a fresh two-decade high at 1.3623 in the Asian session. The asset is preparing for a fresh rally as it is expected to continue its four-days winning spree. A minor corrective move cannot be ruled out as the asset is continuously scaling higher and the US dollar index (DXY) is also dispalying some signs of exhaustion after printing a fresh two-decade high of 114.52.

The DXY is losing momentum as momentum oscillators have turned extremely overbought on lower time frames. The asset remained extremely stronger on souring market sentiment. House arrest of Chinese leader Xi Jinping and warning of nuclesar attck by Russian leader Vladimir Putin has dented the sentiment of market participants.

A volatile performance is also expected from the DXY as invetsors are awiating the release of the US Durable Goods Orders data, which will release on Tuesdasy. The orders for Durable Goods are expected to drop by 1.1%, agaisnt the prior release of 0.1%. The decline in the economic data is mainly because of higher prices for durable goods. Also, the core Consumer Price Inded (CPI) accelerated to 6.3% vs. the former figure of 5.9%.

It is worth noting that the USD/CAD pair is seen much stronger that the DXY, which indicates that Canadian dollar is also weakend along with a firmer DXY. The loonie has truned fragile on weaker oil prices. The black gold has surrendered the psychological support of $80.00 as an ultra-hawkish guidance by the Federal Reserve (Fed) on interest rates has trimmed the growth prospects and eventually demand for oil. Also, the gasoline demand is falling sharply in the US economy.

• NZD/USD remains pressured around 30-month low amid New Zealand’s holiday.
• US dollar cheers Russia-linked risk-aversion, hawkish Fedspeak.
• Hawkish comments from RBNZ’s Orr may trigger the much-awaited corrective bounce.
• Fed Chair Powell’s speech, risk catalysts are important too.

NZD/USD stays depressed around 0.5725, after refreshing the multi-day low to 0.5693, as the holiday in New Zealand restricts the Kiwi pair’s moves on Monday. Even so, the broad US dollar strength keeps the pair bears hopeful.

That said, the US Dollar Index (DXY) prints 0.60% intraday gains around 113.70, after renewing the 20-year high with 114.52 mark, as the risk-aversion wave joins the hawkish Fedspeak and firmer US data.

While portraying the mood, the S&P 500 Futures print mild losses while the US 10-year Treasury yields add four basis points to 3.74% at the latest.

It’s worth noting that fears of multiple central banks’ intervention and fears emanating from Russia weigh on the market sentiment.

Ukraine President Zelenskiy was last heard saying that maybe ''Putin's nuclear threats were a bluff, but now, it could be a reality'' as per a CBS interview. Meanwhile, the United States warned of "catastrophic consequences" if Moscow were to use nuclear weapons in Ukraine after Russia's Foreign Minister said regions holding widely-criticized referendums would get full protection if annexed by Moscow.

Additionally, the latest readings of the US S&P Global PMIs for August, published on Friday, stated that the Manufacturing gauge rose to 51.8 from 51.5, while its services counterpart recovered from 44.6 to 49.3 for September. Following the release, Fed Chairman Jerome Powell said, “We are committed to using our tools.” After him, Fed Vice Chair Lael Brainard mentioned that inflation is very high and is hitting low-income families ‘hard’. During the weekend, Atlanta Federal Reserve President Raphael Bostic said that he still believes the central bank can tame inflation without substantial job losses given the economy's continued momentum, reported Reuters while quoting the Fed policymaker’s interview on CBS' "Face the Nation".

It should be noted that the People’s Bank of China’s (PBOC) updates surrounding the increase in the Forex reserves tried to defend the NZD/USD buyers recently but failed amid the risk-off mood.

Moving on, speeches from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr and Fed Chairman Jerome Powell, respectively on Thursday and Wednesday respectively, will be crucial for the NZD/USD pair traders. Ahead of them, headlines surrounding China and Russia may join the second-tier US data to entertain traders.

Technical analysis

NZD/USD is on the way to test March 2020 low near 0.5470 unless crossing the previous support line from late August, around 0.5815 by the press time.

“There is no change to our stance that we will respond to market moves as needed,” Japanese Finance Minister Shunichi Suzuki said on Monday per Reuters.

The policymaker also mentioned that he is concerned about speculative moves behind the weakening yen.

“Recent one-sided and rapid yen moves are not desirable,” adds the policymaker per Reuters.

On a different page, Japanese Chief Cabinet Secretary Hirokazu Matsuno said, “(Japan) deeply concerned about the possibility of Russia using a nuclear weapon during its invasion of Ukraine.”

“Japan will ban exports of chemical weapon-related goods to Russia as an additional sanction on Moscow’s action in Ukraine,” adds Japan’s Matsuno.

The policymaker also raised the possibilities of North Korea’s nuclear tests.

Market reaction

The 10-year Japan government bond (JGB) yield rose back close to the Bank of Japan's ceiling on Monday, after falling to a more than three-week low in the previous session following the central bank's decision to keep its ultra-low policy unchanged, per Reuters.  That said, the USD/JPY prices also retreat from the daily to 143.75 by the press time.

Also read: USD/JPY marches towards 144.00 on firmer yields, risk-aversion ahead of Fed Chair Powell’s speech

• EUR/USD pares intraday losses after refreshing 20-year low.
• Six-month-old bearish channel, clear downside break of two-month-long support line favor bears.
• Oversold RSI conditions, descending support line from late July tests sellers.
• Recovery remains elusive below the parity level, early 2001 levels may offer extra downside filters.

EUR/USD dropped to the lowest levels since June 2002 before recently bouncing back to 0.9660 during Monday’s Asian session. Even so, the bearish chart formation and sustained trading below the previous key support line from July, now resistance around 0.9830, keeps the pair sellers hopeful.

That said, the recovery moves towards the 0.9830 hurdle can also take clues from the recently oversold RSI (14).

However, the EUR/USD bulls will have to cross the upper line of the bearish channel from March, around 1.0015 by the press time, to convince the buyers to take entry.

Following that, a run-up towards the monthly high near 1.0200 can’t be ruled out.

Alternatively, a daily closing below the downward sloping trend line from July 27, at 0.9640 by the press time, could revisit the January 2001 peak surrounding 0.9600 before dropping towards the support line of the aforementioned channel near 0.9480.

Overall, EUR/USD bears keep the reins but the corrective pullback towards 0.9830 can’t be ruled out.

EUR/USD: Daily chart

Trend: Bearish

• Gold prices have rebounded firmly from $1,630.00, which are supporting a further pullback move.

• The risk-off market mood pushed the DXY above 114.50.

• Weaker forecasts for US Durable Goods Orders data will restrict the DXY’s upside.

Gold price (XAU/USD) has recovered the major portion of losses recorded in the Tokyo session. The precious metal declined sharply to near $1630.00 but recovered firmly and is indicating a formation of buying tail, which indicates a strong resoponsive buying structure. The yellow metal is attempting to shift into the prior balanced area placed in a narrow range of $1,640.00-1,649.06.

Meanwhile, the US dollar index (DXY) moved sharply to 114.52 as the risk porfile turned soar on China’s leader Xi Jinping house arrest and Russian Federation’s warning of nuclear attack in retailation to western sanctions. The G-7 cartel is aiming to cripple the Russian economy by enforcing spree of western sanctions so that that trading structure could get demolished.

The firmer move by the DXY towards 114.52 has also picked offers too ahead fo US Durable Goods Orders data. As per the consensus, the economic data will decline by 1.1% against the prior dcline of 0.1%. The impact will mainly come from weaker demand of gasoline and a 20 basis point (bps) decline in headline Consumer Price Index (CPI) in August reading.

Gold technical analysis

On an hourly scale, the gold prices are attempting to hit the 20-period Exponential Moving Average (EMA) at $1,650.54. If the precious metal manages to overstep the 20-EMA, it will find major barricades around the horizontal resistance placed from September 16 low at $1,654.41.

The Relative Strength Index (RSI) (14) is oscillating in a 20.00-40.00 range, which indicates that the downside momentum is still intact.

Gold hourly chart

• GBP/USD stabilizes after refreshing all-time low, remains on the bear’s radar.
• Fears of BOE intervention challenge bears amid a light calendar.
• UK Chancellor Kwarteng’s hint of more tax cuts, Labour Party’s criticism of latest stimulus weigh on prices.
• Hawkish Fedspeak, pessimism surrounding the UK economy and broad risk-aversion add strength to the bearish bias.

GBP/USD consolidates intraday losses around the recently flashed record low near 1.0340, as bears fear the Bank of England’s (BOE) intervention. That said, the Cable pair picks up bids to 1.0560 by the press time of Monday’s Asian session.

British Chancellor Kwasi Kwarteng’s signals of more tax cuts were perceived as not helping much as Britain's Labour Party Leader Keir Starmer termed the UK government’s tax cuts as helping the wealthy people and pledged to reverse the abolition of the top rate of income tax. It should be noted that UK’s Kwarteng also refrained from pushing the Bank of England (BOE) towards defending the Cable and exerted downside pressure on the GBP/USD prices.

“The selloff that followed the release on Friday of the government’s ‘Growth Plan’-- a budget in all but name and the biggest tax giveaway in half a century -- showed few signs of abating as markets entered a new week, heaping pressure on Prime Minister Liz Truss’s days-old administration,” said Bloomberg.

However, the slump in the prices is too heavy and hence the BOE’s intervention appears imminent, which in turn allows the quote to pare losses.

Even so, the broad risk-aversion wave and the pessimism surrounding the UK economy, mainly due to the Russia-Ukraine woes and the BOE’s late response to the jump in inflation, could keep the GBP/USD bears hopeful.

Recently, UK’s Rightmove said, per Reuters, that Asking prices for British homes advertised rose solidly this month and last week's cut to property purchase tax announced by finance minister Kwasi Kwarteng could fuel demand further.

While portraying the mood, Wall Street slumped and the yields favored the US dollar to remain firmer, amid the hawkish Fedspeak and rate hike. That said, the S&P 500 Futures print mild losses while the US 10-year Treasury yields add four basis points to 3.74% at the latest.

Moving on, fears of the BOE intervention may restrict GBP/USD moves. However, the bears are likely to keep control. Also important to watch will be Fed Chair Jerome Powell’s speech and the US data.

Technical analysis

GBP/USD bears keep reins unless the pair bounces back beyond the year 2020 low near 1.1410.

China's central bank, the People’s Bank of China (PBOC), said on Monday it will reinstate foreign exchange risk reserves for some forwards contracts, a move that would make betting against the yuan currency more expensive in order to slow the pace of recent depreciation, reported Reuters.

Key quotes

AUD/USD stays defensive

The news fails to impress AUD/USD buyers, despite strong ties between Australia and China, as the broad risk-off mood weighs on the Aussie pair.

Also read: AUD/USD Price analysis: Renews two-year low as bears poke four-month-old support around 0.6500

The People’s Bank of China (PBOC) set the USD/CNY reference rate at 7.0298 on Monday when compared to the previous fix and the previous close at 6.9920 and 7.1298 respectively. It should be noted that the PBOC fix rose past the market forecasts of  7.0019.

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.

• US Dollar Index renews the multi-day top, extends Friday’s gains.
• Fears emanating from Russia join hawkish Fedspeak and downbeat EU concerns to propel DXY.
• Geopolitical updates, Fed Chairman Jerome Powell’s speech will be crucial for fresh impulse.
• Bulls are likely to keep the reins amid risk-aversion, Fed’s rate hike concerns.

US Dollar Index (DXY) remains on the front foot around 113.80, after renewing the 20-year top near 114.70, as risk-aversion intensifies on early Monday. In addition to the sour sentiment, hawkish comments from the Fed policymakers also favor the US dollar.

Fed Chairman Jerome Powell said on Friday, “We are committed to using our tools.” Following him, Fed Vice Chair Lael Brainard mentioned that inflation is very high and is hitting low-income families ‘hard’. During the weekend, Atlanta Federal Reserve President Raphael Bostic said that he still believes the central bank can tame inflation without substantial job losses given the economy's continued momentum, reported Reuters while quoting the Fed policymaker’s interview on CBS' "Face the Nation".

As per the latest readings of the US S&P Global PMIs for August, published on Friday, the Manufacturing gauge rose to 51.8 from 51.5, while its services counterpart recovered from 44.6 to 49.3 for September.

On a different page, Ukraine President Zelenskiy was last heard saying that maybe ''Putin's nuclear threats were a bluff, but now, it could be a reality'' as per a CBS interview. Meanwhile, the United States warned of "catastrophic consequences" if Moscow were to use nuclear weapons in Ukraine after Russia's Foreign Minister said regions holding widely-criticized referendums would get full protection if annexed by Moscow.

The risk-off mood drowned Wall Street and the yields favored the US dollar to remain firmer, amid the hawkish Fedspeak and rate hike. That said, the S&P 500 Futures print mild losses while the US 10-year Treasury yields add four basis points to 3.74% at the latest.

Looking forward, risk aversion can help the US dollar gauge to remain firmer against major currencies. However, Fed Chair Powell’s speeches and the US Durable Goods Orders, are important catalysts to watch for clear directions.

Technical analysis

A daily closing beyond 114.00, comprising an upward sloping resistance line from May, becomes necessary for the DXY bulls to keep reins. However, overbought RSI (14) challenges the greenback buyers.

• AUD/USD remains pressured at 29-month low, retreats of late.
• Descending support line from early May, oversold RSI restricts immediate downside.
• Seven-week-old previous support line guards immediate recovery moves.
• May 2020 low can lure sellers on defying the bearish channel formation.

AUD/USD reverses the early Asian session corrective bounce on Monday as it drops back towards 0.6500, around 0.6515 by the press time. In doing so, the Aussie pair pokes the support line of a 4.5-month-old descending trend channel.

Given the oversold RSI (14) and the nearness to the key support, around 0.6500 by the press time, the Aussie pair may witness a corrective bounce.

The recovery moves, however, remain elusive until crossing a downward sloping trend line from August 05, previous support around the 0.6600 threshold.

Even so, the support-turned-resistance line from July, close to 0.6705 at the latest, could challenge the AUD/USD buyers before giving them control.

Alternatively, a clear downside break of the 0.6500 support could quickly fetch the Aussie pair towards the May 2020 lows near 0.6370.

Following that, the 78.6% Fibonacci Expansion (FE) of April-August moves, near 0.6360, could challenge the AUD/USD bears.

Overall, AUD/USD remains on the bear’s radar but the downside room appears limited.

AUD/USD: Daily chart

Trend: Bearish

• USD/JPY picks up bids to refresh intraday high, extends Friday’s recovery.
• Japan’s former FX diplomat rules out plans to defend 145.00 level.
• BOJ’s intervention favored sellers but risk-off mood, hawkish Fed keeps bulls hopeful.
• Second-tier US data, comments from Fed Chair Powell will be important to aim for further upside move.

USD/JPY renews intraday high around 143.60 as Tokyo opens for Monday, extending Friday’s recovery moves. In doing so, the yen pair also reverses the previous day’s pullback from the 24-year high, triggered by Japan’s intervention to defend the national currency.

The yen pair’s latest rebound could be linked to the comments from Japan’s former top currency diplomat Naoyuki Shinohara. “Japan likely won't intervene in the currency market to defend a line-in-the-sand such as 145 yen versus the dollar, and instead limit any further action to smoothing operations aimed at taming volatility,” said Shinohara per Reuters.

It’s worth noting that the USD/JPY price corrected sharply from the highest levels since 1998 on Thursday after the country’s top currency diplomat Masato Kanda confirmed that they have intervened in the FX market. He added that the government “took decisive action in the forex market.”

Even so, strong US PMIs, the escalation in the Russia-Ukraine tension and hawkish central bankers apart from the Bank of Japan (BOJ) keep the USD/JPY buyers hopeful.

As per the latest readings of the US S&P Global PMIs for August, published on Friday, the Manufacturing gauge rose to 51.8 from 51.5, while its services counterpart recovered from 44.6 to 49.3 for September. Following that, Fed Chairman Jerome Powell said on Friday, “We are committed to using our tools.” Following him, Fed Vice Chair Lael Brainard mentioned that inflation is very high and is hitting low-income families ‘hard’. During the weekend, Atlanta Federal Reserve President Raphael Bostic said that he still believes the central bank can tame inflation without substantial job losses given the economy's continued momentum, reported Reuters while quoting the Fed policymaker’s interview on CBS' "Face the Nation".

Elsewhere, Ukraine President Zelenskiy was last heard saying that maybe ''Putin's nuclear threats were a bluff, but now, it could be a reality'' as per a CBS interview. Meanwhile, the United States warned of "catastrophic consequences" if Moscow were to use nuclear weapons in Ukraine after Russia's Foreign Minister said regions holding widely-criticized referendums would get full protection if annexed by Moscow.

Amid the market’s fears, Wall Street closed in the red and the yields favored the US dollar to remain firmer, amid the hawkish Fedspeak and rate hike. That said, the S&P 500 Futures print mild losses while the US 10-year Treasury yields add four basis points to 3.74% at the latest.

Moving on, USD/JPY buyers are likely to keep the reins while closely observing any signals from Japan's intervention and speeches from Fed Chairman Jerome Powell, up for publishing on Tuesday and Wednesday.

Technical analysis

Although the recent higher lows and firmer RSI, not overbought, favor USD/JPY buyers, a daily closing beyond the 13-day-old resistance line, at 144.00 by the press time, becomes necessary for conviction. Alternatively, the 21-DMA level near 142.25 restricts the immediate downside.

Early morning in Asia, ABC News unveiled comments from Australia’s Treasurer Jim Chalmers saying, “Australia not immune from the ‘deteriorating’ global outlook.”

The policymaker also mentioned that he remains optimistic about the near future of the Australian economy while speaking with the national public broadcaster ABC News.

Australia’s Chalmers also flagged tax hikes ahead.

AUD/USD rebounds

AUD/USD portrays a corrective bounce off a two-year low while picking up bids near 0.6535 of late. The reason could be linked to the market’s search for fresh impulse as well as a light calendar and a holiday in New Zealand.

Also read: AUD/USD eyes downside to near 0.6500, focus shifts to US Durable Goods data

• GBP/USD extends Friday’s south-run to refresh multi-year low.
• Discomfort for UK Chancellor’s latest speech, fears of recession weigh on the pair.
• Uncertainty surrounding BOE’s next move versus hawkish Fed pleases sellers.
• Risk catalysts are the key for immediate directions, counter-trend traders may seek opportunities but should remain cautious.

GBP/USD takes offers to drop to the lowest levels since 1985, to 1.0780 during Monday’s Asian session, as the UK’s economic challenges and the fears surrounding the Bank of England’s (BOE) join the broad US dollar strength to favor bears. In doing so, the Cable pair ignores recent efforts from the British policymakers to please voters with the fiscal stimulus.

British Finance Minister (FinMin) Kwasi Kwarteng’s failed attempt to please defend the fiscal expansion amid fears of more inflation seem to weigh on the GBP/USD of late. British FinMin Kwarteng said on Sunday that he was focused on boosting longer-term growth, not on short-term market moves, when challenged over the sharp fall in sterling and bond prices following his first fiscal statement, reported Reuters. On different news, Reuters also reported that Keir Starmer, leader of Britain's Labour Party, termed the UK government’s tax cuts are only helping the wealthy people and pledged to reverse the abolition of the top rate of income tax.

Elsewhere, strong US PMIs, the escalation in the Russia-Ukraine tension and hawkish central bankers propelled the US dollar.

On Friday, US S&P Global PMIs, on the other hand, were encouraging as the Manufacturing gauge rose to 51.8 from 51.5, while its services counterpart recovered from 44.6 to 49.3 for September. Following that, Fed Chairman Jerome Powell said on Friday, “We are committed to using our tools.” Following him, Fed Vice Chair Lael Brainard mentioned that inflation is very high and is hitting low-income families ‘hard’. During the weekend, Atlanta Federal Reserve President Raphael Bostic said that he still believes the central bank can tame inflation without substantial job losses given the economy's continued momentum, reported Reuters while quoting the Fed policymaker’s interview on CBS' "Face the Nation".

On a different page, Ukraine President Zelenskiy was last heard saying that maybe ''Putin's nuclear threats were a bluff, but now, it could be a reality'' as per a CBS interview. Meanwhile, the United States warned of "catastrophic consequences" if Moscow were to use nuclear weapons in Ukraine after Russia's Foreign Minister said regions holding widely-criticized referendums would get full protection if annexed by Moscow.

Although the GBP/USD bears are likely to keep the reins, Friday’s final readings of the UK’s Q2 Gross Domestic Product (GDP) and speeches from Fed Chair Powell will be crucial for the pair traders to watch for clear directions during the week.

Technical analysis

Unless crossing the year 2020 low near 1.1410, the GBP/USD bears are likely approaching the year 1985 low surrounding 1.0520.

• Gold price remains sidelined after refreshing the multi-year low.
• Fears emanating from central banks, Ukraine weigh on XAU/USD.
• Italy’s elections, downbeat EU data versus firmer US numbers also favor gold sellers.
• Risk catalysts, Fed Chair Powell’s speech will be eyed for corrective bounce.

Gold price (XAU/USD) licks its wounds at a two-year low, around $1,645 during Monday’s Asian session, as bears take a breather after the biggest daily fall in a week ahead of the key catalysts. Also testing the metal prices could be the mixed headlines surrounding Europe and Russia. Even so, the bears remain hopeful amid the broad rush to risk safety.

A corrective pullback in the sentiment could be observed in Germany’s ability to get a gas deal from Abu Dhabi, as well as in the absence of any immediate reaction from Russia to the Group of Seven (G7) chatters to muster courage against Moscow. A holiday in New Zealand and a light calendar in Asia also recently allowed the XAU/USD bears to take a breather.

During the last week, strong US PMIs, the downbeat activity numbers from the bloc and Russia’s fierce warning to the West, as well as the Group of Seven (G7) leaders’ readiness to counter Moscow with sanctions weighed on the gold price. Additionally, hawkish central bankers and fears of recession also weighed on the market sentiment and drowned the XAU/USD.

That said, the first readings of September month S&P Global PMIs suggested that the European economy slipped further into contraction, hurt by soaring energy prices. German Services PMI dropped to the two-year low while its counterpart for Europe tested the lowest levels in 19 months. Further, Manufacturing PMIs slumped to the lowest in 20 months. US S&P Global PMIs, on the other hand, were encouraging as the Manufacturing gauge rose to 51.8 from 51.5, while its services counterpart recovered from 44.6 to 49.3 for September.

Elsewhere, Fed Chairman Jerome Powell said on Friday, “We are committed to using our tools.” Following him, Fed Vice Chair Lael Brainard mentioned that inflation is very high and is hitting low-income families ‘hard’. During the weekend, Atlanta Federal Reserve President Raphael Bostic said that he still believes the central bank can tame inflation without substantial job losses given the economy's continued momentum, reported Reuters while quoting the Fed policymaker’s interview on CBS' "Face the Nation".

Recently, Ukraine President Zelenskiy was last heard saying that maybe ''Putin's nuclear threats were a bluff, but now, it could be a reality'' as per a CBS interview. Meanwhile, the United States warned of "catastrophic consequences" if Moscow were to use nuclear weapons in Ukraine after Russia's Foreign Minister said regions holding widely-criticized referendums would get full protection if annexed by Moscow.

Against this backdrop, Wall Street closed in the red and US Treasury yields climbed while the US Dollar Index (DXY) also refreshed the multi-year top. That said, S&P 500 Futures print mild losses at the latest.

Looking forward, Italy’s election results and a speech from European Central Bank (ECB) President Christine Lagarde will be important to watch for intraday moves. However, major attention will be given to the Ukraine-Russia tussles, speeches from Fed Chair Powell and US Durable Goods Orders for clear directions during the week.

Technical analysis

A three-week-old descending support line, currently around $1,635, restricts immediate gold price downside near the multi-month low. The corrective bounce, or at least a pause in further downside, also takes clues from the oversold RSI (14).

However, the 10-DMA and a downward sloping resistance line from September 13, respectively around $1,665 and $1,677, could restrict the immediate recovery of the XAU/USD prices.

Following that, the upper line of the five-month-old bearish channel, around $1,735 by the press time, will be crucial to watch for the metal buyers.

Alternatively, a downside break of $1,635 immediate support could quickly drag gold towards the early 2020 peak surrounding $1,610 before directing the bears to the aforementioned channel’s support line, close to $1,580 at the latest.

Gold: Daily chart

Trend: Corrective bounce expected

Capital controls and currency intervention are among tools emerging Asian policymakers can use if rapid U.S. interest rate hikes and a surging dollar risk triggering a debt crisis, Asian Development Bank (ADB) President Masatsugu Asakawa said on Friday, per Reuters.

Key quotes

Also read: Ukraine headlines are mixed for the open