Daily Market Analysis & Trading Ideas

[Analytix]

Global Markets React to Economic Data and Central Bank Actions: EUR/USD, GBP, AUD in Focus


The EUR/USD pair faced slight downward pressure during the European session, however later recovered to the equilibrium rate of 1.0950 which has been sustained by the market from the last week amid of lack of conclusive signals from the Fed or the ECB:

Dollar index (DXY) rose amidst a thin-volume trading session marked by elevated volatility due to the extended weekend in the United States for Martin Luther King Birthday. US equity futures trade slightly in the red, signaling a risk-averse market sentiment. Investors remain wary about the risk that recent improvement in the US data (CPI, labor market indicators) will translate into inflation persistence in other economies, hence steering clear from aggressive dollar bids.

The focus now shifts to the eagerly anticipated US monthly Retail Sales data for December, scheduled for Thursday. Analysts expect a 0.4% growth, surpassing the 0.3% increase recorded in November. The trajectory of the USD Index remains closely tied to market perceptions of March rate cut by the Federal Reserve. According to the CME Fedwatch tool, traders are currently assigning a 70% probability of a rate cut by the Fed in March.

On the Eurozone front, Germany's preliminary GDP for the fourth quarter of 2023 contracted by 0.3%, in line with expectations. This comes after a notable 1.8% growth in the previous period. While market participants foresee the European Central Bank contemplating interest rate cuts, ECB Chief Economist Philip Lane downplayed the possibility, citing recent inflation data.

Turning to the Pound Sterling, it faces a sell-off ahead of the United Kingdom labor market data for the three months ending November due on Tuesday. Soft wage growth data could potentially contribute to a decline in households' spending power, aiding in the gradual return of inflation towards the 2% target. The demand for labor remains vulnerable, with job postings in the UK declining by 32% in December compared to a year ago, according to the Recruitment and Employment Confederation (REC).

Down under in Australia, higher TD Securities Inflation data indicates mounting price pressures in the coming months. Additionally, job advertisements increased in December after three consecutive declines. However, these positive figures failed to offer significant support to the Australian Dollar. The People's Bank of China's decision to leave its benchmark rate unchanged disappointed investors who were expecting a rate cut to bolster the country's economic recovery. Consequently, the China-proxy Australian Dollar is under increasing bearish pressure, with key supports at 0.6620 (50-day SMA) and 0.6580 (100-day SMA). The pair witnessed reversal of the bullish trend at the start of new year which adds to the view that pair might have entered medium-term downward trend.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

First batch of US labor market data trims chances for Fed rate cut in March


The EURUSD is attempting to develop the ascending impulse that emerged in the second half of the American session yesterday. However, resistance appeared above the 1.09 level, causing the price to drop below, and it is consolidating near the round level. Higher timeframes indicate a breakout of the ascending corridor, which strengthened after the release of the US retail sales report on Thursday. The data exceeded expectations, with both the overall and core sales indicators growing significantly stronger than forecasts. As a result, the market was forced to reassess the chances of a Fed rate cut: futures are now pricing in a 60% chance, down from 70% the previous week:

Since the beginning of the year, data on the US economy has consistently improved. The trend was set by the December NFP (Non-Farm Payrolls) report – job growth, wage payments, and the unemployment rate exceeded expectations positively, indicating that the labor market in December was stronger than anticipated. This was followed by the December CPI (Consumer Price Index), which showed that a significant component, such as prices for housing-related services, accelerated growth in December. Yesterday's retail sales and comments from Fed officials convinced the market that it had jumped ahead of 'dovish' rate expectations. The first batch of labor market data in January – initial unemployment claims for the week ending January 13 – showed an increase of only 187K, compared to expectations of 207K. This is close to the minimum of the current business cycle and should be interpreted as a strong argument in favor of the Fed extending the pause in March.

However, the market's reaction in the form of a strengthening dollar and rising bond yields still appears disproportionate to the improvement in December data. It is likely that the market is trying to attribute the strong indicators to a seasonal effect, based on increased consumer spending in December. Therefore, the market is likely to wait for January figures to make a final conclusion about the outcome of the March Fed meeting.

The ECB, in turn, is also trying to convey to the market that expectations for monetary policy easing in the EU are somewhat exaggerated. Several heads of European banks, predominantly known for their hawkish positions, have slightly adjusted their stance on the easing cycle this year, indicating that the market's expectations for a cumulative rate cut of 150 basis points this year appear overstated. However, in an interview with Bloomberg on Wednesday, Lagarde did not actively resist dovish expectations. As a result, the risk balance for EURUSD, considering the positions of central banks and taking into account data on unemployment benefit claims, looks biased towards a slightly greater decline, probably towards the 1.0750 area (December's low):

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

EURUSD and USJDPY analysis: strong dollar caps any upside but situation could quickly change


The Bank of Japan left the parameters of monetary policy unchanged at today's meeting. BOJ Governor Ueda adopted an ambiguous position regarding withdrawal from QE policy and interest rate hikes, even though in the last quarter of last year, the Japanese yen significantly strengthened on expectations that the BOJ would begin tapering its accommodative policy and 'catch up' with its counterparts in monetary tightening. Trying to explain the indecision, the BOJ chief referred to the uncertainty associated with negotiations on wage hikes by major Japanese companies. Without wage hikes, raising interest rates would be risky, as the BOJ could inadvertently trigger deflationary pressure in the economy and undermine all progress on inflation. Fragility of the situation is underscored by the fact that wage growth in Japan slowed to just 0.2% in November of last year after decent figures in several previous months:

Societe Generale believes that, at the moment, USDJPY is overvalued, and alignment with current yield spreads between Japanese and American bonds (one of the main factors driving yen demand) would be achieved at a cheaper USDJPY rate. However, it is worth noting that current rates in the U.S. reflect the shift in market expectations that the first rate cut in the U.S. is being pushed from March to May, following a series of strong reports on the American economy in January. If the positive series of fundamental data on the U.S. is interrupted, USDJPY should move lower, aligning with the yield differentials.

From a technical analysis perspective, the upward trend in USDJPY that started early last year was disrupted at the end of October when speculation arose that the Bank of Japan would begin unwinding its ultra-accommodative policy. The price broke the ascending channel, declined until the end of the year, but turned around at the beginning of the new year. The reversal zone was around 140 yen per dollar, where a long-term support line also passed (orange line on the chart):

The fact that the price held above the long-term uptrend line and energetically began to rise after the New Year indicates that there are long-term investors in the market expecting the overall trend of yen depreciation to continue. Short-term and medium-term resistance levels for the pair will be 148 (where the price is currently) and the area of 152 yen per dollar. In case of a breakthrough and consolidation, the rally may only accelerate.

The EURUSD pair continues to fluctuate in a narrow range of 1.085-1.09 on Tuesday, to which it shifted after the release of the U.S. inflation report and strong labor market data (initial unemployment claims) last week. The earlier range was 1.09-1.10. Interestingly, the pair still cannot determine its direction and simply moves from range to range. This indicates that both the ECB and the Fed have not formed a market consensus that they are transitioning to a policy easing cycle. This week, clarity is expected to come from the ECB on Thursday, as well as EU services and manufacturing PMI on Wednesday. These will be preliminary PMI readings from HCOB for the first month of this year. A slight improvement is expected for the EU and Germany (more precisely, the pace of activity deterioration will slow down slightly). As for the ECB meeting, the market will assess whose side Lagarde will ultimately take – the hawks or doves of the Governing Council. Unlike the Fed, where there is a relative consensus, ECB officials are divided – some are eager to cut rates, while others prefer to wait for more convincing signals from the inflation front before changing rates.

From a technical point of view, short-term risks for EURUSD are tilted towards the downside, albeit slightly. Attempting to go long on the pair can be considered in the area of 1.08 (the December low of last year):

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

European PMI aids the Euro in overcoming bearish retracement

The US Dollar faced a broad decline against major currencies on Wednesday, driven by positive developments in European economic indicators and uncertainties surrounding the upcoming US PMI release. The initial shift occurred with the release of German and European PMI numbers, indicating improvements in various sectors, albeit remaining in contraction territory.
Euro Gains Ground on Upbeat German PMI:

German Purchase Manager Index figures propelled the Euro higher against the US Dollar, with German Manufacturing rising from 43.3 to 45.4. French Manufacturing also delivered an optimistic surprise, climbing from 44.4 to 46.6. These positive data points contributed to a boost in European indices, with all major markets showing gains of over 1%. The upward jump of EURUSD coincided with the release of PMI data which hints that the data managed to surprise investors and was the cause of buying:

US Economic Indicators and Equity Markets:

Contrasting with the positive European data, the US Mortgage Applications, as reported by the Mortgage Bankers Association, came in at 3.7%, a significant drop from the previous week's 10.4%. A potential further contraction in US PMI numbers later in the day could spell trouble for the US Dollar.

UK Economic Activity Accelerates:

In the UK, private sector economic activity continued to expand at an accelerating pace in January, with the S&P Global Composite PMI rising to 52.5 from 52.1 in December, surpassing the market consensus of 52.2. S&P Global Manufacturing PMI edged higher to 47.3 from 46.2, while the Services PMI advanced to 53.8 from 53.4.

Currency Pairs in Focus: GBP/USD and USD/CAD

The GBP/USD gathered bullish momentum on the back of the upbeat PMI readings, rising 0.6% on the day to 1.2760.
On the other hand, the USD/CAD faced challenges in capitalizing on intraday gains ahead of Canada's interest rate decision. The pair extended its losing streak, trading near 1.3450 during the European session inside the pullback channel after testing 1.35. It is worth noting that major resistance slope line has been broken in the pair after which corrective channel ensued, which creates opportunity to bet on extension of the rally upon completion of the pullback:

The decline in crude oil prices could exert pressure on the Canadian Dollar, limiting the losses of the USD/CAD pair.

Bank of Canada's Expected Hold:

The Canadian Dollar receives upward support amid expectations that the Bank of Canada will maintain its policy rate during its first meeting of the year. This would mark the fourth consecutive time the BoC keeps the interest rate at 5.0%. The anticipation for a steady policy is reinforced by December's inflation figures, revealing an unexpected increase of 3.4% in consumer prices over the last twelve months.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

Selling risks persist for EURUSD as key bearish targets are yet to be met


The EUR/USD pair isn't catching a break, heading south for the second day straight and hovering around 1.0790 during the European session on Thursday. The mighty US Dollar is gaining traction against the Euro, riding high on the words of Federal Reserve Chair Jerome Powell, who slammed the door on a rate cut in the upcoming March meeting. Powell's skepticism that the committee will be ready to slash rates by March is also giving a boost to US Treasury yields. However, the Euro attempts to make a comeback attempt following the release of mixed Eurozone inflation data.

In the technical realm of EUR/USD, the setup signals that the selling pressure might stick around until the price hits the support area near December 2023's lowest point at 1.0740. Brace for a potential rebound from there, pushing the price towards the upper boundary of the current bearish channel:

The Euro faced challenges after softer preliminary CPI data from Germany hit the wires on Wednesday. This has raised expectations of a potential interest rate cut by the ECB in June. However, ECB member Mario Centeno suggested that if inflation keeps heading in its current direction in the upcoming months, the ECB's next move might involve cutting rates, potentially marking the beginning of a cycle aimed at normalizing interest rates. ECB Vice President Luis de Guindos hinted that interest rate cuts would only be on the table when there's confidence that inflation aligns with the central bank's 2% goal.

In terms of economic indicators, the Eurozone HICP showed a 3.3% increase in January, surpassing consensus estimate of 3.2%. The annual CPI met expectations at 2.8%, in line with the previous reading of 2.9%. The month-over-month report displayed a 0.4% decline, reversing the 0.2% rise observed in December:

In Germany, the CPI for January showed a year-on-year increase of 2.9%, falling short of the anticipated 3.0% and marking a substantial drop from December’s 3.7%. Monthly consumer inflation, however, met expectations, rising to 0.2% from the previous 0.1%. The German HICP increased by 3.1%, lower than the previous figure of 3.8%.

The US Dollar continues to flex its muscles amid a growing consensus that the Federal Reserve's policy easing action might not happen until May. Fed funds futures indicate an increased likelihood that the Fed will maintain its stance in March, with odds jumping from 45.5% before the FOMC meeting to over 65% on Thursday. Furthermore, the probability of a quarter-point rate cut in May exceeds 60%:

Thursday's spotlight is expected to be on significant economic indicators such as US Initial Jobless Claims, Nonfarm Productivity, and ISM Manufacturing PMI. The recent report of a 107K jobs increase for January in the ADP Employment Change fell short of the expected 145K and marked a decrease from the previous reading of 158K in December.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[franzschubert]

My Analysis of USDJPY on 6th of February 2024 considering the Smart Money Concept:
Market was moved down today for the first time after the double top reversal pattern yesterday. The second and third strong move should bring the price into the Liquidity Zone at the bottom of the chart, my Take Profit.

 

[franzschubert]

My Analysis of USDJPY on 6th of February 2024 considering the Smart Money Concept:
Market was moved down today for the first time after the double top reversal pattern yesterday. The second and third strong move should bring the price into the Liquidity Zone at the bottom of the chart, my Take Profit.

Sorry people, my Trade hit the StopLoss...

 

[Analytix]

Dollar Rises on Strong Data, Technicals Signal Near Pullback Point



The latest data on the American economy show that it is growing significantly faster than previously thought: over the past two weeks, the estimate of the quarterly GDP growth rate, calculated by the New York Federal Reserve, has been revised upwards by almost 1% - from 2.42% to 3.31%:

This reassessment was driven by four key reports: NFP, January consumer spending, PMI for services and manufacturing, as well as real GDP for the fourth quarter of 2023. All four indicators significantly exceeded expectations.

Against the backdrop of improvements in the data, the dollar has launched a major offensive. On the daily chart of the DXY (dollar index), one can see how the price reversed in late December of last year. Classic for market price dynamics at the beginning of the year. The strengthening of the dollar reflects a higher potential for the US economy compared to other economies, and given that some market participants are still trying to attribute positive surprises to a temporary phenomenon, the growth is clearly not exhausted. In an attempt to identify the point where growth will at least slow down, one can turn to technical analysis: a rebound could occur in the area of the trend line formed by the two previous peaks - in October 2022 and October 2023. This will roughly correspond to the level of 105 on the DXY:

It turns out that the decline of the major pairs EURUSD and GBPUSD may continue: to 1.0680-1.0690 for the first pair and 1.24 for the second. The catalyst for movement could be the CPI for January, which will be released next week, February 13th. Preliminary data, including a sharp increase in jobs in January and wages, suggest that the risks are skewed towards higher CPI values than forecast (core inflation 0.3% m/m).

But before the CPI, markets may pay attention to the BLS annual report on seasonal adjustments to inflation. The release is scheduled for today. Since seasonality is not taken into account in the calculation of annual inflation indicators, there will be no changes to them. But when it comes to monthly inflation figures, seasonality begins to be taken into account, so the monthly inflation rates for November and December of last year may be revised. Considering that the basis for optimistic market sentiments is precisely the surprises of the last two months, including inflation indicators, the market is likely to be sensitive to surprises in the data today. It is worth noting, for example, that adjustments for last year showed that inflation growth rates in the second half of the year were underestimated, leading to the conclusion that the Fed needs to make more efforts to contain inflation. Therefore, today's report may have important implications for both Fed policy and market prices.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

Resilient US Inflation Presents Growing Dilemma for the Fed



The latest report from the US Bureau of Labor Statistics (BLS) revealed a slight softening in inflationary pressures in the United States, with the Consumer Price Index (CPI) showing a year-on-year increase of 3.1% in January, down from 3.4% in December. However, this figure surpassed market expectations, which had anticipated a lower reading of 2.9%. The Core CPI, which excludes volatile food and energy prices, remained resilient, matching December's increase at 3.9% and surpassing analysts' estimates of 3.7%.

On a monthly basis, both the CPI and the Core CPI rose, albeit moderately, by 0.3% and 0.4%, respectively. This modest increase suggests a continued but tempered upward pressure on prices.

The immediate market reaction was a strengthening of the US Dollar (USD) against its rivals, as evidenced by the US Dollar Index climbing 0.45% to 104.60. This rally was underpinned by the data exceeding market expectations and affirming the resilience of the US economy against inflationary pressures.

The BLS also announced revisions to previous CPI data, lowering December's CPI increase to 0.2% from 0.3%, while leaving the Core CPI unrevised at 0.3%. November's CPI increase was revised higher to 0.2% from 0.1%, with October's growth remaining unchanged. These revisions were attributed to adjustments in seasonal factors, indicating the importance of considering the broader economic context beyond monthly fluctuations.

In parallel, the global oil market experienced a surge, with prices rising more than 6% in January due to concerns over a potential supply shock stemming from the ongoing crisis in the Red Sea. However, the Manheim Used Vehicle Index remained unchanged during the same period, suggesting stability in a key sector of consumer spending.

Market sentiment regarding Federal Reserve (Fed) policy underwent a notable shift following robust labor market data for January. This has led to a reassessment of the timing of the Fed's policy pivot, with markets refraining from pricing in a rate cut in March. The release of January's CPI data further solidified these expectations, with federal funds rate futures now indicating expectations of less than 100 basis points (bp) cumulative easing from the Fed this year, down from 175 bp just a month ago:

Looking ahead, the possibility of a rate reduction in May hinges on the trajectory of upcoming Core CPI data for March and April. A significant downward surprise in these figures could prompt a reconsideration of rate cut expectations, potentially leading to a downturn in US Treasury Bond yields and weighing on the US Dollar. Conversely, a stronger-than-forecast increase in Core CPI could bolster the USD in the short term, highlighting the sensitivity of currency markets to inflation dynamics and central bank policy expectations.

The key takeaway from the January CPI report underscores the enduring presence of inflationary pressures in the US, urging the Federal Reserve to tread with increased caution when considering policy adjustments. Against the backdrop of a nuanced economic environment, it is evident that market participants will maintain a vigilant watch over forthcoming data releases and Federal Reserve communications, seeking insights into future policy trajectories and their potential ramifications for currency markets.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

US Dollar Wavers as Disinflation Narrative Persists Amid Mixed Economic Signals


The US Dollar (USD) finds itself in a precarious position, relinquishing its recent gains following a surge triggered by a red-hot inflation report earlier in the week. However Fed members are cautioning against overinterpretation of this singular CPI data point, emphasizing the broader disinflationary trajectory that persists. Austan Goolsbee, a member of the US Federal Reserve, echoed sentiments urging markets not to tether their expectations solely to the CPI figure, hinting at the underlying factors shaping monetary policy.

Amidst a flurry of economic data releases, markets’ attention is fixated on Retail Sales figures, viewed as a litmus test for the resilience of consumer spending. Complementing this heavyweight data, Industrial Production and Import/Export Prices offer supplementary insights into the prevailing disinflationary undercurrents, reinforcing the notion that the recent CPI spike may indeed be an aberration. Additionally, market participants eagerly await remarks from Fed member Christopher Waller, slated to provide further clarity on the central bank's stance.

The US Dollar Index now finds itself in a holding pattern, faltering in its attempt to breach the elusive 105 threshold. With expectations of imminent rate adjustments looming, the DXY is poised to retreat, potentially revisiting support levels at 104 or lower.

Technical setup of DXY played out as expected: price recoiled from medium-term crucial resistance line, validating its importance. Potential selling target could be the support line that guided recovery of the USD since the start of the year, corresponding to 104 level on this instrument:

The Pound Sterling (GBP) grapples with its own set of challenges, tumbling amid news of the United Kingdom slipping into a technical recession. Preliminary Gross Domestic Product (GDP) data from the UK Office for National Statistics underscored a contraction of 0.3% in the fourth quarter, marking the second consecutive quarterly decline—a telltale sign of recession. The bleak economic backdrop intensifies speculation of preemptive rate cuts by the Bank of England, aimed at resuscitating growth momentum.

As economic indicators flash warning signals, the Pound Sterling braces for further downside pressure, exacerbated by foreign outflows amid mounting expectations of dovish policy maneuvers by the BoE. Despite steady consumer price inflation in January, diverging from investor projections of acceleration, BoE Governor Andrew Bailey remains sanguine about price pressures converging toward the target threshold by spring. Nevertheless, the specter of stubborn wage growth and service inflation poses formidable hurdles to achieving the coveted 2% inflation benchmark.

The GBP/USD pair retraces from intraday highs, eyeing a downward trajectory towards the 200-day Exponential Moving Average (EMA) positioned around 1.2520. From there, however the pair has good chances to rebound on the back of broad weakness of the USD described in the previous paragraph:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

EURUSD remains range-bound as markets look for fresh upside catalysts


EUR/USD advanced slightly on Friday following strong bearish backlash after the pair tested horizontal resistance level on Thursday. Despite the intensive pullback, managed to sustain pricing above 1.08, with technical indicators signaling a lack of significant bearish momentum. The reversal was instigated by a weakening US Dollar fueled by improved risk appetite in the market. However, the US Treasury bond yields' upward trajectory, supported by favorable US data, limited bearish momentum in the greenback, restraining EUR/USD's bullish aspirations.

Meanwhile, GBP/USD demonstrated resilience as it surged above 1.2700, marking its highest level in three weeks. The momentum, propelled by robust UK private sector activity, encountered headwinds in the American session on Thursday, leading to a partial retracement. Despite early stability above 1.2650, GBP/USD remains vulnerable to fluctuations, especially in the absence of significant data releases from both the UK and the US.

Key economic data releases played a pivotal role in shaping market sentiments. Notably, the decline in first-time jobless claims in the US to its lowest level since early January, coupled with the S&P Global Composite PMI maintaining expansion territory, underscored the resilience of the US economy. Similarly, upbeat PMI data from the UK fueled optimism surrounding the Pound Sterling. However, the surge in the benchmark 10-year US Treasury bond yield to its highest level since late November acted as a catalyst for the US Dollar's resurgence, exerting pressure on GBP/USD's upward trajectory.

Gold prices experienced a retreat from weekly highs, hovering around $2,025 during Friday's London session. The downward pressure stemmed from tempered expectations of imminent rate cuts by the Fed. As Fed policymakers express reservations regarding inflation reaching the coveted 2% target, gold struggles to significantly extend its upside momentum.

The Fed's stance on interest rates, characterized by a preference for maintaining rates within the 5.25%-5.50% range for some time in order to properly assess monetary policy transmission, reflects a cautious approach towards monetary policy. Amidst January's persistent inflation figures, policymakers exhibit a reluctance to hastily implement rate cuts, fearing potential repercussions on consumer price inflation. This cautious demeanor underscores the Fed's commitment to a balanced approach in navigating economic uncertainties.

Gold, often viewed as a safe-haven asset, faces headwinds as the opportunity cost of holding non-yielding assets escalates amidst the Fed's inclination towards prolonging higher interest rates. The diminished prospects of rate cuts diminish the attractiveness of gold as an investment avenue, prompting investors to reassess their portfolios. Consequently, gold prices experience downward pressure amidst the prevailing market sentiment favoring the US Dollar.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

EUR/USD Sees Modest Rise Amidst Dollar Weakness



At the dawn of the trading week, the EUR/USD pair has started on a modestly positive note, edging higher by 0.2%, however remaining below the intraday resistance level at 1.0850. This upward movement comes against the backdrop of a weakened US Dollar, driven primarily by the surprising move from the Chinese central bank, which fixed the Renminbi higher on Monday morning, sparking broad-based USD selling.

While today's uptick suggests a slight recovery, the pair remains ensnared within a new short-term downtrend, trying to regain ground above the critical 200-day SMA line. This downtrend was further exacerbated by last week's decline following the release of Eurozone and US flash PMI data, which underscored the resilience of the US economy, contrasting with Eurozone performance.

The resilience of the US economy has reignited discussions regarding the Federal Reserve's monetary policy trajectory. Despite earlier expectations of three interest rate cuts this year, recent data indicating US economic strength has prompted reassessment. If the Fed opts for a slower rate-cutting pace, it could buoy the US Dollar, drawing increased foreign capital inflows seeking higher returns.

Short-term technical analysis of the Dollar index (DXY) shows that the FOMC-induced decline towards 103 was followed by sharp rebound to 104 and breakout of the medium-term resistance line. This recovery occurred after Friday encouraging PMI data which could be a sign that the market cast doubts on the dovish Fed signals made during the FOMC meeting. In turn, this increases risk that the rally will continue after retest of the line which flipped into support level:

Adding to the market's speculation, the surprise decision by the Swiss National Bank to cut interest rates has raised concerns that the European Central Bank might follow suit. Historically, the ECB and SNB have mirrored each other's policy moves, albeit with the SNB typically following the ECB. However, the recent SNB decision has flipped this narrative, prompting investors to anticipate potential ECB rate adjustments on signs of easing inflation pressures on the European continent, as indicated by the SNB move.

The statements from ECB Chief Economist Philip Lane affirming confidence in wage inflation converging towards the 2% inflation target further underscore the likelihood of impending rate cuts, adding another layer of complexity to the currency markets. Wage pressures have often been cited by the ECB officials as the key variable that explains persistence of inflation due to the self-reinforcing “wage-consumption-inflation” cycle.

Further complicating the currency landscape is the intervention talk emanating from Japan, with Masato Kanda, Japan’s currency chief, hinting at potential market operations to support the Yen. USD/JPY has dipped, hovering in the 151.300s, spurred by the historical precedent of Bank of Japan (BoJ) intervention when the pair breaches the 150.000 mark. This sentiment is bolstered by data from the currency futures market, revealing an increase in bearish bets on the Yen during the BoJ's March meeting week, despite rumors of a rate hike.

The vicinity around the 150 level on USDJPY has consistently posed a formidable obstacle for buyers, with the pair failing to maintain any substantial upward momentum amid concerns of currency interventions. It seems probable that this scenario will persist, and any data indicating weakness in the USD is likely to trigger a surge in bearish momentum, pushing the pair towards levels more favorable for the Japanese government. From a technical standpoint, it appears that the near-term selling target for the pair could lie within the range of 148-148.50:

In the realm of upcoming events, attention turns to the Federal Reserve Bank of Atlanta President Raphael Bostic's scheduled speech, which could offer insights into the Fed's policy stance. Additionally, US New Home Sales and the Chicago Fed National Activity Index releases are poised to influence market sentiment.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

Dollar rally stalls as market participants wait for more signals of the strength of the US economy


The EUR/USD pair is showing resilience, defending its near-term support level at 1.08. Broad, albeit slight dollar weakness contributed to the strength of the pair. However, recent economic data releases from both the United States and Europe have injected fresh dynamics into the forex landscape, influencing market sentiment and shaping expectations regarding central bank policies.

The release of US Durable Goods Orders for February presented a positive surprise, with headline figures surpassing expectations. Headline Durable Goods Orders rose by 1.4%, exceeding the forecast of 1.3%. Moreover, various components, including Durable Goods Orders ex Defense and Nondefense Capital Goods ex Aircraft, outperformed market estimates.

Furthermore, commentary from Federal Reserve officials, particularly from Raphael Bostic, President of the Federal Reserve Bank of Atlanta, has been notably hawkish. Bostic's assertion that the Fed is likely to cut interest rates only once in 2024 contrasts with the market's expectation of three cuts. Such comments temper the extent of dollar sell-offs and contribute positively to the upside potential of the currency.

Conversely, European Central Bank officials have adopted a more dovish tone, signaling a potential shift towards earlier interest rate cuts. ECB Member Fabio Panetta's remarks regarding the emerging consensus for a rate cut, possibly as early as June, have weighed on the Euro's outlook. Additionally, ECB Chief Economist Philip Lane's confidence in wage inflation reaching levels consistent with the ECB's target suggests a forthcoming start of a policy easing cycle.

The prospect of lower interest rates in Europe, coupled with the likelihood of a dovish stance from the ECB, rein in upward momentum in the pair. A rate cut in April, as hinted by Panetta, could further undermine the Euro's attractiveness, potentially leading to decreased inflows of foreign capital.

Short-term technical analysis suggests that the resurgence of buying pressure, signaling a potential pullback, may occur specifically around the medium-support line, aligning with the 1.0750 level:

Meanwhile, the Pound Sterling has exhibited strength against the US Dollar, extending its gains above 1.2650. Despite concerns regarding the Bank of England's (BoE) dovish stance, driven by lower-than-anticipated inflation data, the GBP/USD pair has shown resilience. The BoE's recent monetary policy statement indicated a reluctance to reduce interest rates immediately, although market expectations of rate cuts persist.

Technically speaking, the recent price action has seen a breakdown below both the resistance line and the ascending support line, leaving the pair with limited prospects for an immediate recovery. Sellers are likely to target the 1.25 level before considering their triumph, potentially paving the way for bullish momentum thereafter:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

EUR/USD Dips as Diverging Central Bank Policies Drive Market Sentiment


In the ever-volatile currency markets, the EUR/USD pair demonstrated a downward trajectory on Wednesday, eventually stabilizing in a narrow band between 1.082 and 1.084. Despite Spanish inflation data for March meeting economists' expectations at 3.2% for the headline reading, the pair struggles to meaningfully extend it upsides. In this scenario, Tuesday's bearish reversal can be interpreted as a mere technical retreat from the psychological barrier of the 1.08 level, which swiftly lost momentum, reinstating the pair on its downward trajectory:

EURUSD’s bearish trend underscores the contrasting stances of two major central banks: the US Federal Reserve and the European Central Bank, shaping investor sentiment and currency flows.

The recent discourse among ECB officials suggests a growing likelihood of interest rate cuts in June. ECB Governing Council members, including Madis Muller and Fabio Panetta, hinted at an impending shift in monetary policy, emphasizing the emergence of a consensus favoring rate reductions. Moreover, ECB Chief Economist Philip Lane underscored that wage inflation is steadily converging towards normal levels, signaling a significant step toward removing the primary obstacle to ECB interest rate cuts in the near future.

Conversely, the Federal Reserve's stance appears more divided. While Chairman Jerome Powell advocates for a June rate cut, dissenting voices within the Fed, such as Raphael Bostic and Lisa Cook, advocate for a cautious approach, emphasizing the need for sustainable inflation returns. The variance in viewpoints within the Federal Reserve underscores a heightened level of uncertainty regarding both the pace and magnitude of future interest rate adjustments, surpassing the level of uncertainty observed within the ECB's discussions.

Looking ahead, market participants eagerly anticipate Friday's release of the Core Personal Consumption Expenditures Price Index, considered the Fed's preferred gauge of inflation. The result of this event is positioned to significantly impact the Fed's decision-making process regarding interest rates, as it will complement CPI data by offering a comprehensive view of inflation from the perspective of demand side (compared to supply side as in the case with CPI).

In parallel, the gold market remains in a consolidative phase below the $2,200 mark, as traders await further clarity on the Fed's policy trajectory. The upcoming PCE release on Friday is expected to provide meaningful insights into USD demand dynamics, thereby impacting gold prices. Moreover, upbeat US economic indicators, such as Tuesday's Durable Goods Orders, coupled with persistent inflationary pressures, may prolong the Fed's stance on maintaining higher interest rates, bolstering US Treasury bond yields and the USD.

Short-term price analysis in Gold reveals an initial failure to sustain a breakout above the $2200 level on March 21. Nevertheless, the price swiftly regained its upward momentum, positioning itself for a second attempt at testing this critical level. This resilience suggests robust demand near the all-time high, heightening the likelihood of a new record being established in the near future. A potential bullish target could reside in the mid-$2250 range, reflecting the market's underlying strength and upward trajectory:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

EUR/USD Steadies Near 1.0850 Amid ECB and Fed Speculations



In Tuesday's European session, the EUR/USD remains tethered near the 1.0850 mark, indicating a lull in market volatility. This stasis reflects the greenback's stabilization as traders anticipate pivotal data releases later this week, notably the FOMC Minutes and the preliminary S&P Global PMI data for May.

On the technical side, pair recently broke out of a descending channel, signifying a potential shift in trend. However, the pair is currently experiencing a brief consolidation phase just below the 1.0900 level, as indicated by the recent price action. The Relative Strength Index is hovering near the 60 mark, suggesting that there is still some bullish momentum left in the market. If the pair manages to break above the immediate resistance around 1.0935, it could target higher levels. Conversely, a failure to maintain this breakout could see the pair retreating back towards the 1.0723 support level:

The Euro is holding its ground against the Dollar despite brewing uncertainties around the ECB potential rate cuts post-June. ECB policymakers exhibit a cautious stance, leaning towards initiating a rate reduction next month while refraining from committing to further cuts. They emphasize a data-dependent approach moving forward.

However, some ECB officials have voiced concerns that additional rate cuts in July could reignite price pressures, undermining efforts to control inflation. The ECB's cautious optimism is juxtaposed against the backdrop of US inflation, which showed a predictable decline in April. Nonetheless, the Federal Reserve remains unconvinced that inflation is steadily retreating towards its 2% target.

Michael Barr, the Fed's Vice Chair for Supervision, underscored on Monday that the first quarter's inflation data was disheartening, lacking the reassurance needed to relax monetary policy. Barr's remarks highlight the Fed's commitment to a stringent policy stance until further evidence of disinflation emerges. Complementing this, Atlanta Fed President Raphael Bostic told Bloomberg TV that the Fed requires additional time to ascertain a consistent downtrend in inflation.

Investors are now keenly awaiting the FOMC minutes from May's policy meeting, due Wednesday. These minutes are expected to convey a hawkish sentiment, driven by the stubborn inflation seen in early 2023, which suggests a stalled disinflationary trend.

Across the channel, the Pound Sterling is maintaining a solid position, trading slightly above 1.2700 in the European session. The trajectory of GBP/USD will likely be influenced by the upcoming UK CPI data for April and the FOMC minutes.

Should the anticipated decline in UK inflation materialize, it would bolster investor confidence that inflationary pressures are easing back towards the 2% target. This would fuel expectations for the Bank of England to initiate rate cuts sooner, with the debate centered around whether the first cut will occur in June or August.

The GBP/USD pair is currently trading within a short-term ascending channel, suggesting a bullish outlook in the near term. The pair is approaching the long-term key resistance around 1.2795, which, if breached, could open the door for further gains towards the 1.3000 level. The RSI is hovering near the 60 mark, indicating there is room for additional upward momentum. Immediate support is found at 1.2634, and a drop below this level could see the pair testing the lower boundary of the ascending channel around 1.2516. Overall, the bias remains slightly bullish as long as the pair stays above the 1.2634 support:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

EURUSD Struggles Amid ECB Dovish Expectations; GBPUSD Holds Near 1.30 After Strong UK Retail Sales

The EURUSD pair is struggling to maintain momentum above the key short-term support level of 1.0850. After a modest recovery on Friday, the pair faces renewed selling pressure, with the possibility of touching key medium-term support level near 1.0780:

The primary catalyst for the euro's weakness is the growing expectation that the ECB will continue to ease monetary policy. With the Eurozone grappling with sluggish economic growth and inflation dipping below the ECB's 2% target, market participants are increasingly pricing in the likelihood of another rate cut in December.The dovish sentiment is reinforced by the ECB's latest Survey of Professional Forecasters, which revised the 2024 inflation projection downward to 1.9% from the previous estimate of 2%.

Contrasting the ECB's dovish stance, the US dollar remains firm, bolstered by expectations of a measured approach to monetary easing by the Fed. Interest rate derivatives indicate that markets anticipate a cumulative 50 bps reduction in interest rates by the end of the year, suggesting 25 bps cuts at both the November and December meetings.

Recent US economic data for September have showcased resilience, diminishing the urgency for aggressive rate cuts. Investors are closely monitoring upcoming data releases, including the preliminary S&P Global PMI for October due this Thursday, to gauge the economy's trajectory.

Furthermore, several Fed officials are slated to speak this week, potentially providing additional insights into the central bank's policy direction. Notably, Atlanta Fed President Raphael Bostic recently advocated for caution, suggesting the Fed should refrain from cutting rates too swiftly. He envisions only one rate cut in the remaining two meetings this year and anticipates the federal funds rate settling between 3% and 3.5% by the end of 2025.

Adding another layer to the dollar's strength is the approaching US presidential election on November 5. Betting markets have begun to slightly favor a potential victory for former President Trump. Historically, political uncertainty or shifts towards candidates perceived as pro-business can influence currency valuations. A Trump win could be associated with expectations of fiscal stimulus or deregulation, factors that might further bolster the dollar.

The British pound extends consolidation near the key round support level of 1.30 against the US dollar in today's session. Previously weighed down by expectations of aggressive interest rate cuts from the BoE amid easing inflation, the pound's outlook is now subject to reevaluation following stronger-than-expected UK Retail Sales data for September. Short-term upside looks like a more likely outcome, considering that the main bearish catalysts for the Pound have been factored in and the GBPUSD price managed to sustain above 1.30 support level:

Retail Sales, a critical indicator of consumer spending and economic health, unexpectedly increased by 0.3% month-over-month, defying economists' predictions of a contraction. This suggests that UK consumers remain resilient despite broader economic challenges, potentially reducing the urgency for the BoE to implement immediate rate cuts.

Prior to this data, markets had been pricing in rate reductions at both of the BoE's remaining policy meetings this year. The positive surprise in consumer spending may prompt a reassessment of these expectations. However, it is essential to consider that one data point does not constitute a trend. Investors should monitor subsequent economic indicators to determine if this momentum is sustainable.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

US Dollar Resumes Strengthening Amid Election Uncertainty and Safe-Haven Demand


The US Dollar accelerated its rally on Wednesday ahead of the US opening bell, driven by heightened uncertainty surrounding the upcoming presidential election and a surge in safe-haven inflows as equities continue their downbeat performance. The Dollar Index (DXY) gained momentum as investors sought refuge amid increasing volatility in risk assets.

Technical picture in DXY currently showing strong upside momentum, reflected in its sharp rise from recent lows. However, technical indicators, including the RSI near overbought territory, suggest that the move is becoming overstretched in the short term. A key target for bulls appears to be around the 106 level, which aligns with the upper bound of the medium-term descending price corridor. Given this, bullish positions may be more appealing following a pullback, especially if the DXY finds support around 104, offering a better risk-reward setup:

Market participants are particularly concerned about the potential re-election of President Trump, which could usher in a continuation or escalation of trade tensions. A Trump victory raises the specter of higher tariffs, significantly impacting exports from key US trading partners such as the Eurozone, Canada, Mexico, China, and Japan. This scenario could disrupt global supply chains and dampen international trade, adding to the appeal of the USD as a safe-haven currency.

US Treasury bonds extended their sell-off, pushing yields higher across the curve. The benchmark 10-year yield added more than 0.15% since the start of the week. This upward movement reflects market pricing of a modest policy easing (25 bp rate cut) at the upcoming FOMC meeting on November 7, with interest rate derivatives indicating a nearly 90% probability of a cut versus a 10% chance of rates remaining unchanged. This cautious outlook on monetary easing is further supported by the IMF raising its US growth forecast for this year to 2.8%, up from the 2.6% projected in July. The combination of accommodative monetary policy and robust economic growth enhances the attractiveness of US assets, contributing to the strength of the USD.

The US Mortgage Bankers Association (MBA) reported a fourth consecutive week of declining mortgage applications, with a 6.7% contraction for the week ending October 18, following a steep 17% drop the prior week. The sustained decrease suggests that higher borrowing costs are dampening demand in the housing market. Elevated mortgage rates, driven by rising Treasury yields, are impacting affordability and could lead to a slowdown in residential investment, a key component of GDP growth.

The British Pound remains below the psychological resistance level of 1.3000 against the USD. The currency is under pressure as traders await a speech by BoE Chair Andrew Bailey later today. Market participants are keen to glean insights into the BoE's monetary policy trajectory for November and December, especially as traders have priced in another interest rate cut in November.

On the technical side, GBP/USD pair has seen its short-term bullish trend weaken significantly as sellers have successfully pushed the price below the key 1.30 level, signaling a break of the lower bound of the ascending channel. This breach suggests that the upside momentum has been lost, and further downside pressure is likely. The next significant technical target for sellers is around the 1.28 level, where the 200-day SMA provides potential support, marking a critical level for the pair in the medium term:

Crude oil prices halted their two-day surge on Wednesday after the API weekly report indicated a larger-than-expected increase in US stockpiles. The API data revealed a build of 1.64 million barrels, surpassing the forecasted 0.7 million barrels and reversing the previous week's draw of 1.58 million barrels. The surprise build somewhat increased concerns about oversupply in the market, which could offset recent price gains.

Markets are now awaiting the EIA report due later today. The consensus expectation is for a modest build of 0.7 million barrels following a significant drawdown of 2.2 million barrels a week earlier. Should the EIA confirm a larger-than-anticipated increase in inventories, it may signal persistent oversupply issues, potentially leading to a pullback in crude prices toward the $70.00 per barrel mark or lower.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

US Dollar Retreats Due to Profit Taking Move but Upside Risks Remain



The US Dollar has weakened against most major currencies today, as market participants book profits after the parabolic rise and ahead of crucial US economic data releases. The spotlight is on the PMI data for October, which is expected to provide insights into the health of the US manufacturing and services sectors.

Consensus forecasts suggest the Services PMI will remain broadly stable at 55.0, marginally down from 55.2 in September. A reading above 50 indicates expansion, and stability here could reinforce the narrative of a resilient US economy amid global uncertainties.

A stable PMI and strong labor market data could temper expectations of aggressive monetary easing by the Federal Reserve. However, with US interest rate derivatives pricing in a 93% probability of a 25 bps rate cut at the upcoming FOMC meeting on November 7, the market seems convinced of imminent policy accommodation.

Another important data update, released today, Initial Jobless Claims, decreased to 227K from the previous week's 242K, providing mixed evidence about the much-discussed labor market slack in the US. Downward trend in claims often supports the USD, as it suggests robust employment conditions that may prompt the Fed to delay policy easing:

With the US presidential election scheduled for November 5, markets are bracing for potential volatility. A potential re-election of President Trump raises concerns about the reimplementation of higher tariffs, which could disrupt global trade and negatively impact economies closely tied to the US. The uncertainty surrounding the election outcome may limit significant dips in the USD, as investors often flock to safe-haven assets during periods of political uncertainty.

In the Eurozone, preliminary PMI readings present a dichotomy between member states:

France continues to exhibit contraction across all sectors, with PMIs remaining below the 50 threshold. However, Germany delivered better-than-expected PMI readings. Nevertheless, except for the Services PMI, other sectors remain in contraction territory, signaling that Europe's largest economy is not out of the woods yet:

Mario Centeno, Governor of the Bank of Portugal and ECB policymaker, indicated that a 50 bps rate cut in December is a possibility. His comments highlight accumulating downside risks to growth within the Eurozone. The prospect of additional monetary easing by the ECB may exert downward pressure on the Euro (EUR) against major currencies. For USD-denominated investors, this could influence currency hedging strategies and European asset allocations.

The EUR/USD technical chart shows that the pair has touched the lower bound of a well-established ascending channel, signaling a key technical target has been achieved. This area is likely to act as a strong support level, and the reaction around this level suggests a possible technical rebound is imminent. Short-term momentum indicators, including RSI nearing oversold levels, support this view. A rebound to the 1.0850-1.09 range is likely as market participants could capitalize on the completion of this technical target, eyeing higher retracement levels within the channel. This confluence of factors should draw further buying interest in the near term:

The Pound Sterling has bounced back to near 1.30 against the USD, recovering from a two-month low of 1.2900 observed on Wednesday. The UK's Composite PMI edged lower to 51.7 in October from 52.6 in September, indicating that while the economy continues to expand, the pace is slowing in both manufacturing and services sectors. Governor Andrew Bailey, in his recent speech, expressed confidence that inflation is decelerating faster than anticipated. However, he also cautioned about potential structural changes in the economy that could impact the inflation outlook. Bailey's comments have spurred market speculation of an imminent rate cut by the BoE, possibly as soon as the November meeting, with expectations of a repeat cut in December. Anticipation of lower interest rates will likely maintain structural medium-term weakness in GBP price.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

Market Analysis: Durable Goods Contraction Provides Welcomed Relief to Battered Market Sentiment

The latest data shows that US Durable Goods Orders fell by 0.8% in September, marking the second consecutive month of contraction after a sharp downward revision of the previous month's figure from 0% to -0.8%. While the headline number was better than economists' forecasts, the underlying trend points to weakening demand in the manufacturing sector.
The consecutive declines suggest that businesses may be scaling back on capital expenditures due to economic uncertainties.

Equity markets embraced the softer Durable Goods data, rallying on rising implied odds of additional Fed rate cut in December. Interest rate futures price in a 97% probability of a 25 basis point rate cut at the upcoming FOMC meeting on November 7.

The US Dollar Index (DXY) is at a critical juncture, testing support at the 104.00 level. A close above this threshold could pave the way for a rally toward 105.50, especially as uncertainties surrounding the upcoming US presidential election begin to intensify:

The Pound Sterling has gained traction against the US Dollar, approaching the psychological resistance level of 1.3000. This movement is supported by hawkish comments from Bank of England Monetary Policy Committee member Catherine Mann and stronger-than-expected economic data.

The preliminary S&P Global/CIPS Purchasing Managers' Index (PMI) for October indicates continued expansion in both manufacturing and services, outperforming the US and Eurozone counterparts.
The GBP/USD technical chart shows a clear ascending trendline, which has been respected multiple times, acting as a strong support level. However, the price is currently testing this trendline, and a break below it could signal a bearish reversal. If the price breaks decisively below the trendline, it may open the door for further downside towards the 1.2800 level. The RSI is trending lower, indicating weakening momentum, which supports the potential for a breakdown. A failure to hold this key support could attract more selling pressure, potentially accelerating a bearish move:

Later today, the University of Michigan will release its final Consumer Sentiment reading for October. Expectations are modest, with a slight uptick to 69.0 from the preliminary 68.9. The 5-year inflation expectations are projected to remain steady at 3%.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[Analytix]

USD Poised to Rise as Bearish Correction Concludes; Labor Market Surprises Ahead



The greenback resumed its advance on Wednesday, with the US Dollar Index seemingly completing a modest bearish retracement from 104.50 down to 104. Market participants are holding off on broad profit-taking in the USD due to uncertainties surrounding the upcoming US elections, which maintain significant upside risks for US fixed-income yields and, by extension, the dollar. Furthermore, expectations of strong US economic data releases—which could challenge the disinflation trend and signal a less pronounced easing in the labor market—are making bearish bets against the USD unattractive at the moment:

Today's release of the Consumer Confidence Index and the JOLTS Job Openings figures will provide valuable insights into consumer sentiment and labor market conditions. An improvement in consumer confidence to an expected 99.5 could signal increased consumer spending, a primary driver of GDP growth. Similarly, sustained high levels of job openings near 8 million suggest that the labor market remains tight, which could exert upward pressure on wages and inflation.

The preliminary US Q3 GDP data, scheduled for release on Wednesday, is anticipated to show a robust annualized growth rate of 3%. This strong figure highlights the US economy's resilience and makes it stand out among its major counterparts.

While the Nonfarm Payrolls report on Friday is expected to reveal a slower increase in employment compared to the previous month, the overall strength of the labor market remains a key factor for the Federal Reserve.

Recent strong US economic data have led markets to reassess expectations for the Federal Reserve's interest rate path. Although interest rate derivatives suggest a near-certainty of a 25 basis point cut in November and more than a 70% chance of another cut in December, robust economic indicators could prompt the Fed to adopt a less dovish stance. Higher interest rates typically support the US Dollar by attracting foreign capital seeking higher yields, which could further bolster the DXY.

Gold has pushed higher into the $2,750s per ounce, benefiting from a confluence of factors:

- The recent 6% drop in Brent crude prices, driven by geopolitical developments in the Middle East, has eased concerns over energy-driven inflation. Lower oil prices reduce costs across various economic sectors, potentially accelerating the decline in global inflation rates;

- With uncertainties surrounding global economic growth and geopolitical tensions, investors are increasing allocations to safe-haven assets like gold. The prospect of lower real interest rates enhances gold's appeal, as it reduces the opportunity cost of holding a non-yielding asset.

A near-term technical buying target for gold is the upper bound of its ascending corridor, which is located roughly near $2,800 per troy ounce:

The Pound Sterling is trading cautiously, remaining locked in a tight triangle between the 1.30 horizontal resistance and an ascending support line:

Major upcoming fundamental events—such as the UK's Autumn Forecast Statement slated for Wednesday and US labor market data—are prompting investors to adopt a wait-and-see stance. Regarding the fiscal announcement, it is expected to play a crucial role in shaping the Bank of England's monetary policy. Expansionary fiscal policies could necessitate tighter monetary policy to counter inflationary pressures, while austerity measures might allow for a more accommodative stance.

Market consensus indicates that the Bank of England is poised to cut interest rates by 25 basis points to 4.75% in its November 7 meeting, marking the second rate cut this year. The central bank's decisions will significantly influence the Pound's valuation against major currencies.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.