CFD Markets News and Forecasts — 24-10-2024

• EUR/USD reclaimed the 1.0800 handle on Thursday.
• EU PMI figures came in mixed, giving Euro bulls just enough ammo.
• US Durable Goods Order and UoM Consumer Inflation Expectations in the barrel for Friday.

EUR/USD made a half-hearted recovery on Thursday, rebounding four-tenths of one percent and clawing back north of the 1.0800 handle. Despite a late-week bounce, Fiber remains steeply off of recent highs after declining over 4% top-to-bottom from late September’s peak bids near 1.1200.

Pan-European HCOB Purchasing Managers Index (PMI) figures mixed early Thursday, with the EU Manufacturing PMI from October rising to a firmer 45.9 from the previous month’s 45.0, eclipsing the expected 45.1. On the low side, October’s EU Services PMI sank to 51.2, lagging below the previous month’s 51.4 and missing the forecast uptick to 51.6.

The Euro’s representation on this week’s economic data docket is functionally wrapped up, with only low-tier data on the offer for Friday. Markets will have to contend with US Durable Goods Orders and an update to 5-year Consumer Inflation Expectations from the University of Michigan (UoM). Headline US Durable Goods Orders in September are expected to contract a full 1.0% MoM, extending the recent downturn after August’s flat-footed 0.0% print. October’s UoM 5-year Consumer Expectations are expected to come in close to their previous print of 3.0%.

EUR/USD price forecast

The EUR/USD pair continues its corrective movement, having found support just above the 1.0750 level following a sharp decline from the highs near 1.1250 in mid-September. The pair has briefly rebounded from this key support, but remains below both the 50-day EMA (blue line) at 1.0968 and the 200-day EMA (black line) at 1.0896, indicating that the overall trend is still tilted to the downside. The moving averages are sloping downward, confirming bearish momentum in the near term. The recent bounce appears corrective, and unless the pair breaks above the 1.0900 area, sellers may look to reenter the market.

The MACD indicator shows a continued bearish bias, with the MACD line (blue) remaining below the signal line (orange), and the histogram firmly in negative territory. However, there are early signs of potential exhaustion in the selling pressure, as the histogram shows less pronounced red bars. This suggests that while the bears are still in control, the momentum is waning. A break above the 200-day EMA could signal a bullish recovery, but failure to clear that resistance would likely lead to further downside, with immediate support around the 1.0750 level and a potential test of the 1.0650 zone in case of extended selling pressure.

EUR/USD daily chart

• GBP/USD recovered four-tenths of a percent on Thursday.
• Markets bid up the Pound Sterling despite UK PMI figures missing the mark.
• US PMI data came in above expectations, limiting Greenback losses.

GBP/USD recovered some much-needed ground on Thursday, climbing 0.4% as Cable bidders grapple with keeping price action north of the 1.2900 handle. UK Purchasing Managers Index (PMI) figures broadly missed the mark early Thursday, but both the Services and Manufacturing PMI components held north of contraction territory below 50.0.

US PMI figures broadly beat expectations, containing US Dollar losses and keeping GBP/USD tied up just below 1.3000. US Manufacturing PMI activity figures rose to 47.8 in October, beating the expected 47.5 and climbing even further from August’s 47.3. Meanwhile, the Services PMI component bounced to 55.3, climbing from the previous month’s 55.2 and beating the expected decline to 55.0.

Meaningful UK economic data takes a break on Friday, leaving markets to contend with US Durable Goods Orders and an update to 5-year Consumer Inflation Expectations from the University of Michigan (UoM). Headline US Durable Goods Orders in September are expected to contract a full 1.0% MoM, extending the recent downturn after August’s flat-footed 0.0% print. October’s UoM 5-year Consumer Expectations are expected to come in close to their previous print of 3.0%.

GBP/USD price forecast

The GBP/USD pair is currently in a corrective phase after a significant bullish rally that peaked near the 1.3300 level in early October. Following the recent decline, the price has found support near the 200-day EMA (black line) at 1.2848, which could act as a key level for the pair in the coming sessions. The 50-day EMA (blue line) at 1.3057 is now positioned as an overhead resistance, and with the pair trading below this level, the short-term trend remains bearish. However, the price has managed to bounce slightly from the 1.2900 psychological level, signaling that buyers are stepping in to defend the 200-day EMA.

The MACD indicator is currently in bearish territory, with the MACD line (blue) sitting below the signal line (orange), and the histogram displaying negative momentum. This suggests that the bearish pressure is still prevalent. However, the recent narrowing of the MACD histogram indicates that selling momentum may be fading, and a potential bullish crossover could materialize if the pair holds above the 1.2848 support level. A daily close below this support would likely accelerate the downward move toward the 1.2700 area, while a rebound above the 1.3050 resistance could reinvigorate the bulls, aiming for the 1.3200 zone.

GBP/USD daily chart

• NZD/JPY pair has seen a pullback with some selling pressure emerging.
• Technical indicators suggest a weakening bullish outlook, with the RSI and MACD flattening.
• The pair has formed a strong resistance near the convergence of the 100 and 200-day SMAs.

The NZD/JPY pair has retreated from its recent highs, signaling a potential shift in momentum. In Thursday's session, the pair shed 0.40% to 91.30, and continues to side-ways trade but with some signs of bulls weakening.

The technical indicators are mirroring this shift. The RSI, which measures the strength of buying pressure, has declined to 56, indicating a weakening bullish sentiment. The MACD, which gauges the relationship between the pair's short-term and long-term moving averages, has flattened, suggesting a neutral outlook remains flat and green.

Important support and resistance levels need to be watched closely are seen at 91.30, 91.00, and 90.50. Resistance levels are located at 91.50, 92.00 (the convergence of the 100 and 200-day SMAs), and 92.30. The pair's price action is likely to fluctuate within these levels in the near term. The 20-day SMA remains as a critical support level on the downside, and its breach could intensify the selling pressure and strengthen the bearish momentum.

That being said, the price action will be determined by fundamentals as the pair continues to be stuck between the 20-day SMA and the 100 and 200-day SMA convergence. Investors should monitor a breach of these two boundaries.

NZD/JPY daily chart

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• The Canadian Dollar lost another tenth of a percent against the Greenback.
• Canada took a backseat with US PMIs featuring heavily on Thursday’s data docket.
• The BoC’s 50 bps rate trim this week is doing little to support the CAD.

The Canadian Dollar (CAD) eased slightly on Thursday, trimming another tenth of a percent against the Greenback as global FX markets continue to turn their backs on the Loonie following the Bank of Canada’s (BoC) midweek rate trim.

Canada saw strictly low-tier data on the economic calendar docket, and broadly upbeat US Purchasing Managers Index (PMI) activity figures bolstered the US Dollar across the board.

Daily digest market movers

• US PMI figures beat on both sides of the forecast, with Services climbing to 55.3 in October compared to the expected 55.0, and slightly beating September’s 55.2.
• The US Manufacturing PMI component also rose, climbing to 47.8 from the previous 47.3, beating the expected rise to 47.5.
• US Initial Jobless Claims also eased back to 227K for the week ended October 18. Markets expected a print matching the previous week’s revised 242K.
• Canadian Employment Insurance Beneficiaries Change fell in August to 1.5% from the previous month’s 2.2%. Little market impact came of it.
• Canadian Retail SAales figures from September are slated for Friday, but likely to get overshadowed by US Durable Goods Orders and University of Michigan Consumer Sentiment figures due at the same time.

Canadian Dollar price forecast

The USD/CAD pair is currently trading in a bullish trend after recovering from a prolonged period of downward movement seen in mid-August through late September. The price has decisively broken above both the 50-day EMA (blue line) at 1.3666 and the 200-day EMA (black line) at 1.3628, indicating a shift in market sentiment towards the upside. The recent bullish momentum has been strong, with the pair consolidating near the 1.3850 level after a steady rise. The moving averages are beginning to converge, suggesting the possibility of a medium-term bullish crossover that would further support upward momentum.

Looking at the MACD indicator at the bottom of the chart, the bullish divergence is evident as the MACD line (blue) is crossing above the signal line (orange), confirming the recent bullish trend. The histogram also shows increasing positive momentum, with expanding green bars. However, the price appears to be approaching a key resistance area around the 1.3850-1.3900 level, where the pair might face selling pressure. Traders should watch for a potential retracement or consolidation phase if this resistance holds, with support levels around the 1.3700 mark, where the 50-day EMA could offer a safety net for bulls. A clear break above 1.3900, however, could open the doors for further gains toward the 1.4000 psychological level.

USD/CAD daily chart

• Silver price recovers from a four-day low but remains stuck in a $1 range, failing to capitalize on a weaker US Dollar and falling yields.
• Momentum supports buyers, with RSI in bullish territory, as XAG/USD targets the YTD high of $34.86 and beyond.
• A break below $33.25 could shift bias to neutral, with further support at $33.00 and the October 17 low of $31.32.

Silver consolidated at around $33.60 as grey metal bulls failed to capitalize on falling US yields and a weak US Dollar. At the time of writing, XAG/USD is seesawing within a $1 range and virtually unchanged.

XAG/USD Price Forecast: Technical outlook

Silver price recovered some ground after falling to a four-day low of $33.25. The uptrend remains intact, and if buyers lift the XAG/USD spot price above $34.00 a troy ounce, they could challenge the year-to-date (YTD) high at $34.86.

Momentum backs buyers, with the Relative Strength Index (RSI) persisting in bullish territory.

If XAG/USD clears the YTD high, the next key resistance levels would be the October 2012 peak at $35.40, ahead of challenging the psychological $40.00, and the August 2011 high at $44.22.

Conversely, if the grey metal drops below $33.25, the next support would be $33.00. The break below could shift the bias to neutral, and if sellers drive Silver’s below October 17 low of $31.32, XAG/USD might reach the 50-day Simple Moving Average (SMA) at $30.64.

XAG/USD Price Chart – Daily

• AUD/USD defends its ground due to a modest pullback in the US Dollar.
• Corrective decline in US Treasury bond yields and profit-taking around the safe-haven US Dollar benefit the risk-sensitive Australian Dollar.
• Monetary policy divergences between the Fed and RBA might also benefit the Aussie.

The AUD/USD traded around 0.6625 during Thursday's session. A modest pullback in the US Dollar and a stable performance in equity markets contributed to the Aussie losing further ground.

Corrective declines in US Treasury bond yields and profit-taking around the safe-haven US Dollar might affect the risk-sensitive Australian Dollar. In addition, while the Federal Reserve (Fed) is expected to cut interest rates two more times in 2024, the Reserve Bank of Australia’s (RBA) hawkish stance might also limit the AUD/USD decline.

Daily digest market movers: Australian Dollar gains on USD pullback

• The USD Index (DXY) retreats due to a decline in US Treasury bond yields and a stable equity market, benefiting the risk-sensitive AUD.
• The US flash PMI prints for October show higher Composite and Manufacturing activity, while Services activity remains strong but fails to benefit the USD.
• The RBA isn’t showing clear signs of embracing rate cuts as it maintains the Official Cash Rate (OCR) at 4.35%, while the Federal Reserve is expected to cut in November and December.

AUD/USD technical outlook

The Relative Strength Index (RSI), which measures the momentum of price changes, is at 34, suggesting that selling pressure is flat. The Moving Average Convergence Divergence (MACD), which is used to identify trend changes and trading signals, is below the zero line. The red histogram suggests that selling pressure is rising. The overall outlook is bearish, and it would be reinforced if the sellers breach the 200-day SMA at 0.6630.

• Gold advances as US Treasury yields fall alongside the US Dollar.
• Tensions due to the Middle East and US election boost Bullion’s demand.
• Strong US labor market data and better-than-expected PMI results underscore economic resilience despite mixed housing data.
• Analysts highlight rising US fiscal debt concerns as key factors supporting Gold's rally.

Gold prices climbed late on Thursday as US Treasury yields dropped on demand for safe-haven assets. Heightened tensions in the Middle East and US election woes underpin the golden metal. At the time of writing, the XAU/USD trades at $2,734, up 0.72%.

Risk appetite has improved, as portrayed by Wall Street trading in the green. US data reveals that the labor market remains solid and not as weak as projected by the Federal Reserve (Fed), which cut rates by 50 basis points (bps) in its last meeting due to fears of over-tightening monetary policy.

The US economy continued to strengthen as S&P Global Flash PMIs fared better than expected. Despite this, US housing data was mixed with Building Permits tumbling, while New Home Sales rose.

ANZ analysts commented, "Concerns around the rising US fiscal debt outlook is strengthening the investment case for Gold.”

Sources cited by Reuters stated, “Uncertainty leading into the US election is one additional pillar of support for the Gold market, given the unease that the market may be feeling going into the election.”

Gold’s advance reflects traders' uncertainty about the outcome of the US election, as markets expect a narrowly contested race. Former President and Republican nominee Donald Trump was seen gaining an edge over Vice President Kamala Harris in the upcoming election, which is less than two weeks away.

In the geopolitics space, Israeli officials delivered strong rhetoric against Iran. An Israeli strike on Tehran might lead to a further escalation of hostilities.

Daily digest market movers: Gold price counter-attacks as US yields tumble

• The US 10-year Treasury note yield fell five basis points to 4.20%.
• The DXY, which measures the performance of the US currency against another six, edges down 0.37% at 104.00.
• Initial Jobless Claims for the week ending October 19 rose to 227K, below estimates of 242K and the previous reading of 241K.
• October S&P Global Manufacturing PMI came in at 47.8, up from 47.3 in September and exceeding the forecast of 47.5. The Services PMI also improved, rising from 55.2 to 55.3, above analysts' projection of 55.0.
• New Home Sales in September grew 4.1% from 0.709 million to 0.738 million.
• Data from the Chicago Board of Trade, based on the December fed funds rate futures contract, indicates that investors estimate 47 basis points (bps) of Fed easing by the end of the year.

XAU/USD technical outlook: Gold price rises above $2,730

Gold price advanced continued despite the formation of a Bullish Engulfing candle pattern on the daily chart, which was invalidated as of writing as XAU/USD edges higher.

Momentum suggests that buyers are moving in. The Relative Strength Index (RSI) halted its downfall and resumed upwards in bullish territory.

If XAU/USD clears $2,750, the next resistance would be the year-to-date (YTD) high at $2,758. Once surpassed, the next stop would be $2,800.

On the flip side, if Bullion prices edge below the October 23 low of $2,708, the next support would be the 38% Fibonacci Retracement at $2,699, followed by the 50% and 61.8% Fib Retracements at $2,681 and $2,662, respectively.

European Central Bank (ECB) Governing Council Member Martins Kazaks noted late Thursday that the case for European interest rates is very likely on the lower side. The Bank of Latvia Governor also hinted that further moves on rates are likely in the ECB's upcoming meetings.

Key highlights

Bank of Japan (BoJ) Kazuo Ueda hit newswires late Thursday, noting that while BoJ policymakers remain hopeful for a soft landing economic scenarios, moves in the Yen market need to be watched closely.

Key highlights

The US dollar faced some profit-taking and lost momentum in line with a slight pullback in US yields, as risk sentiment improved mildly. Meanwhile, business activity in Europe for October remains lacklustre, showing little sign of recovery.

Here is what you need to know on Friday, October 25:

The US Dollar Index (DXY) experienced a knee-jerk on Thursday, receding from recent tops past the 104.00 barrier. The Durable Goods Orders are due seconded by the final Michigan Consumer Sentiment.

After bottoming out around 1.0760, EUR/USD regained some balance and trespassed the key 1.0800 barrier. Germany’s Business Climate tracked by the IFO institute will take centre stage in Europe ahead of the ECB’s Consumer Inflation Expectations and M3 Money Supply figures. In addition, the ECB’s McCaul is due to speak.

GBP/USD left behind three straight days of losses and approached the key 1.3000 yardstick amidst decent gains. The GfK’s Consumer Confidence will grab all the attention at the end of the week across the Channel.

The selling pressure in the Greenback and lower US yields weighed on USD/JPY, sending it back below 152.00. The final Coincident Index and Leading Economic Index are next on tap followed by the Tokyo CPI figures.

AUD/USD ended the session with marginal gains following the weaker US Dollar. Next on tap in Oz will be the release of the RBA’s Monthly CPI Indicator on October 30.

Demand concerns coupled with uncertainty around the upcoming US elections and the Middle East weighed on crude oil prices and dragged the barrel of the American WTI below the $70.00 mark per barrel.

Gold prices reclaimed some ground lost in the previous session and retested the area above the $2,730 mark per ounce troy helped by the offered tone in the Greenback and shrinking US yields. Silver prices traded in a volatile fashion, alternating gains with losses around the $33.60 zone.

• The Dow Jones backslid another 0.9% at the low point on Thursday.
• Lopsided earnings reports have key equities tilted into the low side.
• The Dow is headed for its first losing week since August.

The Dow Jones Industrial Average (DJIA) trimmed further into the low end on Thursday, declining nearly 400 points at the bottom as uneven earnings figures dragged key stocks even lower. The major equity index has moderated to a more reasonable -150 points on the day, facing a 0.4% contraction from Thursday’s opening bids.

US Purchasing Managers Index (PMI) figures came in broadly higher than expected, helping to bolster overall equities despite sharp declines in key Dow-listed stocks. US Manufacturing PMI activity figures rose to 47.8 in October, beating the expected 47.5 and climbing even further from August’s 47.3. Meanwhile, the Services PMI component bounced to 55.3, climbing from the previous month’s 55.2 and beating the expected decline to 55.0.

Dow Jones news

Despite the overall upbeat print in key US activity figures, the Dow Jones is getting dragged into the red by losses in key weighted players. Roughly two-thirds of the index is testing into the red on Thursday, but most losses are contained within key players in the tech space as the chipmaker rally continues to wobble.

IBM (IBM) fumbled the ball, declining over 6.5% and slipping below $218 per share after missing revenue forecasts in the third quarter. Honeywell (HON) also shed weight, falling 5% and easing under $210 per share after revenue, which grew over the period, failed to meet Wall Street expectations, prompting the company to lower year-end guidance.

Dow Jones price forecast

The Dow Jones Industrial Average (DJIA) daily chart reflects a bearish pullback after reaching a peak near 43600. The index has dropped to 42331.67, displaying a series of bearish candles as it approaches the 50-day EMA, currently at 41833.84. The 50-day EMA has provided support in the past, and it will be critical to monitor if this level holds once again. If it does, a potential bounce could see the price testing recent highs around 43600. On the other hand, if the 50-day EMA is breached, a more significant correction could be in play, with the next support target around the 200-day EMA at 39665.77.

The MACD indicator is signaling increasing bearish momentum. The MACD line has crossed below the signal line, and the histogram is deepening in negative territory. This confirms the weakening bullish sentiment and could suggest further downside in the short term. Traders should be cautious of additional bearish price action, especially if the DJIA fails to hold the 50-day EMA. A break below could accelerate selling pressure, with a deeper retracement towards the 200-day EMA in focus.

Dow Jones daily chart

• US Dollar falls on profit-taking after a solid week.
• Flash US PMI signaled solid business activity in October.
• Two more Fed rate cuts in 2024 remain on the table, markets await further data to validate it.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, retreated on Thursday, giving up some of the gains accumulated during a solid week marked by a stellar performance. This pullback is attributed to profit-taking following the release of mixed US economic data. Despite positive signals from the flash US S&P PMI, suggesting robust business activity, the Greenback saw losses and is set to consolidate in the next session.

Daily digest market movers: US Dollar declines on profit-taking, S&P PMIs show promising results

• The flash US S&P Global October Composite PMI came in at 54.3, slightly above estimates, with services expanding at 55.3 and manufacturing contracting for the third straight month.
• Despite the overall PMI improvement, employment in the US fell slightly for the third month, reflecting uncertainty ahead of the upcoming presidential election.
• The CME Fedwatch Tool indicates a 90% probability of a 25-basis-point rate cut at the November 7 Fed meeting.
• In the meantime, the US 10-year benchmark remains below the peak reached on Wednesday near 4.20%.

DXY technical outlook: DXY faces resistance, poised for consolidation

The DXY index surged above its 200-day SMA, but buying momentum waned, signaling overextension. The index is poised for sideways consolidation to alleviate overbought conditions per the Relative Strength Index (RSI).

Key support levels include 104.50, 104.30 and 104.00, while resistance lies at 104.70, 104.90 and 105.00.

• Mexican Peso consolidates as Mexico’s headline inflation rises slightly in early October.
• IMF projects Mexico’s GDP growth at 1.5% in 2024, compared to a stronger 2.8% forecast for the US economy.
• Strong US jobs data and improving PMI figures support the US Dollar.

Mexican Pesos remains firm against the Greenback during the North American session on Thursday amid an improvement in risk appetite. Mexico’s inflation edged slightly up in the first 15 days of October, while US jobs data was solid, underpinning the US Dollar. At the time of writing, the USD/MXN trades at 19.82, virtually unchanged.

The Instituto Nacional de Estadística Geografía e Informatica (INEGI) revealed that Mexico's headline inflation accelerated in the first half of October. However, the underlying rate moderated to levels last seen in February 2021. This reinforced expectations that the Bank of Mexico (Banxico) would lower borrowing costs after economic activity and Retail Sales data in August suggested the economy was losing ground.

Projections by the International Monetary Fund (IMF) suggest Mexico’s economy is expected to grow by 1.5% in 2024 and 1.3% in 2025. On the contrary, the IMF revealed the US economy will hit 2.8% Gross Domestic Product (GDP) growth in 2024 and 2.2% in 2025.

In addition, a strong jobs market report by the US Department of Labor revealed that the number of Americans filing for unemployment claims in the week ending October 19 was lower than expected.

Recently, S&P Global revealed that Manufacturing and Services PMI in October improved, though the former remained in contractionary territory. This lifted the Composite PMI from 54.0 to 54.3, a tailwind for the Greenback.

Earlier, the Cleveland Fed’s Beth Hammack said that core inflation has eased but isn’t yet at 2% target, adding that prices had cooled amid strong job market and “good growth.” She stated it is reasonable to expect more disinflation.

Daily digest market movers: Mexican Peso wavers amid mixed inflation readings

• Mexico’s mid-month inflation report in October was 4.69% YoY, up from the 4.65% expected and the previous reading of 4.66%. Underlying inflation data rose by 3.87% YoY, down from 3.95%, though it missed the mark of 3.82%.
• On a monthly basis, mid-month inflation rose by 0.43% MoM, exceeding the previous reading of 0.09% and estimates of 0.40%.
• Analysts at Monex suggested that the latest inflation data could prevent Banxico from lowering rates in subsequent meetings. Banxico’s next meeting is on November 14.
• Initial Jobless Claims for the week ending October 19 rose by 227K, below estimates of 242K and the previous reading of 241K.
• October S&P Global Manufacturing PMI came at 47.8, up from 47.3 in September and exceeding forecasts of 47.5. The Services PMI improved from 55.2 to 55.3, above the 55.0 projected by analysts.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 48 bps of Fed easing by the end of the year.

USD/MXN technical outlook: Mexican Peso consolidates below 20.00

The USD/MXN uptrend remains intact, though it has consolidated within the 19.80-20.00 range. Momentum shows that sellers have stepped in with the Relative Strength Index (RSI) aiming lower, capping the exotic’s pair advance.

If buyers clear the 20.00 figure, they could test the weekly peak at 20.09. On further strength, the USD/MXN could aim toward the year-to-date (YTD) high at 20.22, ahead of key psychological levels of 20.50 and 21.00.

On the other hand, if sellers reclaim the October 18 low at 19.64, this could pave the way for a challenge to 19.50. The next move would be toward the October 4 swing low of 19.10 before testing 19.00.

• EUR/GBP remains sideways, technical indicators are mixed.
• Buyers got rejected by the 20-day SMA.
• Indicators suggest a neutral to slightly bullish bias.

The EUR/GBP pair has been trading in a narrow range over the past few days, with minimal price fluctuations. The pair is currently trading at 0.8335, slightly lower than its opening price for the day after getting rejected by the 20-day Simple Moving Average (SMA).

Technical indicators are sending mixed signals. The Relative Strength Index (RSI) is hovering around 44, indicating that selling pressure is rising as it points down. However, the Moving Average Convergence Divergence (MACD) is green and rising, suggesting that buying pressure is also increasing. The overall short-term outlook is mixed, with the RSI indicating a bearish trend and the MACD indicating a bullish recovery.

In terms of support and resistance levels, support can be identified at 0.8330, 0.8315, and 0.8300, while resistance levels stand at 0.8350, 0.8370 and 0.8400. The pair is likely to continue trading within this range in the near term if the buyers are unable to conquer the 20-day SMA at 0.8350.

EUR/GBP daily chart

• GBP/USD bounces off two-month low of 1.2907, testing resistance near the 100-day SMA at 1.2964.
• Sellers maintain control as momentum points downward, with key support at 1.2900 and the 200-day SMA at 1.2800.
• A move above 1.3000 could open the door for a test of 1.3102, with further resistance at the 50-day SMA at 1.3140.

The Pound Sterling recovered some ground against the Greenback after UK GILTS yields jumped after Chancellor Reeves confirmed that a change to UK fiscal rules would help fund GBP 20 billion in investment. At the time of writing, the GBP/USD trade was 1.2974, up by 0.41%.

GBP/USD Price Forecast: Technical outlook

The GBP/USD bounced off the bottom trendline of an ascending channel after hitting a two-month low of 1.2907. Since then, the pair recovered some ground and hit a high of 1.2987, before struggling to sustain the advance above the 100-day Simple Moving Average (SMA) at 1.2964.

Momentum shows sellers are in charge, even though the Relative Strength Index (RSI) aimed slightly up but so far failed to clear the latest peak. Therefore, the path of least resistance is tilted to the downside.

The first support for GBP/USD would be 1.2900. Once surpassed, sellers could push prices toward the 200-day SMA at 1.2800.

On the other hand, a bullish continuation could happen if GBP/USD climbs above 1.3000 and clears the October 15 high at 1.3102. Further upside lies at the 50-day SMA at 1.3140.

GBP/USD Price Chart – Daily

• EUR/GBP stays pressured at two-year lows on speculation the ECB could slash interest rates before year-end. 
• Lower interest rates would reduce foreign capital inflows, weighing on the Euro. 
• The Pound holds its ground despite weak PMI data and mildly dovish comments from BoE Governor Bailey.  

EUR/GBP trades at two-year lows in the 0.8320s on Thursday, having fallen a quarter of a percent on the day mainly due to a softer Euro (EUR). The Single Currency is falling as a result of increasing market speculation that the European Central Bank (ECB) will have to cut interest rates more aggressively – and to a lower base – than previously expected, to avert a hard landing for the Eurozone economy. 

The Pound Sterling (GBP), meanwhile, remains stable due to the relatively high 5.00% bank rate of  the Bank of England (BoE) which now stands out as one of the highest in the G10, and acts as a magnet to capital. In addition, the BoE is not expected to cut interest rates at the same pace as most other leading central banks, suggesting this could favor the Pound into the end of 2024. 

EUR/GBP declines as markets revise outlook for Eurozone

EUR/GBP is losing ground on Thursday and lies at multi-year lows as the Euro weakens against the Pound Sterling. 

The catalyst for this weakness stems from a surprise drop in Eurozone economic data, in particular inflation. Headline inflation in the Euro Area was revised down to 1.7% in September from its 1.8% preliminary estimate, and fell below the ECB’s 2.0% target for the first time in over three years, according to recent data from Eurostat. The surprise fall provided the catalyst for speculation the bank might need to cut interest rates more aggressively than previously expected. 

A Reuter’s story on Wednesday added fuel to the fire after it reported that the ECB was considering cutting interest rates to below the “neutral” rate. The neutral rate, also known as the “equilibrium level” of interest rates, is a theoretical level at which inflation should remain unchanged. The story added to speculation the ECB was sharpening its sword and led investors to sell the Euro. 

EUR/GBP Daily Chart

“Rates are falling significantly as markets are pricing a higher probability of the ECB going for a 50 bps rate cut in December,” said Andres Larsson, Senior FX Analyst at Nordea Bank, adding,  “..and a higher probability of the ECB eventually cutting rates to below neutral,”

According to Larsson, the market is pricing in “-35.6bp for the December ECB meeting and -32.4bp for the ECB meeting on 25 January.” This is substantially higher than a few weeks ago. 

Eurozone data out on Thursday failed to quell speculation. Mixed preliminary October PMIs revealed Manufacturing activity rising but still in contraction territory (below 50) at 45.9 vs. 45.1 expected. The Services PMI dipped to 51.2 vs. 51.5 expected and 51.4 in September. 

“Today’s PMIs were more or less in line with expectations, although the employment component dropped below 50, pointing to the risk of rising unemployment ahead,” said Larsson. 

Employment and wages could be a key determining factor for whether the ECB decides to go for a “Christmas slasher” or not. 

The ECB’s Chief Economist Philip Lane has said that wage inflation is likely to stay elevated in the second half of 2024 and contribute to higher broad inflation during the period before falling in 2025. 

According to Q2 Wage Growth data, Eurozone wages rose 4.5% which, though lower than the 5.2% in the previous quarter, remained high. There is still no data for Q3, however, but the Eurozone Average Monthly Wage continues to rise quite strongly, reaching EUR 2,180 in September. 

EUR/GBP at historic lows as Pound stands firm despite weak data

Sterling, meanwhile, remains firm despite weaker-than-expected UK PMI data for October.  This showed Manufacturing PMI falling to 50.3 vs. 51.5 expected and actual in September, and Services PMI at 51.8 vs. 52.4 expected and actual in September. The data could limit gains for the EUR/GBP pair.

“The weak PMI print along with the sharp slowdown in inflation raise the likelihood the BoE dials up its easing cycle, which can further curtail GBP upside momentum on the crosses,” said Elias Haddad, Senior Markets Strategist at Brown Brothers Harriman (BBH). 

The Consortium of British Industry (CBI) October distributive trades survey was also softer than expected. CBI Total orders came in at -27 vs. -28 expected while selling prices came in at 0 vs. 9 expected and 8 in September. “Most importantly, its quarterly measure of business optimism came in at -24 vs. -5 expected and -9 in July and is the lowest since October 2022,” said Haddad. 

In a recent speech, BoE Governor Andrew Bailey struck a mildly dovish chord after saying that “disinflation is happening I think faster than we expected it to, but we have still genuine question marks about whether there have been some structural changes in the economy.”  

At the same time Bailey did not reiterate the need for a more “activist” and “aggressive” stance on cutting interest rates as he had done in a previous speech. Markets took the view that this meant Bailey acknowledged he had overstepped the mark in the previous comments and that he was trying to steer the ship back to a more “cautious” approach. As such, Sterling held its ground.

• USD/JPY falls due to mild correction in the US Dollar.
• US flash S&P Global PMI for October came in better than projected.
• Investors doubt whether the BoJ will hike interest rates again in the remainder of the year.

The USD/JPY pair falls to near 152.00 in Thursday’s North American session after refreshing a 12-week high near 153.20 on Wednesday. A mild correction in the asset is purely driven by a temporary pause in the US Dollar’s (USD) rally for a while.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, corrects to near 104.20 after revisiting the August high of 104.50.

The Greenback remains near its intraday low, although the flash S&P Global PMI data for October has come in better than expected. The report showed that activities in the service sector expanded at a surprisingly faster-than-expected pace to 55.3. Economists expected the Services PMI to have grown at a slower pace to 55.0 from 55.2 in September. Meanwhile, the Manufacturing PMI contracted for the fourth straight month but at a slower-than-expected pace to 47.8.

Meanwhile, the outlook of the US Dollar remains firm as the Federal Reserve (Fed) is expected to pursue the interest rate cut path at a moderate pace. Also, growing uncertainty over the United States (US) presidential elections has improved the US Dollar’s appeal as a safe haven.

In the Tokyo region, investors doubt whether the Bank of Japan (BoJ) will hike interest rates again after slightly dovish guidance from Governor Kazuo Ueda. "When there's huge uncertainty, you usually want to proceed cautiously and gradually," Ueda said on Wednesday, Reuters reported. The comments from Ueda also indicated that the BoJ need to more time to gain confidence about inflation sustainably achieving 2% target.

CTA trend followers are adding to their Palladium longs as price action triggers uptrend signals, TDS’ Senior Commodity Strategist Daniel Ghali notes.

CTAs are set to sell at a large-scale over the coming week

“Fear is the trade, given the US has requested G7 nations consider these inclusions, but the EU has already stopped short of considering them over the past years. Though with flows over the last weeks otherwise muted and with US election season underway, there are pathways for momentum to persist in the near-term.”

“Interestingly, however, the scope for subsequent CTA buying activity is limited, with a large uptape over the coming week only likely to spark small-scale purchases from algo traders. Meanwhile, price action has been as supportive as it can be for Platinum markets, adding a few days of delays to potential large-scale selling activity from the trend follower community.”

“Still, in every reasonable scenario for prices, CTAs will sell at a large-scale over the coming week. Even a modest reversal could be sufficient to catalyze a massive selling activity before the week's end.”

Bank of England’s policymaker Catherine Mann suggested that prices in the services sector still remain elevated.

Key Quotes

Federal Reserve Bank of Cleveland President Beth Hammack argued on Thursday that while inflationary pressures have been easing, they have not yet reached the desired levels.

Key Quotes

•  Initial Jobless Claims rose to 227K, down from the previous week's 242K.
• Continuing Jobless Claims climbed to 1.897M in the week ending October 11.

US citizens filing new applications for unemployment insurance rose to 227K for the week ending October 18, as reported by the US Department of Labor (DoL) on Thursday. This print came in below the consensus forecast and the previous week's tally of 242K (revised from 241K).

The report also highlighted a seasonally adjusted insured unemployment rate of 1.3%, while the four-week moving average climbed to 238.50K, marking an increase of 2K from the prior week’s revised average.

Moreover, Continuing Jobless Claims increased by 28K to reach 1.897M for the week ending October 11.

Market reaction

Following the move to new three-month tops near 104.60 in the previous day, the US Dollar Index (DXY) now faces some renewed downward bias and comes all the way down to the proximity of the 104.00 key support.

UK PMI data for October were broadly weaker than forecast. Manufacturing, Services and Composite readings all held above the 50 point this month but the sharp drop in Manufacturing (50.3, from 51.5) and the Composite measure (51.7, from 52.6) suggests a notable slowing in growth momentum, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP overlooks weak PMIs

“BoE Governor Bailey commented yesterday that inflation was falling faster than expected but services inflation was still inconsistent with the Bank’s price target. The Governor speaks again today but the trend in UK data reports support market expectations for a 25bps rate cut next month.”

“Short-term price patterns in Cable indicate a minor rebound in price may be developing. Intraday price patterns show a minor “morning star” bull reversal pattern developed overnight ahead of 1.29. A push above intraday resistance at 1.3025 should drive more gains in the pound towards 1.3075/00. Support is 1.2900/10.”

The Euro (EUR) is nudging back over the 1.08 line as trading gets going in North America, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR regains 1.08 handle despite mixed PMI data

“October PMI data were mixed—French data were weaker than September and came in below expectations. German data were the opposite which produced on expectations or slightly better than forecast data for the preliminary Eurozone overall. The broader economic picture remains soft which will encourage expectations of more ECB easing ahead—but with 25bps clips of cuts rather than 50bps.”

“Spot’s move back above 1.08, albeit barely so, gives the EUR a mildly positive look as it suggests the support zone in the upper 1.0780/00 range noted earlier this week is having some effect on price (despite a brief push to the 60s yesterday). The EUR undertone remains weak, however, and spot has a lot of work to do to improve meaningfully.”

“EUR/USD remains deeply oversold, which bolsters the potential for a stabilization in spot, or even a mild rebound. Spot will need to break above 1.0875 to show any real signs of (short-term) technical strength.”

The Bank of Canada (BoC) duly delivered the 50bps cut that the markets were more or less expecting yesterday. The CAD wobbled for a bit but held its ground around the mid/ upper 1.38s, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD steadies after BoC policy decision

“Messaging that indicated the easing process will continue while inflation risks more balanced now. As such, terminal rate pricing just under 3% for the middle of next year is little changed, helping steady the CAD. Still, the door was not closed on further 1/2 point cuts and the unusually wide policy spread over the Fed that is extending into wide swap and cash bond spreads persists.

“The CAD has picked up a little more support through the overnight session but prospects for a significant rebound are limited with rate differentials as wide as they are. Spot’s mildly negative price reaction to yesterday’s minor push above 1.3850 resistance has prompted a more neutral, short-term tone in spot today.”

“USD/CAD remains deeply overbought on the intraday and daily studies which may slow USD gains in the short run and could prompt a modest pullback (at least) in the recent bull trend. Support is 1.3800/10, with a push below here potentially extending to test support at 1.3750.”

• GBP/CAD is climbing higher within what could be a Rising Wedge price configuration. 
• It is currently finding support at the 50-day SMA. 
• A decisive break lower could signal substantial further weakness. 

GBP/CAD continues trading higher in what looks like a Rising Wedge pattern. Within the confines of the pattern’s borders the pair is finding support at the (red) 50-day Simple Moving Average (SMA) at about 1.7879. 

GBP/CAD Daily Chart 

GBP/CAD will probably respect the borders of the pattern and continue rising in line with the medium and long-term bull trend. The short-term trend is less clear and could be classed more specifically as sideways. 

A decisive break below the lower trendline of the Rising Wedge would probably signal the start of a steeper descent. Such a breakout lower would be confirmed by a close below 1.7700, and would probably result in a move down to support at the 200-day SMA at around 1.7445. 

The US Dollar (USD) is trading broadly lower on the day. Stocks are trading mixed (mostly lower in Asia, firmer in Europe, with US equity futures mixed) while bonds are broadly higher across the major markets. Treasurys are outperforming and the modest decline in US yields from yesterday’s peak (5-6bps for the 10Y) is perhaps enough to reason away the USD slippage, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD edges lower versus majors as US yields retreat

“A soft-sounding Beige Book release yesterday, which noted flat economic activity across most districts since early September, contrasts with the generally positive (and broadly better than expected) hard data reports from the US economy over the recent past. The USD dipped slightly following the release which gives Chair Powell the cover to ease policy November.”

“Swaps continue to reflect some 23bps of anticipated easing at the next policy decision. Beyond that, markets continue to ponder the outlook for rates amid resilient US growth and the potential for a Trump win in the presidential election unleashing generous tax cuts and global tariffs. That policy combination would boost domestic growth prospects and lift inflation risks.”

“The USD still looks very stretched to me from a short/medium-term point of view but it is likely to remain well-supported on minor pullbacks at least until the outcome of the presidential election is known. The data round picks up a little this morning, with the US releasing weekly claims, New Home Sales, PMIs and some regional Fed activity surveys.”

Recently, uncertainties around the US elections on 5 November and geopolitical concerns have been supporting Gold. The near-term upward trajectory shows no signs of easing. Gold prices could go even higher over the near term and into 2025, but the rally may become overstretched and possibly be curbed when the USD and the US yields stay firm, in our precious metals analyst’s view, HSBC’ commodity analysts note.

Gold prices are likely to remain above $2,200 per ounce

“Our precious metals analyst believes Gold has entered a new price paradigm, which will probably remain above $2,200 per ounce, supported by a mix of bullish factors, including “safe haven” demand prompted by geopolitical risks and economic uncertainty. Mounting fiscal deficits are also encouraging Gold demand. Global monetary easing and expectations of further easing have increased speculative demand for Gold.”

“The rally is likely to moderate later in 2025, in our precious metals analyst’s view

Nevertheless, a combination of physical and financial market factors may tame the rally, as we move through 2025, with Gold prices likely to be moderately lower by end-2025. In the physical market, high Gold prices are driving outright declines in Gold jewellery purchases, alongside lower Gold coins and bar demand.”

“At the same time, global Gold output is on an upward trajectory at least for this and next year, with mining being the biggest single source of new supply to the market. High Gold prices are also stimulating scrap supply of Gold. In other words, Gold may face headwinds from weaker demand for jewellery and bar & coins and rising mine supply and recycling levels. Gold exchange-traded funds (ETFs) continue to liquidate holdings, and central bank demand may also moderate in the face of high prices.”

The Japanese Yen (JPY) has rebounded modestly overnight following yesterday’s sharp sell-off. It has resulted in USD/JPY falling back closer to the 152.00-level after hitting an intra-day high yesterday of 153.19, MUFG’s FX analyst Lee Hardman notes.

Trump victory can trigger another leg higher for USD/JPY

“So far this month USD/JPY has risen by just over 6% which is the strongest equivalent period of gains since back in late August/early September 2022. It was then quickly followed by intervention by Japan to support the JPY in September and October 2022. In light of recent price action there is building speculation over the possibility of another of bout of intervention from Japan although it appears unlikely ahead of the US election given a Trump victory and Red Sweep could trigger another leg higher for USD/JPY.”

“Market speculation over further intervention from Japan was encouraged overnight by comments from Finance Minister Kato who stated ‘we are seeing one-sided, rapid moves’ in the foreign exchange markets, and emphasized that ‘we will closely monitor the foreign exchange market with a stronger sense of urgency, including watching for speculative trading’.”

“The comments have helped to provide some temporary support for the JPY overnight but the gains are likely to prove short-lived if US yields and the US dollar continue to adjust higher ahead of the US election in anticipation of Trump victory and Red Sweep.”

The Euro (EUR) has continued to weaken against the US dollar since last week’s ECB policy meeting with EUR/USD falling to an intra-day low of 1.0761 on Wednesday, MUFG’s FX analyst Lee Hardman notes.

ECB larger 50bps cuts are coming next

“The pair is now trading back below its year to date of average 1.0875 after hitting a year to date high of 1.1214 on 25th September. The abrupt reversal lower for EUR/USD over the past month has been driven mainly by building speculation over a Trump victory and Red Sweep following the US election, and market expectations for widening policy divergence between the ECB and Fed.”

“A Trump victory and Red Sweep could also reinforce market expectations for a wider ECB and Fed policy divergence going forward. Trump’s trade war poses upside risks for the US inflation while it would heighten downside risks for the euro-zone economy.”

“As result, it could curtail the Fed’s room to keep lowering rates in the coming years while the ECB keeps lowering rates to support growth.”

• Silver price recovers above $34.00 as US yields tumble.
• The Fed is expected to pursue a moderate rate-cut approach.
• Geopolitical tensions surrounding the Middle East limit the downside in the Silver price.

Silver price (XAG/USD) rebounds strongly above $34.00 in Thursday’s European session after declining to near $33.40 on Wednesday. The white metal bounces back as US bond yields tumble after a sharp rally in the past few weeks. 10-year US bond yields plummet to 4.19%, down 1.28% at the time of writing.

Lower yields on interest-bearing assets reduce the opportunity cost of holding an investment in non-yielding assets, such as Silver. Meanwhile, the US Dollar has also faced a slight correction after a sharp rally. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slides to near 104.15 after posting a fresh 12-week high around 104.50 on Wednesday.

The outlook of US yields and the Greenback remains firm as investors expect the Federal Reserve (Fed) to follow a moderate interest rate cut cycle. According to the CME FedWatch tool, the central bank is expected to cut interest rates by 25 basis points (bps) in November and December.

In today’s session, investors will focus on the flash United States (US) S&P Global PMI data for October, which will be published at 13:45 GMT.

The Silver price remains well-supported due to uncertainty over the United States (US) presidential elections, which are coming in less than two weeks and escalating Middle East tensions. The scenario of geopolitical and political uncertainty bodes well for precious metals, such as Silver price, as investors use the asset as a hedge in risky market conditions.

Silver technical analysis

Silver price recovers sharply after a mild correction to near $33.40. The white metal aims to revisit a fresh over 12-year high near $35.00. The asset strengthened after breaking above the horizontal resistance plotted from the May 21 high of $32.50 on a daily timeframe, which will act as support for now. Upward-sloping 20- and 50-day Exponential Moving Averages (EMAs) near $32.30 and $31.10, respectively, signal more upside ahead.

The 14-day Relative Strength Index (RSI) oscillates above 60.00, points to an active bullish momentum.

Silver daily chart

• Crude Oil extends weekly gains, moving away from $70.00 and looking for more upside. 
• Markets are pricing in escalating geopolitical tensions after failed attempts from US Secretary of State Blinken in the Middle East. 
• The US Dollar Index fades after its steep rally earlier this week, focus on the US PMI on Thursday. 

Crude Oil prices continue to increase and extend weekly gains on Thursday, with traders focussing on the geopolitical side of the price action again. The repricing comes after US Secretary of State Antony Blinken failed to broker a diplomatic deal between Israel and Iran and even failed to convince Israel to allow humanitarian aid in the region. Markets are writing off his visit and attempts as a failed one, opening room for further escalations in the region. 

The US Dollar Index (DXY), which tracks the performance of the Greenback against six other currencies, fades on Thursday ahead of the preliminary US Purchase Managers Index (PMI) reading for October. The rally in the DXY was steep this week, with quite a few important pivotal levels being breached on its way up above 104.00. Less than 14 days before the US presidential election on November 5, expectations are that the Greenback will remain under pressure, primed for more upside. 

At the time of writing, Crude Oil (WTI) trades at $72.10 and Brent Crude at $76.00

Oil news and market movers: Saudi Arabia is losing 

• Saudi Arabia sees its revenue from Oil exports slump to the lowest in over three years. The main reason is sluggish demand growth, which weighs on Crude prices, according to Bloomberg.
• ExxonMobil has sold its onshore Oil and Gas assets in Nigeria to Seplat Plc for around $1.3 billion after approval from the Nigerian government, Reuters reports. 
• Mexican state-owned Oil company Pemex is said to have boosted its Gas and Oil reserves during President Claudia Sheinbaum’s term, several official documents showed, Reuters reports. 

Oil Technical Analysis: It becomes tricky

Crude Oil price is picking up and recovering further on Thursday, gaining ground and heading back to $75.00. The move comes after markets were too dialled in on the US presidential election and briefly forgot about the geopolitical card from the Middle East. The uneventful visit from Antony Blinken has pulled traders' attention back to the region, making clear that the tensions are far from over and can only escalate further. 

At the time of writing, Crude Oil price has risen above the 55-day Simple Moving Average (SMA) at $71.81, and needs to see preferably a daily close above it to confirm a breakout. Next up, the hefty technical level at $75.08, with the 100-day Simple Moving Average (SMA) and a few pivotal lines, is possibly the first big hurdle ahead. 

On the downside, traders need to look much lower, at $67.12, a level that supported the price in May and June 2023. In case that level breaks, the 2024 year-to-date low emerges at $64.75 followed by $64.38, the low from 2023.

US WTI Crude Oil: Daily Chart

• Gold recovers, aided by a rise in geopolitical risks after a steep sell-off on the previous day. 
• Speculation that a BRICS Gold-backed currency could become an alternative to the US Dollar also drives flows.  
• XAU/USD continues to look bullish as its overall uptrend remains intact and the commodity keeps making higher highs. 

Gold (XAU/USD) recovers to trade back in the $2,730s on Thursday, after a 1.2% sell-off on the previous day, most probably driven by profit-taking. The precious metal is once again on the rise on the back of continued safe-haven flows as the conflict in the Middle East continues with no sign of resolution.

Further, the news that North Korea has sent troops to Russia to potentially participate in the war with Ukraine has ratcheted up geopolitical risks, as has increased election uncertainty in the US. 

Gold recovers as major central banks slash interest rates 

Gold sees further upside as a result of the Bank of Canada’s (BoC) decision to slash its cash rate by 50 basis points (bps) on Wednesday and increasing speculation the European Central Bank (ECB) might do the same in December, after the release of tepid economic data for the region. With interest rates set to fall rapidly all over the globe, Gold should benefit given this will increase its attractiveness as a non-interest-paying asset. 

That said, in the US market expectations of the trajectory for interest rates have been subject to a substantial revision after the release of robust labor market data reduced the chances of the US Federal Reserve (Fed) aggressively cutting US interest rates.   

A further factor helping Gold price higher could be the focus on the BRICS 2024 summit in Kazan, Russia, as members – especially Russia – seek to find an alternative to the dominance of the US Dollar (USD), with a currency backed by Gold touted as a viable alternative.  

Technical Analysis: Gold pulls back then rebounds

Gold pulled back over 1.2% on Wednesday but rebounds on Thursday, continuing its rally higher.

The yellow metal is in a steady uptrend on all time frames (short, medium and long) which given the technical dictum “the trend is your friend” favors more upside. Having breached $2,750, the next big-figure target level lies at $3,000 (round number and psychological level). 

XAU/USD Daily Chart

The Relative Strength Index (RSI) has pulled back out of overbought, advising long-holders to close their long positions and open shorts. It is possible this could herald  a deeper correction, however, given the strong uptrend it is not enough alone to be certain. Support lies at $2,750, $2,700 (key round-number levels) and $2,685 (September high).  

Gold’s overall strong uptrend, however, suggests that any corrections will probably be short-lived, and afterward, the broader bull trend will resume.  

The US Dollar (USD) is expected to trade in a range between 7.1180 and 7.1440. In the longer run, momentum is slowing; a breach of 7.0900 would indicate that USD is more likely to trade in a range instead of strengthening further, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.  

USD/CNH momentum is slowing

24-HOUR VIEW: “Our view for USD to ‘rise to 7.1500’ did not materialise, as it pulled back from a high of 7.1462, closing largely unchanged at 7.1350 (- 0.02%). The current price movements are likely part of a range trading phase. Today, we expect USD to trade between 7.1180 and 7.1440.”

1-3 WEEKS VIEW: “Our update from Monday (21 Oct, spot at 7.1170) remains valid. As highlighted, the recent buildup in momentum is slowing, and a breach of 7.0900 would indicate that USD is more likely to trade in a range instead of strengthening further. Looking ahead, USD has to break and remain above 7.1500 before an advance to 7.1600 can be expected.”

The South African rand lost around one percent against the US dollar yesterday. However, the reason for this was actually a positive one. Inflation fell to an annual rate of 3.8%, as expected by most analysts, after having stood at 4.4% in August, Commerzbank’s FX analyst Volkmar Baur notes.

Positive real interest rate to continue to support the currency

“This naturally raises hopes on the market that, after the first interest rate cut of 25 basis points to 8.0% at the end of September, the South African Reserve Bank (SARB) could shift up a gear in November to cut the key interest rate by 50 basis points. However, I believe this assessment is premature.”

“Although it is true that inflationary pressure in South Africa has eased significantly in recent months, two aspects in particular have been decisive for this. On the one hand, the oil price has fallen significantly in recent weeks. The fall in petrol prices is therefore also reflected in the inflation rate. If this effect is factored out, the rate of price increases in September remained unchanged from the previous month at 4.5%.”

“In addition, the inflation figures for October will be released before the November meeting - which somewhat diminishes the importance of the figures published yesterday. I therefore continue to assume that the central bank will proceed cautiously and cut interest rates again by only 25 basis points. In combination with lower inflation, this results in a still clearly positive real interest rate, which should continue to support the currency.”

• The US Dollar eases slightly after German PMIs came in stronger than expected. 
• The risk-off tone for this week, which has been supporting the Greenback, is taking a step back. 
• The US Dollar index edges down in search of support after touching an almost three-month high on Wednesday. 

The US Dollar (USD) weakens slightly on Thursday ahead of a more busy day in terms of  US data releases, with the Purchasing Managers Indices (PMI) data for October as the main event. Earlier on Thursday, the European PMIs came in mixed, with France contracting further in all sectors and Germany posting better-than-expected readings. Still, except for the German Services PMI, all readings for both countries – which are the Eurozone’s largest economies –remain in contraction territory. 

The US calendar will also offer the PMI data, which will give insight about the state of the economy. Apart from these, the weekly Jobless Claims figures and both the Chicago Fed and Kansas City Fed activity trackers will create some additional volatility. 

Daily digest market movers: Bulk load of data 

• Thursday’s calendar kicks off at 12:30 GMT with the Chicago Fed National Activity Index and the weekly Jobless Claims numbers. Initial claims are expected to tick up to 242,000 from 241,000 last week.
• At 13:45 GMT, S&P Global will release its preliminary readings for the October PMIs:
  • The Services PMI is expected to remain broadly stable at 55.0 from 55.2 in September. 
  • The Manufacturing PMI should pick up, though remain in contraction at 47.5 against 47.3 previously. 
  • The Composite reading stood at 54.0 in September, no forecast is available for October. 
• At 15:00 GMT, the Kansas Fed Manufacturing Activity tracker for October will come in. There is no consensus view available, and the previous reading was at -18.
• The equities world turns upside down on Thursday, with China being the laggard for the first time this week while European and US equities are finally posting some gains. 
• The CME Fedwatch Tool is backing a 25 basis point (bps) rate cut with an 93.0% probability against an 7.0% chance of no rate cut for the upcoming Fed meeting on November 7.  
• The US 10-year benchmark rate trades at 4.19% and is trading off its high from 4.24% seen Wednesday. 

US Dollar Index Technical Analysis: Not a straight line

The US Dollar rally, measured by the US Dollar Index (DXY), is taking a breather. Like with everything in financial markets, there is never a straight line for multiple trading sessions in a row, and a breather to cool down the rally a bit is more than welcome. Do not be surprised to see a bit of a turnaround as markets are still very much positioned for more US Dollar strength ahead of the upcoming US elections on November 5. 

The DXY has broken above 104.00 and is in an empty area that could quickly see 105.00 emerge as the first cap on the upside. Once above that level, watch out for the pivotal 105.53 (April 11th high) and 105.89 (May 2nd high). Ultimately, 106.52 (double top April) or even 107.35 (October 3rd, 2023 high) could show sharp resistance and selling pressure with profit taking on the rally to materialize at these levels. 

On the downside, the 200-day SMA at 103.81 emerges as very strong support. Look out for false breaks, and consider waiting for a daily close below that level when reassessing if there will be more downside for the DXY. The next big support is double, with the 100-day SMA at 103.19 and the pivotal 103.18 level (March 12 high). If that level breaks, a big gap lower would occur to the 101.90 support zone, with the 55-day SMA at 101.93.

US Dollar Index: Daily Chart

Upward momentum remains strong; the next level to monitor is 153.40, followed by 154.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.  

Next level to monitor is 153.40

24-HOUR VIEW: “When USD was trading at 151.05 yesterday, we highlighted that ‘provided that 150.50 is not breached, USD is likely to rise to 151.50.’ We indicated that ‘the major resistance at 151.90 is not expected to come into view.’ However, USD broke above 151.50 and 151.90, as it surged to a high of 153.18. USD pulled back from the high to close at 152.75 (+1.12%). The pullback in severely overbought conditions suggests USD is unlikely to rise much further. Today, it is more likely to trade in a range between 152.00 and 153.20.”

1-3 WEEKS VIEW: “Two days ago (22 Oct), when USD was at 150.90, we indicated that ‘there has been a clear increase in momentum.’ We also indicated that ‘if USD breaks above 151.00, the focus will then shift to 151.90.’ After USD broke above 151.00, we stated yesterday (23 Oct, spot at 151.05) that ‘The focus now is at 151.90.’ Our view of a stronger USD was correct, but we did expect it to jump above 151.90 (high has been 153.18). Not surprisingly, momentum remains strong. From here, the next level to monitor is 153.40, followed by 154.00. Overall, only a breach of 151.00 (‘strong support’ level was at 150.00 yesterday) would mean that the advance that started early this month has come to an end.”

After the Chinese renminbi almost slipped below 7 against the US dollar in the wake of the stimulus announcements at the end of September, the euphoria subsided considerably in October. USD/CNY recently traded at around 7.12 (CNY weaker), almost 1.5% above its low, Commerzbank’s FX analysts Volkmar Baur notes.

Interest rate differential to limit CNY's potential

“The main reason for this was certainly the lack of details on the support packages, which makes it difficult to assess how sustainably the manifold problems in the Chinese economy can be solved. However, the data published for September also show why we should be cautious about becoming overly optimistic about the CNY's appreciation.”

“At 0.4%, the annual rate of inflation was again very low in September - even though the volatile food component rose by 3.3%. On the one hand, petrol prices counteracted the rise in food prices. At -7.6%, they once again fell significantly. However, the core rate was also very low year-on-year at just 0.1%. In fact, it was lower than ever before, apart from the Great Financial Crisis and the pandemic. And this is unlikely to change in the near future. At -2.8%, producer prices also fell significantly faster than in the previous month.”

“Sooner or later, falling real estate prices should also have an impact on rental price trends. And as these are estimated to make up around 20% of the inflation index, the core rate is likely to remain low for some time to come. We are therefore still a long way from a turn in the interest rate cycle in China. The interest rate differential to the US should therefore remain negative for the foreseeable future and limit the CNY's potential.”

This month’s USD recovery driven by the “Trump Trade” risks becoming over-extended. The DXY Index and the US Treasury 10Y yield have climbed back to the levels in late July from which they sharply declined before the Fed’s first cut in September. While the resurgence of Trump in the polls has fuelled USD bullish sentiment, we remain cautious as the race to the White House remains tight, particularly in the swing states. In the fortnight leading to the 2016 election, the DXY corrected downward when early vote counts raised doubts about a Trump victory, DBS’ Senior FX Strategist Philip Wee notes.

DXY and US yields looking lofty

“The Fed’s latest Beige Book noted that US economic activity has changed little across most districts since early September, contrasting with recent positive economic data. Many contacts highlighted the uncertainty surrounding the US Elections on November 5, leading to cautious consumer spending and business delays in investing and hiring. Employment growth was modest, primarily driven by replacement hiring rather than expansion.” 

“Hence, Fed officials consider monetary policy as very tight and anticipate further cuts in November and December. Today’s Fed rate-cutting trajectory differs from the Fed’s hiking cycle that started in December 2016, following Trump’s victory. Another rise in today’s US initial jobless claims would support expectations for a renewed drop in nonfarm payrolls to 135k in October after the surprise rise to 254k in September.” 

“Meanwhile, the US Treasury 10Y yield has returned to late-July levels, prompting concerns that rising yields may reflect deeper worries about America’s unsustainable fiscal situation, rather than expectations of higher inflation driven by Trump’s fiscal plans and fixation with tariffs. This concern could mirror the UK mini-budget crisis in 2022, where fears of imprudent fiscal practices led to the GBP’s plunge to a lifetime low.” 
 

Oversold decline could extend to 0.5985 before stabilisation can be expected. In the longer run, potential for further declines could be limited; the levels to watch are 0.5985 and 0.5970, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.  

The levels to watch are 0.5985 and 0.5970

24-HOUR VIEW: “Our view for NZD to trade in a range yesterday was incorrect. Instead of trading in a range, it fell sharply to 0.5993. Although oversold, the decline could extend to 0.5985 before stabilisation can be expected. Today, a sustained break below this level seems unlikely. Resistance is at 0.6020; a breach of 0.6040 would mean that the weakness in NZD has stabilised.”

1-3 WEEKS VIEW: “On Tuesday (22 Oct, spot at 0.6030), we indicated that ‘the recent price action indicates that 0.6005 is within reach.’ We added, ‘Looking ahead, the next level to watch below 0.6005 is 0.5985.’ Yesterday, NZD dropped below 0.6005, reaching a low of 0.5993. While we continue to expect NZD to decline, the weakness that started early this month appears to be overextended, both time- and price-wise. In other words, the potential for further decline could be limited. The levels to watch are 0.5985 and 0.5970. Should NZD break above 0.6060 (‘strong resistance’ level previously at 0.6085), it would mean that NZD is not declining further.”

BRICS will probably have the most room to progress their de-dollarisation agenda in the areas of reserve management and energy trade invoicing, ING’s Chris Turner notes.

BRICS de-dollarisation agenda to influence FX reserves and fuel trade

“Also interesting is the aspect of the CBDCs and the project m-Bridge which one day could cut US banks out of cross-border payments in the BRICS sphere of influence. The prospect of ongoing de-dollarisation also reminds us of the long-term impact on the US Treasury market.”

“Back in the 2000s, after China joined the World Trade Organisation, Asian nations amassed large trade surpluses and large FX reserves as they tried to slow the appreciation of their local currencies. These oversized FX reserves suppressed Treasury yields. BRICS de-dollarisation is the reverse of that trend.”

• NZD/USD finds fresh buying interest near 0.6000, while the near-term trend remains bearish.
• The US Dollar’s outlook remains firm due to multiple tailwinds.
• Traders expect the RBNZ to cut interest rates again by 50 bps in November.

The NZD/USD pair bounces back from the psychological support of 0.6000 in Thursday’s European session. The Kiwi pair rebounds as the US Dollar (USD) corrects after posting a fresh high in 12 weeks. The US Dollar Index (DXY) faces pressure while attempting to break above the key resistance of 104.50.

The US Dollar could resume its upside trend amid uncertainty over United States (US) 2024 presidential elections. Meanwhile, the recent rally in the Greenback suggests that trades price in former US President Donald Trump’s victory over current Vice President Kamala Harris.

The US Dollar has also benefitted from growing expectations that the Federal Reserve (Fed) will pursue a modest interest rate cut path.

Meanwhile, the New Zealand Dollar (NZD) is expected to remain weak as traders have priced in 50 basis points (bps) interest rate reduction from the Reserve Bank of New Zealand (RBNZ) in its last meeting of the year on November 27, a similar move seen on October 9. This would be the third straight interest rate cut by the RBNZ in a row.

NZD/USD finds a temporary support near 0.6000. However, the outlook of the Kiwi pair remains weak as it trades below the 61.8% Fibonacci retracement around 0.6050. The Fibo tool is plotted from the July 29 low at 0.5857 to the September 30 high at 0.6380.

Downward-sloping 20- and 50-day Exponential Moving Averages (EMAs) near 0.6100 and 0.6130, respectively, suggests more weakness ahead.

The 14-day Relative Strength Index (RSI) oscillates below 40.00, indicating a strong bearish momentum.

More downside is highly likely towards the August 15 low of 0.5974 and the round-level support of 0.5900 if the pair decisively breaks below the psychological support of 0.6000.

On the flip side, a reversal move above the October 8 high of 0.6146 will drive the asset towards the 50-day EMA at 0.6173 and the October 4 high near 0.6220.

NZD/USD daily chart

Strong momentum indicates further Australian Dollar (AUD) weakness; the significant support at 0.6585 is likely out of reach for now. In the long run, AUD is expected to continue to decline; the level to watch is a significant support at 0.6585, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.  

The level to watch is a significant support at 0.6585

24-HOUR VIEW: “The sharp drop in AUD that reached a low of 0.6614 was surprising (we were expecting sideways trading). Strong momentum indicates further AUD weakness is likely. However, the significant support at 0.6585 is likely out of reach for now. There is another support level at 0.6605. To keep the momentum going, AUD must remain below 0.6665 with minor resistance at 0.6650.”

1-3 WEEKS VIEW: “We have held a negative view in AUD since early this month. As we tracked the decline, we highlighted two days ago (22 Oct, spot at 0.6715) that ‘the rejuvenated momentum suggests that the AUD weakness from early this month remains intact.’ We added, ‘the level to monitor is 0.6620.’ AUD subsequently rebounded, but did not break our ‘strong resistance’ level at 0.6705. Yesterday, in a sudden move, it plummeted to 0.6614. Downward momentum remains strong and we continue to expect AUD to decline. The level to watch is a rather significant support at 0.6585. On the upside, the ‘strong resistance’ level has moved lower to 0.6685.”

Silver prices (XAG/USD) rose on Thursday, according to FXStreet data. Silver trades at $34.26 per troy ounce, up 1.63% from the $33.71 it cost on Wednesday.

Silver prices have increased by 43.96% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 79.91 on Thursday, down from 80.57 on Wednesday.

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Once again the calendar has little to offer today except consumer confidence in the Czech Republic. However, the main driver remains the global story, which adds volatility to the entire emerging markets (EM) space. Yesterday the market again came under pressure and with today's focus on PMI data in Europe and the US, the markets may see more negative news and reasons for further weakness in the Central and Eastern Europe (CEE) region, ING’s Frantisek Taborsky notes.

More reasons for further CEE weakness

“The main focus will be on Hungary today which was closed yesterday for a local holiday. Rates had no chance to react but EUR/HUF is flirting with 403 levels in the meantime, a new local high. Today we will watch rates opening closely. The market has priced out almost all rate cuts, but we still see two cuts priced in for the second half of next year that may be priced out today as well, and if EUR/HUF continues to head higher, it would not be a surprise if the market starts to increase the odds for some central bank action.”

“PLN also came under pressure yesterday with the weakest levels since June. The last few days have brought some negative numbers from the Polish economy, which has frontloaded the National Bank of Poland (NBP) pricing of rate cuts. After some time, pricing has returned to the dovish side and we see the first cut priced for February next year, while our economists expect May.”

“At the same time, the market seems to be unwinding long-term PLN positions ahead of the US election and NBP cuts. Clearly, sentiment around the zloty is changing to the negative side. The CZK thus remains the only currency in the region without major losses and has outperformed the region in recent days and remains our currency of choice, while the rest of the region may see further losses at least until the outcome of the US election.”

• EUR/USD holds support near 1.0760 while the near-term outlook remains downbeat amid weakness in Eurozone business activity.
• Traders look for fresh cues about the ECB’s likely interest rate cut size in December.
• EUR/USD has also been benefitted by a slight correction in the US Dollar.

EUR/USD finds fresh buying interest near a three-month low of 1.0760 in Thursday’s European session. The major currency pair strengthens even though the preliminary Hamburg Commercial Bank (HCOB) Composite Purchasing Managers Index (PMI) data showed that Eurozone's economic activity continued to contract in October. The PMI ticked higher to 49.7 from 49.6 in September, below the 50 threshold that separates expansion from contraction, amid a continuous decline in the manufacturing sector activity and moderate growth in the service sector output.

“The eurozone is stuck in a bit of a rut, with the economy contracting marginally for the second month running. The ongoing slump in manufacturing is being mostly balanced out by small gains in the service sector. At the country level, it can be noted that the deterioration of the situation in France was met by a slight moderation in the decline in Germany. For now, it is not clear whether we will see a further deterioration or an improvement in the near future,” said Dr. Cyrus de la Rubia, Chief Economist at HCOB.

The HCOB PMI report also showed subdued business confidence, weak orders from domestic and overseas markets, a modest increase in input prices, and a reduction in the workforce, which points to the need for economic stimulus that would prompt expectations of more interest rate cuts by the European Central Bank (ECB).

The ECB has already reduced its Deposit Facility Rate by 75 basis points (bps) this year to 3.25%, and traders expect the central bank to cut again in December. Meanwhile, market participants are uncertain about the likely rate-cut size as the option of a larger-than-usual reduction has come into the picture.

On Wednesday, Governor of the Bank of Portugal and ECB policymaker Mario Centeno said that the option of a 50 bps rate cut in December is on the table. Centeno warned that downside risks to growth are accumulating.

Daily digest market movers: EUR/USD gains at US Dollar’s expense

• EUR/USD has also added some gains in the European session on Thursday at the US Dollar’s (USD) expense. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, corrects slightly to near 104.20 after posting a fresh 12-week high around 104.50 on Wednesday.
• However, the near-term outlook of the US Dollar remains firm as investors expect the Federal Reserve (Fed) to follow a more gradual rate-cut approach. Wednesday’s Fed Beige Book showed that the overall business activity was little changed through early October, and there was a slight uptick in hiring with moderate growth in inflationary pressures.
• Meanwhile, the uncertainty over the United States (US) presidential election on November 5 has also kept strength in the US Dollar afloat. Market participants worry that the scenario of Trump winning the election will result in higher tariffs, which will have a significant impact on closed trading partners to the US.
• Going forward, the next move in the US Dollar will be driven by the preliminary US S&P Global PMI data for October and the Durable Goods Orders data for September, which will be published at 13:45 GMT and on Friday, respectively.

Technical Analysis: EUR/USD hovers near three-month low of 1.0760

EUR/USD finds temporary support near 1.0760 in European trading hours. However, the outlook of the major currency pair remains downbeat as it stays below the 200-day Exponential Moving Average (EMA), which trades around 1.0900.

The downside move in the shared currency pair started after a breakdown of a Double Top formation on the daily time frame near the September 11 low at around 1.1000, which resulted in a bearish reversal.

The 14-day Relative Strength Index (RSI) indicator dives below 30.00, indicating a strong bearish momentum. However, a recovery move remains on the cards as conditions turn oversold.

On the downside, the major could see more weakness towards the round-level support of 1.0700 if it slips below the upward-sloping trendline at 1.0750, which is plotted from the October 3 low around 1.0450. Meanwhile, the 200-day EMA near 1.0900, and the psychological figure of 1.1000 will be the key resistance for the pair.

With inflation in abeyance and business confidence low, this is fertile ground for the ECB doves, ING’s Chris Turner notes.

ECB policy rate needs to be cut below neutral

“Perhaps it is no surprise then that one of the most dovish members, Bank Of Italy's Fabio Panetta, is speculating that the ECB policy rate does not just need to be cut to neutral (2.00/2.25%) but lower.”

“Currently, the OIS ESTR curve does indeed price ECB rates being cut to 1.75% next year. That's why the EUR:USD two-year swap differential has exploded to 150bp in favour of the dollar and sent EUR/USD sub 1.08.”

“EUR/USD and rate spreads have come a long way very quickly. It is hard to see rate spreads going an awful lot wider from current levels. But deteriorating liquidity ahead of US elections on November 5th warns against trying to sell the dollar. We tentatively see something like a 1.0765-1.0850 EUR/USD range for the time being.”

• The AUD/JPY cross could recover as traders anticipate that the RBA may avoid implementing rate cuts in 2024.
• Japan’s polls indicate the LDP-led coalition may lose its majority in the general election this weekend.
• Australia's Judo Bank Services PMI inched up to 50.6 in October, marking its ninth consecutive month of expansion.

AUD/JPY breaks its three-day winning streak, trading around 101.20 during the European hours on Thursday. The Japanese yen (JPY) gained some traction as buyers might have responded to verbal intervention from Japanese officials earlier in the day.

However, the upside of the Japanese Yen could be limited due to growing concerns over political instability, which further clouds the outlook for the Bank of Japan's (BoJ) monetary policy. In Japan, recent polls indicate the ruling coalition led by the Liberal Democratic Party (LDP) may lose its majority in the general election this weekend.

Japan's Finance Minister, Katsunobu Kato, voiced concern over the rapid and one-sided movements in the currency market, emphasizing the importance of stable currency movements that align with economic fundamentals, per Reuters.

Additionally, on Thursday, Japan's Deputy Chief Cabinet Secretary, Kazuhiko Aoki, stated that the government is closely monitoring foreign exchange fluctuations, including speculative activities, with a sense of urgency.

The downside of the AUD/JPY cross could be limited as the Australian Dollar (AUD) receives support from the prevailing hawkish sentiment surrounding the Reserve Bank of Australia (RBA), bolstered by the positive employment data. Earlier this week, RBA Deputy Governor Andrew Hauser noted that the labor participation rate is remarkably high and emphasized that while the RBA is data-dependent, it is not data-obsessed.

On the data front, Australia's Judo Bank Composite PMI slightly rose to 49.8 in October, up from 49.6 in September, signaling a second straight month of contraction in private sector output. The Services PMI inched up to 50.6 from 50.5, marking its ninth consecutive month of expansion, while the Manufacturing PMI dipped to 46.6 from 46.7, continuing its decline.

The Pound Sterling (GBP) could continue to weaken; oversold conditions suggest 1.2860 is likely out of reach for now. In the longer run, price action suggests GBP could decline further to 1.2860, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.  

Has a chance to fall towards 1.2860

24-HOUR VIEW: “Two days ago, we expected GBP to weaken, but we were of the view that ‘the 1.2940 level is expected to provide strong support.’ After GBP dropped to 1.2945 and rebounded, we indicated yesterday that ‘there is a chance for GBP to dip towards 1.2940 again before a more sustained rebound is likely.’ However, GBP broke clearly below 1.2940 and dropped further to 1.2908. GBP could continue to weaken today, but severely overbought conditions suggest 1.2860 is likely out of reach for now. There is another support level at 1.2890. Resistance levels are at 1.2940 and 1.2965.”

1-3 WEEKS VIEW: “Our most recent narrative was from Tuesday (22 Oct, spot at 1.2980), wherein GBP ‘must break and remain 1.2940 before a resumption of weakness can be expected.’ We highlighted that ‘The likelihood of GBP breaking clearly below 1.2940 will remain intact, provided that the ‘strong resistance’ level at 1.3060 is not breached in the next couple of days.’ Yesterday, GBP broke clearly below 1.2940. The price action indicates GBP could decline further to 1.2860. On the upside, the ‘strong resistance’ level has moved lower to 1.3000 from 1.3060.”

The previous release of the Beige Book warned that nine of the Fed's 12 districts saw flat or declining activity and was thought to have prompted the 50bp Fed cut in September. Well, last night’s release, prepared for the 7 November FOMC meeting, reported stable activity in nearly all districts, with two districts showing expansion, ING’s Chris Turner notes.  

DXY to stay bid in a 104-105 range now

“Nothing here then to alarm the Fed and US interest rate futures barely budged on the release. The USD OIS curve still only prices 37bp of Fed rate cuts before year-end – suggesting the possibility that the Fed might skip a 25bp rate cut at either the November or December meeting. This is all in stark contrast to other central bankers like in Canada or the eurozone which seem in a rush to get rates to neutral, if not lower.”

“This is all happening in the context of the impending US election. Volatility will probably rise into the 5 November election, and assuming that Donald Trump continues to perform well in the polls, the dollar should stay bid. If volatility does indeed take another leg higher from here and liquidity evaporates, we could see USD/NOK punching through two-year highs around the 11.25 area.”

“In the US we see the S&P PMIs, the weekly initial jobless claims and new home sales data. None of these should move the needle on the Fed story and any jump in initial claims could be dismissed as weather-related. DXY has had a virtually 4.5% uninterrupted rally this month. It is hard to think it can push aggressively ahead from here – but reasons for a strong retracement look scarce. DXY is probably to stay bid in a 104-105 range now.”

The Euro (EUR) is expected to trade in a range between 1.0760 and 1.0810. In the longer run, to continue to decline, EUR must break the significant support at 1.0740, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.  

Expected to trade between 1.0760 and 1.0810

24-HOUR VIEW: “Yesterday, when EUR was at 1.0800, we indicated that EUR ‘is under mild downward pressure.’ We expected it to ‘edge lower, but is unlikely to break the major support at 1.0770.’ However, EUR fell more than expected to 1.0760, recovering slightly to close at 1.0781 (- 0.15%). Oversold conditions combined with tentative signs of slowing momentum suggests EUR is unlikely to weaken much further. Today, we expect EUR to trade in a range between 1.0760 and 1.0810.”

1-3 WEEKS VIEW: “Our most recent narrative was from two days ago (22 Oct, spot at 1.0815), wherein ‘despite the relatively sharp decline, downward momentum has not improved much.’ We indicated that ‘there is a chance for EUR to drop to 1.0770 before stabilisation can be expected.’ Yesterday, EUR dropped to 1.0760. Although, there is no sign of stabilisation yet, there has been no significant increase in momentum either. To continue to decline in a sustained manner, EUR must break the significant support level at 1.0740 (see 1-3 months update below). The likelihood of EUR breaking below 1.0740 will remain intact, provided that 1.0840 (‘strong resistance’ level was at 1.0870 yesterday) is not breached. Looking ahead, if EUR breaks clearly below 1.0740, the next level to watch is another significant support at 1.0665.”

• AUD/USD attracts buyers on Thursday amid a modest USD pullback from a three-month high.
• Retreating US bond yields, along with stable risk sentiment, prompts some USD profit-taking.
• Bets for smaller Fed rate cuts and the US political uncertainty could limit deeper USD losses. 

The AUD/USD pair builds on its steady intraday ascent through the first half of the European session on Thursday and recovers further from its lowest level since August 16, around the 0.6615-0.6610 region touched the previous day. The momentum lifts spot prices beyond the mid-0.6600s in the last hour and is sponsored by a modest US Dollar (USD) downtick.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, retreats from a nearly three-month top amid a corrective decline in the US Treasury bond yields. Furthermore, a stable performance around the equity markets prompts profit-taking around the safe-haven buck and benefits the risk-sensitive Aussie. That said, a combination of factors should limit any meaningful USD downfall and keep a lid on the AUD/USD pair. 

The markets have fully priced out the possibility of a more aggressive policy easing by the Federal Reserve (Fed) as the recent US macro data suggested that the economy remains on strong footing. This, along with concerns that the spending plans of both Vice President Kamala Harris and the Republican nominee Donald Trump will further increase the deficit, should continue to act as a tailwind for the US bond yields and revive the USD demand. 

This, in turn, makes it prudent to wait for strong follow-through buying before confirming that the AUD/USD pair's recent sharp retracement slide from the 0.6940-0.6945 region, or the highest level since February 2023 touched last month has run its course. From a technical perspective, the overnight failure to find acceptance below the very important 200-day Simple Moving Average (SMA) warrants some caution before placing fresh bearish bets.

Market participants now look forward to the release of the flash US PMI prints for the month of October. Apart from this, the US bond yields and the broader risk sentiment will influence the USD price dynamics, which, in turn, should produce short-term trading opportunities around the AUD/USD pair.

• The Mexican Peso executes a technical bounce and rises despite negative fundamentals. 
• The move could be technically inspired or as a result of a revival in carry flows due to the weakening Yen. 
• USD/MXN pulls back after testing the 20.00 hurdle. The pair remains in a broader uptrend. 

The Mexican Peso (MXN) edges higher on Thursday following a reversal on Wednesday, in which it first fell to a one-month low against the US Dollar (USD) but then reversed – partly due to technical buying – and recovered by an average of about half a percent in its most heavily-traded pairs – the USD/MXN, EUR/MXN and GBP/MXN. A revival of the carry trade due to the recent depreciation in the Japanese Yen (JPY) might be a further factor in the Peso’s recovery.

Mexican Peso recovers: Potential revival of the carry trade?

The Mexican Peso executed a surprising volte face in its key pairs on Wednesday and builds on the rebound on Thursday. One possible explanation for the recovery, given MXN’s negative fundamentals, is the weakness experienced by the Japanese Yen, which could be reviving investor interest in the carry trade and, as a result, raising demand for the Peso. 

The Mexican currency tends to be a key beneficiary of carry flows because of its relatively high interest rates offered to depositors in Mexico, influenced by The Bank of Mexico’s (Banxico) cash rate, which is 10.50%. This compares to only 0.25% in Japan, where interest rates are stuck at low levels due to endemic deflation. 

The carry operation involves borrowing capital in a low-interest currency, such as the Japanese Yen, and using the money to buy a higher interest-paying alternative, such as the Mexican Peso. The difference between the cost of servicing the Yen-denominated loan and the interest earned on the MXN investment generates a profit (10.50% - 0.25% = 10.25%), assuming no change in the exchange rate. If the Yen weakens or the Peso strengthens, however, the carry trade becomes even more profitable. 

Mexican Peso still vulnerable to bearish fundamentals

Despite possible gains from the carry flows, the Mexican Peso remains vulnerable to multiple bearish fundamental factors. 

Data released this week painted a gloomy picture of the Mexican economy after both Economic Activity and Retail Sales fell sharply in August. This reinforces the negative economic outlook forecast by the IMF for Mexico in its recent reports for 2024 and 2025. 

Weak growth will likely weigh on the Mexican Peso and pressure Banxico to lower interest, which would reduce foreign capital inflows. 

Uncertainty over the outcome of the US election is a further negative factor for the Peso now that former President Donald Trump has bounced back after falling behind in the polls. Trump has said he will use tariffs to limit foreign imports, particularly of Mexican-made cars, which would be negative for the Peso. According to election website FiveThirtyEight.com, the latest poll held by Forbes on October 21-22 put Trump one point ahead on 49%, versus Vice President Kamala Harris’s 48%.  

Technical Analysis: USD/MXN pulls back but momentum remains with bulls

USD/MXN is pulling back after flirting with the 20.00 level. However, it overall remains in an uptrend within a rising channel, which, given the technical dictum “the trend is your friend,” is eventually likely to resume and push the price to higher highs.

USD/MXN Daily Chart 

The Relative Strength Index (RSI) indicator in the daily chart remains relatively elevated, signaling momentum remains bullish. At the moment, this further supports the view that the pullback will only be a temporary stumbling block for the uptrend before it resumes its upside bias. 

The break above 19.83 (October 1 high) has confirmed a probable move up to the next target in the vicinity of the September 10 high at 20.13.

• UK Services PMI drops further to 51.8 in October, misses estimates.
• Manufacturing PMI in the UK fell to 50.3 in October.
• GBP/USD trims gains to near 1.2960 after UK business PMIs.

The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) eased to 50.3 in October from 51.5 in September. The data missed the market forecast of 51.4.

Meanwhile, the Preliminary UK Services Business Activity Index declined to 51.8 in October after recording 52.4 in September while falling short of expectations of 52.2.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Business activity growth has slumped to its lowest for nearly a year in October as gloomy government rhetoric and uncertainty ahead of the Budget has dampened business confidence and spending.“

FX implications

GBP/USD pares back gains to revisit 1.2950 after the dismal UK PMI data. The pair is adding 0.24% on the day, as of writing.

• USD/CAD drifts lower on Thursday and is pressured by a combination of factors.
• Rising Oil prices underpin the Loonie and weigh on the pair amid a softer USD.
• The BoC’s outsized rate cut and bets for a less aggressive Fed easing limit losses.

The USD/CAD pair attracts some sellers on Thursday and moves away from its highest level since early August, around the 1.3860-1.3865 region touched in reaction to the Bank of Canada's (BoC) oversized rate cut the previous day. The Canadian central bank took an aggressive step and decided to lower its key benchmark interest rate by 50 basis points (bps) for the first time since the COVID-19 pandemic. Moreover, the recent decline in Canada’s annual inflation rate to 1.6% in September, along with signs that the economy and labour markets are weakening, paves the way for aggressive interest rate cuts going forward. This, in turn, weighed on the Canadian Dollar (USD) and provided a goodish intraday lift to the currency pair. 

That said, a fresh leg up in Crude Oil prices, bolstered by persistent geopolitical risks stemming from the ongoing conflicts in the Middle East, offers some support to the commodity-linked Loonie. Apart from this, a modest US Dollar (USD) pullback, from its highest level since July 30 touched on Wednesday, is seen exerting some downward pressure on the USD/CAD pair. The US Treasury bond yields retreat from a three-month peak, which, along with a stable performance across the global equity markets, prompts some profit-taking around the safe-haven buck. That said, bets for smaller rate cuts by the Federal Reserve (Fed) and deficit-spending concerns after the US election should limit the downside for the US bond yields. 

Investors remain concerned that the spending plans of both Vice President Kamala Harris and the Republican nominee Donald Trump will further increase the deficit. Furthermore, rising odds of former President Donald Trump winning the November 5 US Presidential election fuel speculations about the launch of potentially inflation-generating tariffs. This might continue to push the US bond yields higher and favors the USD bulls, supporting prospects for the emergence of some dip-buying around the USD/CAD pair. Traders now look forward to the release of the flash US PMI prints. Apart from this, the US bond yields will influence the USD, which, along with Oil price dynamics, might produce short-term trading opportunities.

Technical Outlook

From a technical perspective, a daily close above the 1.3800 mark earlier this week was seen as a fresh trigger for bulls. Adding to this, oscillators on the daily chart are holding comfortably in positive territory and suggest that the path of least resistance for the USD/CAD pair is to the upside. That said, the overnight failure to build on the momentum beyond the 1.3850 region warrants some caution before positioning for further gains. Acceptance above the said area could lift spot prices beyond the 1.3875 intermediate hurdle, towards reclaiming the 1.3900 mark. The upward trajectory could extend further towards challenging the highest level since October 2022, around the 1.3945 region touched last month. 

On the flip side, weakness below the 1.3800 mark could be seen as a buying opportunity. This should help limit the downside near last week's swing low, around the 1.3750-1.3745 area. A convincing break below the latter, however, might prompt some technical selling and drag the USD/CAD pair further below the 1.3700 mark, towards testing the 100-day Simple Moving Average (SMA), currently pegged near the 1.3665 region. This is followed by the 200-day SMA, around the 1.3625 zone, which if broken will negate the positive outlook and shift the near-term bias in favor of bearish traders.

USD/CAD daily chart

• EUR/GBP holds losses following the release of Purchasing Managers Index data from the Eurozone and Germany.
• The HCOB Eurozone PMI Composite improved to 49.7 in October, against the previous 49.6 reading.
• Traders will likely observe the UK Purchasing Managers Index scheduled to be released later in the day.

EUR/GBP retraces its recent gains registered in the previous session, trading around 0.8320 during the European hours on Thursday. The Euro remains tepid against the Pound Sterling (GBP) following the HCOB Purchasing Managers Index (PMI) data from the Eurozone and Germany.

The HCOB Eurozone PMI Composite edged up to 49.7 in October as expected, slightly surpassing September's reading of 49.6, marking a two-month high. In contrast, the Services PMI dipped to 51.2 in October, down from 51.4 in September and falling short of the forecasted 51.6, hitting its lowest level in eight months. Meanwhile, the Manufacturing PMI increased to 45.9 from 45.0 prior, outperforming the anticipated 45.1 and reaching a five-month high.

Moreover, the HCOB Preliminary German Composite Output Index increased to 48.4 in October, up from 47.5 in September, marking its highest level in two months. The Manufacturing PMI climbed to 42.6, surpassing September's 40.6 and beating the forecast of 40.5. Meanwhile, the Services PMI rebounded to 51.4 from 50.6 prior, exceeding market expectations of 50.5 and hitting a three-month high.

During a discussion at the Institute of International Finance's annual membership meeting in Washington, D.C., on Wednesday, Bank of England Governor Andrew Bailey stated that inflation is currently below target due to annual base effects. Bailey noted that the high savings rate indicates consumer caution and added that pension funds should not be required to make compulsory allocations to UK assets.

The British Pound gains ground ahead of the release of the Purchasing Managers Index data from the United Kingdom (UK), scheduled for later in the day. Traders are also expected to pay attention to a speech by Bank of England (BoE) Monetary Policy Committee member Catherine Mann at a panel discussion during the Reinventing Bretton Woods Global Macro Economy event in Washington, D.C. Additionally, the focus will shift to BoE Governor Andrew Bailey's lecture at the Mike Gill Memorial hosted by the CFTC.

• Eurozone Manufacturing PMI advanced to 45.9 in October, beating the 45.1 forecast.
• Bloc’s Services PMI dropped to 51.2 in October vs. 51.6 anticipated.
• EUR/USD keeps gains near 1.0800 after German, Eurozone PMI data.            

The Eurozone manufacturing sector contraction eased while the services sector activity deteriorated further in October, according to the data from the HCOB's latest Purchasing Managers Index (PMI) Survey published on Thursday.

The Eurozone Manufacturing Purchasing Managers Index (PMI) rose to 45.9 in October from 45.0 in September, bettering the expected 45.1 print. The index rebounded to a five-month high.

The bloc’s Services PMI slipped to 51.2 in October from 51.4 in September. The data came in below the market consensus of 51.6 and reached an eight-month bottom.

The HCOB Eurozone PMI Composite improved slightly to 49.7 in October vs. 49.7 expected and September’s 49.6. The data hit a two-month high.

EUR/USD reaction to the Eurozone PMI data

EUR/USD retakes 1.0800 on the mixed Eurozone PMI data, adding 0.18% on a daily basis.

• The S&P Global preliminary PMIs for October are likely to show little variation from the September final readings.
• The Federal Reserve will likely trim rates again in November, with PMIs having no significant impact on the decision.
• Financial markets revolve around the potential outcome of the US presidential election. 
• EUR/USD is poised to extend its decline after breaking below 1.0800. 

S&P Global will publish the preliminary estimates of the United States (US) Purchasing Managers Indexes (PMIs) for October on Thursday. The indexes result from surveys of the senior executives in the private sector. They are meant to indicate the overall health of an economy, providing insights into key economic drivers such as GDP, inflation, exports, capacity utilization, employment, and inventories.

S&P Global releases three indexes: The Manufacturing PMI, the Services PMI, and finally, the Composite PMI, which is a weighted average of the two sectors. Readings above 50 indicate that economic activity is expanding, while figures below it represent economic contraction. Such indexes are released every month in advance of other official figures, becoming a key leading indicator of the status of the economy.

According to the September final S&P Global Manufacturing PMI, “the sector moved deeper into contraction territory at the end of the third quarter of the year,” blaming such a result to weaker demand and political uncertainty related to the upcoming US election. The index resulted at 47.3, declining from 47.9 in August. 

On the contrary, the PMI for services suggested that the sector’s output expanded, with the index printing at 55.2 in September. Despite easing from 55.7 in August, the Services PMI signalled a “market monthly increase in service sector output at the end of the third quarter, and one that was among the strongest in the past two-and-a-half years.” 

As a result, the S&P Global Composite PMI posted 54.0 in September, down from 54.6 in August. The report, however, included a worrisome line: “Inflationary pressures strengthened,” with the increases in input costs and output prices hitting 12-month highs for the service sector and six-month highs for manufacturing. 

What can we expect from the next S&P Global PMI report?

Financial markets anticipate a modest improvement in the flash Manufacturing PMI, foreseen at 47.5 in October. The services index is expected to print at 55, while the Composite PMI will likely show little variation from the September reading of 54. 

A poor performance of the manufacturing sector would come as no surprise, and the expected uptick would likely neutralise concerns particularly if the Services PMI keeps indicating a solid expansion in the sector.

Overall, recessionary fears have receded, with the focus shifting to the upcoming presidential election and the potential impact of the outcome on the economy. Indeed, better-than-anticipated figures will boost optimism about the American economy and maintain the Federal Reserve (Fed) on the monetary loosening path. 

The Fed trimmed the benchmark interest rate by 50 basis points (bps) in its September meeting, and market participants expected the central bank would continue cutting rates at an aggressive pace. However, signs of steady growth spooked away such concerns. Fed officials will likely deliver 25 bps cuts in November and December and will continue to do so in the year ahead. PMI figures should deliver an extremely disappointing surprise to trigger concerns and shift these expectations, which is quite an unlikely scenario. 

When will the October flash US S&P Global PMIs be released, and how could they affect EUR/USD?

The S&P Global Manufacturing, Services and Composite PMIs report will be released on Thursday at 13:45 GMT and are expected to show manufacturing output is still in trouble while the service sector remains the strongest. Overall, the anticipated figures represent no significant variation from September final figures.

Ahead of the release, the US Dollar is the strongest currency among major ones, helped by a constant run to safety ahead of the US presidential election. The EUR/USD pair trades below the 1.0800 mark and at fresh multi-week lows. Given tepid European growth-related data, the Euro is among the weakest USD rivals. It is worth noting that the Eurozone PMIs will be released ahead of the US ones and will likely have a negative impact on the local currency.

From a technical perspective, Valeria Bednarik, FXStreet's Chief Analyst, says: “The EUR/USD pair bearish trend is quite evident in the daily chart, with technical indicators maintaining their firm downward slopes, despite being in oversold territory. Other than extreme readings, there are no signs of bearish exhaustion. Even further, the pair is developing below all its moving averages, which gain downward traction far above the current level, reflecting persistent selling interest.”

Bednarik adds: “The pair has an immediate support area at around 1.0750, where it posted several intraday highs and lows back in June and July. Once below it, the next natural support level comes at 1.0700, en route to the year’s low at 1.0601. Near-term resistance lies at around the 1.0840 figure,  while a flat 200 Simple Moving Average (SMA) in the daily chart is the next relevant dynamic resistance, currently at around 1.0870.” 

• The Pound Sterling trades in a limited range as investors await the preliminary UK PMI data for October.
• Investors await BoE Mann and Bailey’s speech for fresh interest rate guidance.
• The uncertainty over US presidential elections continues to weigh on risky assets.

The Pound Sterling (GBP) trades sideways against its major peers in Thursday’s London session as investors await the preliminary United Kingdom (UK) S&P Global/CIPS Purchasing Managers Index (PMI) data for October, which will be published at 08:30 GMT. 

The PMI report is expected to show that overall business activity expanded at a moderate pace. Activities in the manufacturing sector are estimated to have increased but at a slower pace to 51.4 from 51.5 in September. In the same period, the Service PMI is expected to have grown to 52.2 but lower than the former release of 52.4. Signs of continuous expansion in the economic activity will indicate a robust economic outlook.

The outlook of the Pound Sterling is expected to remain volatile as Bank of England (BoE) Governor Andrew Bailey remained confident about inflation decelerating faster than expected. “Disinflation is happening, I think, faster than we expected it to, but we still have genuine question marks about whether there have been some structural changes in the economy,” Bailey said during the Institute of International Finance event, Bloomberg reported.

The comments from Bailey have prompted BoE’s dovish bets. According to market speculation, traders expect the BoE to cut interest rates in November and are heavily confident about repeating the move in December.

In today’s session, BoE Monetary Policy Committee (MPC) member  Catherine Mann is scheduled to speak at 13:00 GMT. Mann, an outspoken hawkish, was among four MPC members who voted to leave interest rates unchanged in August, the only time the BoE cut its key borrowing rates this year. At 19:45 GMT, Governor Bailey will deliver the Mike Gill Memorial Lecture at the US Commodity Futures Trading Commission (CFTC).

Daily digest market movers: Pound Sterling stays on backfoot against US Dollar

• The Pound Sterling trades close to a fresh two-month low near 1.2950 against the US Dollar (USD) in European trading hours on Thursday. The GBP/USD pair remains on the backfoot as the US Dollar clings to gains due to a slight decline in market expectations for the Federal Reserve (Fed) to reduce interest rates in each of the remaining policy meetings this year. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto gains near a fresh 12-week high around 104.50.
• According to the CME FedWatch tool, the likelihood that the central bank will reduce interest rates by 50 bps to 4.25%-4.50% by the year-end has slightly declined to 68.3% from 71.7% a week ago. The tool shows that traders have priced in a 25-bps interest rate cut in November but are not fully confident about a similar move in December.
• Meanwhile, growing uncertainty for the United States (US) presidential election outcome, coming in less than two weeks, has improved the US Dollar’s appeal as safe-haven. Latest national polls show a fierce competition between former President Donald Trump and current Vice President Kamala Harris.
• In Thursday’s New York session, investors will pay close attention to the US preliminary S&P Global PMI data for October, which will be published at 13:45 GMT. The Manufacturing and Services PMI are estimated to have contracted and expanded, respectively, but at a slower pace.

Technical Analysis: Pound Sterling falls to near 1.2900

The Pound Sterling is at make or a break near the lower boundary of a Rising Channel chart formation on the daily timeframe. The GBP/USD pair could face sharp selling pressure if it fails to hold the same. 

The near-term trend of the Cable has worsened further as it has broken below the 100-day Exponential Moving Average (EMA), which trades around 1.2990. 

The 14-day Relative Strength Index (RSI) slides to near 35.00, signals an active bearish momentum.

Looking down, the 200-day EMA near 1.2845 will be a major support zone for Pound Sterling bulls. On the upside, the Cable will face resistance near the psychological figure of 1.3000 and the 20-day EMA around 1.3060.

• USD/CAD falls slightly to near 1.3820 after refreshing an 11-week high.
• The BoC cut its key borrowing rates by 50 bps to 3.75% on Wednesday, as expected.
• The US Dollar holds onto gains as the Fed is expected to cut rates gradually.

The USD/CAD pair corrects slightly to near 1.3820 in Thursday’s European session after posting a fresh 11-week high above 1.3850 on Wednesday. The Loonie pair has shown a one-sided rally since September 25, which appears to have paused for a while as investors look for fresh cues about the likely monetary policy action by the Bank of Canada (BoC) and the Federal Reserve (Fed) in the remaining year.

On Wednesday, the BoC reduced its key borrowing rates by 50 basis points (bps) to 3.75%, as expected. This was the fourth straight interest rate cut by the BoC in a row. The BoC has cut its interest rates by 125 basis points (bps) this year as officials are worried about the continuation of the disinflationary trend due to weak economic growth.

Going forward, the Canadian Dollar (CAD) will be influenced by the monthly Retail Sales data for August, which will be published on Friday. The Retail Sales data, a key measure of consumer spending, is estimated to have grown by 0.5%, slower than 0.9% in July.

Meanwhile, the US Dollar (USD) clings to gains slightly above the August high as investors expect the Fed to follow a gradual policy-easing approach as upbeat Nonfarm Payrolls (NFP), Services PMI, and Retail Sales data for September have diminished risks of a downturn.

USD/CAD witnessed strong buying interest after a breakout above the September 19 high of around 1.3650.

The near-term outlook of the Loonie pair remains firm as the 20- and 50-day Exponential Moving Averages (EMAs) near 1.3725 and 1.36665, respectively, are sloping higher.

The 14-day Relative Strength Index (RSI) oscillates inside the bullish range of 60.00-80.00, pointing to an active momentum.

More upside toward the round-level resistance of 1.3900 and Year-To-Date (YTD) high of 1.3945 would appear if the pair decisively breaks above Wednesday’s high of 1.3863.

In an alternate scenario, a downside move below the September 19 high of around 1.3650 will expose the asset to a May 16 low near 1.3600, followed by a September 30 high of 1.3538.

USD/CAD daily chart

(This story was corrected at 08:00 GMT to say in the last paragraph that a downside move below the September 19 high around 1.3650 will expose the asset to the May 16 low near 1.3600, followed by the September 30 high of 1.3538, not the September 13 high of 1.3538)

• Germany’s Manufacturing PMI jumps to 42.6 in October vs. 40.5 estimate.
• Services PMI for the German economy bounces to 51.4 in October vs. 50.5 forecast.
• EUR/USD holds small gains toward 1.0800 after upbeat German PMIs.

The German manufacturing sector witnessed a tepid recovery in October while the services sector activity also rebounded, the preliminary business activity report published by the HCOB survey showed Thursday.

The HCOB Manufacturing PMI in the Eurozone’s top economy rose to 42.6 this month, compared to September’s 40.6 while beating the estimates of 40.5. The measure jumped to a three-month top.

Meanwhile, Services PMI rebounded to 51.4 in October from 50.6 in September. The market expectations were for a 50.5 readout in the reported period. The gauge set a three-month high.

The HCOB Preliminary German Composite Output Index arrived at 48.4 in October vs. 47.5 in September. The index was at its strongest in two months.

FX implications

EUR/USD finds fresh demand on the encouraging German data, currently trading 0.13% lower on the day at 1.0795.

• USD/CHF maintains its position near a two-month high of 0.8686, reached on Wednesday.
• Rising geopolitical tensions might have provided minor support for the safe-haven Swiss Franc.
• Traders will likely observe the US Purchasing Managers Index scheduled to be released on Thursday.

USD/CHF trades around 0.8660 during the early European session on Thursday, hovering around the two-month high of 0.8686, which was recorded on Wednesday. The USD/CHF pair could appreciate further as the Swiss Franc (CHF) faces challenges due to heightened expectations of another interest rate cut by the Swiss National Bank (SNB) at its upcoming December meeting.

The Swiss Franc may receive some support from safe-haven flows amid rising concerns over the Middle East conflict. On Wednesday, Israeli strikes hit southern Beirut, while US Secretary of State Antony Blinken toured the region, advocating for a ceasefire in both Gaza and Lebanon.

Moreover, Iran-backed Hezbollah intensified its attacks on Israel, deploying "precision missiles" for the first time and launching new types of drones targeting Israeli sites. Hezbollah also claimed to have struck an Israeli military factory near Tel Aviv, per Reuters.

The US Dollar weakened slightly, driven by a modest dip in US Treasury yields. However, the downside risk for the Greenback would be limited as rising inflation concerns have lessened the chances of a significant rate cut by the Federal Reserve in November. According to the CME FedWatch Tool, there is an 88.9% probability of a 25-basis-point rate cut, with no expectation of a larger 50-basis-point cut.

Traders are likely to keep an eye on the S&P Global Purchasing Managers Index (PMI), a leading indicator gauging US private-business activity in the manufacturing and services sector, which is set to be released on Thursday.

Here is what you need to know on Thursday, October 24:

After suffering large losses against its major rivals on Wednesday, the Japanese Yen (JPY) stages a rebound early Thursday. S&P Global will release preliminary October Manufacturing and Services Purchasing Managers' Index (PMI) data for Germany, the Eurozone, the UK and the US later in the session. The US economic calendar will also feature weekly Initial Jobless Claims data and New Home Sales figures for September. In the meantime, market participants will continue to scrutinize comments from central bank officials.

USD/JPY extended its uptrend and touched its highest level since late July above 153.00, gaining more than 1% on Wednesday. Reflecting the broad-based selling pressure surrounding the JPY, EUR/JPY rose 0.95% and GBP/JPY added 0.6%. Early Thursday, USD/JPY corrects lower and was last seen losing 0.35% on the day below 152.50.

Speaking on the policy outlook late Wednesday, Bank of Japan (BoJ) Governor Kazuo Ueda noted that it's taking time for them to get to the 2% inflation target in a sustainable manner. "It's very hard to pin down the appropriate size of rate hikes from here," he added. Meanwhile, Japan’s Finance Minister Katsunobu Kato refrained from commenting on a possible intervention in foreign exchanged markets, reiterating that it's desirable for currencies to move stably, reflecting economic fundamentals.  

Following its October meeting, the Bank of Canada (BoC) decided to lower the policy rate by 50 basis points to 3.75% as expected. In the post-meeting press conference, BoC Governor Tiff Macklem said that the shelter price inflation has started to come off, increasing their confidence that it will gradually continue to ease. USD/CAD stretched higher following the BoC event and touched its highest level since early August above 1.3860. The pair stays on the back foot early Thursday and declines toward 1.3800.

EUR/USD continued to push lower and closed the third consecutive day in the red on Wednesday. The pair recovers modestly in the European morning but stays below 1.0800.

GBP/USD lost 0.5% on Wednesday and came in within a touching distance of 1.2900. The pair edges higher toward 1.2950 to start the European session.

Gold climbed toward $2,760 and set a new all-time high during the European trading hours on Wednesday. As the benchmark 10-year US Treasury bond yield rose to a three-month high above 4.25%, however, XAU/USD lost its traction and ended the day with a loss of more than 1%. The precious metal regains its traction and trades in positive territory above $2,730.

FX option expiries for Oct 24 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

• 1.0750 1.7b
• 1.0755 2.3b
• 1.0775 849m
• 1.0780 1.5b
• 1.0785 1.3b
• 1.0800 1.7b
• 1.0850 950m
• 1.0900 2b
• 1.0950 1.3b
• 1.1000 1.7b

GBP/USD: GBP amounts     

• 1.2900 655m

USD/JPY: USD amounts                     

• 150.00 930m
• 151.00 770m
• 151.50 991m
• 152.00 1.5b

USD/CHF: USD amounts     

• 0.8875 725m

AUD/USD: AUD amounts

• 0.6605 1.5b
• 0.6640 1.1b
• 0.6800 694m

USD/CAD: USD amounts       

• 1.3810 1.5b
• 1.3925 817m

NZD/USD: NZD amounts

• 0.5875 757m
• 0.5895 548m
• 0.6075 1.3b
• 0.6090 700m

EUR/GBP: EUR amounts        

• 0.8340 829m
• 0.8395 476m

• GBP/USD holds ground ahead of PMI data release from both nations.
• BoE Governor Andrew Bailey indicated that inflation is currently below the target level primarily because of annual base effects.
• The US Dollar may appreciate due to the prevailing sentiment of nominal rate cuts by the Fed in 2024.

The GBP/USD pair trades around 1.2930 during the Asian session on Thursday, staying near its 10-week low of 1.2907 reached on Wednesday. Traders are likely to focus on the Purchasing Managers Index (PMI) figures from both the United Kingdom (UK) and the United States (US), which are scheduled for release during the day.

During a discussion at the Institute of International Finance's annual membership meeting in Washington, D.C., on Wednesday, Bank of England Governor Andrew Bailey stated that inflation is currently below target due to annual base effects. Bailey noted that the high savings rate indicates consumer caution and added that pension funds should not be required to make compulsory allocations to UK assets.

The upward movement of the GBP/USD pair can be linked to a slight decline in the US Dollar (USD), influenced by lower US Treasury yields. As of this writing, the 2-year and 10-year yields on US Treasury bonds are at 4.06% and 4.22%, respectively. However, the US Dollar Index (DXY), which measures the USD's value against six major currencies, surged to its highest level since late July, reaching 104.57 on Wednesday.

The US Dollar may further appreciate as signs of economic resilience and increasing inflation concerns have diminished the likelihood of a significant rate cut by the Federal Reserve in November. According to the CME FedWatch Tool, there is an 88.9% probability of a 25-basis-point rate cut, with no expectation for a larger 50-basis-point cut.

• EUR/USD attracts some buyers on Thursday amid a modest USD pullback from a three-month high.
• Expectations for a less aggressive policy easing by the Fed should help limit losses for the Greenback.
• Bets for a jumbo ECB rate cut in December might undermine the Euro and cap the upside for the pair. 

The EUR/USD pair gains some positive traction during the Asian session on Thursday and for now, seems to have snapped a three-day losing streak to its lowest level since early July, around the 1.0760 area touched the previous day. Spot prices climb back closer to the 1.0800 mark in the last hour amid a modest US Dollar (USD) downtick, though the fundamental backdrop warrants some caution for bullish traders. 

The US Treasury bond yields retreat from a three-month high prompt some USD profit-taking following the recent strong rally to the highest level since late July. That said, growing acceptance that the Federal Reserve (Fed) will proceed with modest rate cuts, along with investors' nervousness ahead of the US Presidential election on November 5, should act as a tailwind for the safe-haven Greenback. Apart from this, dovish European Central Bank (ECB) expectations should keep a lid on any meaningful appreciating move for the EUR/USD pair.

The annual inflation rate in the Eurozone fell to 1.7% in September, below the ECB’s 2% target for the first time since June 2021. This validates the central bank's view that the disinflationary process is well on track and supports prospects for further policy easing. Moreover, ECB Mario Centeno said on Wednesday that downside risks dominate growth and inflation and that a 50 basis points (bps) rate cut in December is on the table. Moreover, ECB's Bostjan Vasle said that recent data presents some risks that might delay the expected improvement in growth.

This, in turn, might hold back traders from placing aggressive bullish bets around the shared currency and cap the upside for the EUR/USD pair. Market participants now look to the release of the flash PMI prints from the Eurozone and the US, which might provide fresh insight into the health of the global economy and in turn, influence the broader risk sentiment. Apart from this, the US bond yields will drive the USD and provide some impetus. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.

European Central Bank (ECB) Governing Council member Bostjan Vasle said on Thursday that “we should keep going to neutral in measured steps.”

Further comments

Market reaction

EUR/USD was last seen trading at 1.0791, unaffected by these above comments. The pair is up 0.10% on a daily basis.

• The NZD/USD has appreciated as the Fed's Beige Book indicated minimal changes in economic activity across nearly all districts.
• The US Dollar Index trades just below its recent high of 104.57, marking its strongest point since late July.
• The New Zealand Dollar may struggle due to the rising likelihood of another rate cut in November by the RBNZ.

NZD/USD gains ground as the US Dollar (USD) faced downward pressure following the release of the Federal Reserve’s (Fed) Beige Book on Wednesday. The latest report indicated that economic activity was "little changed in nearly all Districts," in contrast to August's report, where three Districts reported growth and nine showed flat activity. The pair trades around 0.6010 during the Asian session on Thursday.

The US Dollar weakened slightly, driven by a modest dip in US Treasury yields. 2-year and 10-year yields on US Treasury bonds stand at 4.07% and 4.23%, respectively, at the time of writing. However, The US Dollar Index (DXY), which tracks the US Dollar’s (USD) value against six major currencies, surged to its highest level since late July, reaching 104.57 on Wednesday.

Signs of economic resilience and rising inflation concerns have lessened the chances of a significant rate cut by the Federal Reserve in November. According to the CME FedWatch Tool, there is an 88.9% probability of a 25-basis-point rate cut, with no expectation of a larger 50-basis-point cut.

Traders are likely to keep an eye on the S&P Global Purchasing Managers Index (PMI), a leading indicator gauging US private-business activity in the manufacturing and services sector, which is set to be released on Thursday.

However, the upside of the New Zealand Dollar (NZD) could be limited due to rising odds of another rate cut in November by the Reserve Bank of New Zealand (RBNZ), with inflation easing and economic output remaining sluggish.

European Central Bank (ECB) policymaker Robert Holzmann noted in a Bloomberg News interview on Thursday,” I'd say a quarter-point step is probable in December.”

Holzmann added that "a bigger half-point cut is unlikely though not impossible. But we might also conclude that preemptively cutting in October might have been sufficient to take a break in December.”

Market reaction

These comments failed to move the needle around the Euro. At the time of press, EUR/USD was trading at 1.0795, up 0.09% on a daily basis.

• Silver regains positive traction following the overnight pullback from a 12-year top.
• A move beyond $34.25-$34.30 is needed to support prospects for additional gains
• Any meaningful dip could attract dip-buyers and remain limited near $32.75-$32.65.

Silver (XAG/USD) attracts some buyers during the Asian session on Thursday and for now, seems to have stalled its corrective slide from the $34.85-$34.90 area, or the highest level since October 2012 touched this week. The white metal currently trades just below the $34.00 round figure, up over 0.50% for the day.

Looking at the broader picture, the recent strength beyond the $32.65-$32.75 supply zone was seen as a fresh trigger for bullish traders. Furthermore, oscillators on the daily chart are holding comfortably in positive territory, suggesting that the path of least resistance for the XAG/USD is to the upside. That said, this week's fake-out above a short-term ascending channel extending from the August swing low warrants some caution.

Hence, it will be prudent to wait for some follow-through buying and a sustained move beyond the $34.25-$34.30 immediate hurdle before positioning for any further gains. The XAG/USD might then accelerate the positive momentum and make a fresh attempt to conquer the $35.00 psychological mark. The momentum could extend further and lift the commodity to the October 2012 swing high, around the $35.35-$35.40 region. 

On the flip side, the $33.45-$33.40 area, or the weekly low touched on Wednesday, could protect the immediate downside ahead of the $33.00 round-figure mark. Any further decline is likely to attract some dip-buyers, which, in turn, should limit losses for the XAG/USD near the $32.75-$32.65 resistance-turned-support. Some follow-through selling, however, might shift the bias in favor of bears and pave the way for a further downfall.

Silver daily chart

Gold prices rose in India on Thursday, according to data compiled by FXStreet.

The price for Gold stood at 7,369.73 Indian Rupees (INR) per gram, up compared with the INR 7,340.16 it cost on Wednesday.

The price for Gold increased to INR 85,959.05 per tola from INR 85,614.14 per tola a day earlier.

FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.

(An automation tool was used in creating this post.)

• The Indian Rupee trades within a tight range of 84.00-84.10.
• Indian PM Modi and Chinese President Xi Jinping agreed to enhance communication and cooperation during the BRICS summit on Wednesday.
• Traders are likely to observe India’s HSBC Purchasing Managers Index (PMI) data on Thursday.

The Indian Rupee (INR) steadies against the US Dollar (USD) on Thursday, with the USD/INR pair hovering within the 84.00-84.10 range. Market interventions by the Reserve Bank of India (RBI) helped limit downside risks for the INR, despite continued outflows from Indian equities.

The Rupee received downward pressure as Foreign Institutional Investors (FII) were net sellers of Indian stocks for the 18th consecutive session on Wednesday, shifting funds to China due to stimulus measures and more attractive valuations. The Nifty 50 has fallen 1.7% over the past three sessions this week and is down about 6% from last week's record highs, weighed down by disappointing earnings results.

Indian Prime Minister Narendra Modi and Chinese President Xi Jinping held their first formal talks in five years on the sidelines of the BRICS summit in Russia. During their meeting on Wednesday, the two leaders agreed to enhance communication and cooperation between India and China, aiming to resolve ongoing conflicts and improve relations that were strained following a deadly military clash in 2020, according to Reuters.

Traders are likely to keep an eye on the HSBC Purchasing Managers Index (PMI), a key indicator of business activity in India, which is set to be released on Thursday. Attention will also turn to FX Reserves (USD) data for the week ending October 14, expected to be published on Friday.

Daily Digest Market Movers: Indian Rupee resists downward pressure due to potential RBI intervention

• The US Dollar faced downward pressure following the release of the Federal Reserve’s (Fed) Beige Book on Wednesday. The latest report indicated that economic activity was "little changed in nearly all Districts," in contrast to August's report, where three Districts reported growth and nine showed flat activity.
• According to the CME FedWatch Tool, there is an 88.9% probability of a 25-basis-point rate cut, with no expectation of a larger 50-basis-point cut.
• Jim O'Neill, the former Goldman Sachs economist who coined the term BRIC in 2001, told Reuters that the notion of the BRICS group challenging the US Dollar is unrealistic as long as China and India remain divided and unwilling to cooperate on trade.
• In the minutes from the October meeting, members of the rate-setting panel stated that the Monetary Policy Committee (MPC) must take a cautious approach to lowering interest rates, as India cannot afford to face another bout of inflation.
• In a speech at the New York Fed Central Banking Seminar, RBI Deputy Governor Michael Patra stated, "We believe that the best defense against global risks is to strengthen the macroeconomic fundamentals and build adequate buffers, supported by prudent macroeconomic policies." He highlighted that India’s central bank has been strategically increasing its foreign exchange reserves, which are now equivalent to or nearly equal to 12 months' worth of imports.
• In a post on the social media platform X, Federal Reserve Bank of San Francisco President Mary Daly stated that the economy is clearly in a better position, with inflation having fallen significantly and the labor market returning to a more sustainable path.
• Federal Reserve Bank of Minneapolis President Neel Kashkari highlighted on Monday that the Fed is closely monitoring the US labor market for signs of rapid destabilization. Kashkari cautioned investors to anticipate a gradual pace of rate cuts over the coming quarters, suggesting that any monetary easing will likely be moderate rather than aggressive.

Technical Analysis: USD/INR finds support around 84.00, nine-day EMA

The USD/INR pair holds steady above 84.00 on Thursday. An analysis of the daily chart shows that the pair is hovering within an ascending channel pattern, suggesting a bullish bias. The 14-day Relative Strength Index (RSI) is nearing the 70 mark, which further reinforces the current bullish momentum.

In terms of resistance, the pair may face obstacles at its all-time high of 84.14, reached on August 5. A breakout above this level could enable the USD/INR pair to test the upper boundary of the ascending channel, which is around 84.20.

On the support side, immediate backing is located at the nine-day Exponential Moving Average (EMA) near the 84.02 level, coinciding with the lower boundary of the ascending channel and the psychological level of 84.00.

USD/INR: Daily Chart

• Gold regains positive traction and stalls the overnight pullback from the all-time peak.
• Retreating US bond yields prompts some USD profit-taking and benefits the XAU/USD.
• Geopolitical risks and the US political uncertainty contribute to the intraday move up.

Gold price (XAU/USD) witnessed an intraday turnaround on Wednesday and tumbled around $50 after hitting a fresh record high, around the $2,760 region. Against the backdrop of slightly overbought conditions on the daily chart, a further rise in the US Treasury bond yields and a stronger US Dollar (USD) prompted some profit-taking around the non-yielding yellow metal. That said, the US political uncertainty ahead of the November 5 Presidential election and Middle East tensions assisted the safe-haven commodity to stall the corrective slide ahead of the $2,700 mark.

This, along with a modest USD pullback from its highest level since July 30 and retreating US bond yields, attracts some dip-buyers around the Gold price during the Asian session on Thursday. That said, the prospects for smaller interest rate cuts by the Federal Reserve (Fed) should act as a tailwind for the buck and the US bond yields amid deficit-spending concerns after the US election. Moreover, signs of stability in the equity markets might cap the XAU/USD. Traders now look to the flash PMIs for fresh insight into the global economy and short-term impetus.

Daily Digest Market Movers: Gold price attracts some dip-buyers and draws support from a combination of factors

• The US Dollar and the US Treasury bond yields shot to their highest level in three months, triggering an intraday profit-taking slide in the Gold price on Wednesday. 
• The incoming robust US macro data suggested that the economy remains on strong footing and dampened hopes for a more aggressive easing by the Federal Reserve.
• Furthermore, the recent comments from a slew of influential Fed officials suggested the central bank will proceed with modest interest rate cuts over the next year. 
• The CME Group's FedWatch Tool indicates that traders are pricing in over a 90% chance that the Fed will lower borrowing costs by 25 basis points in November.
• Meanwhile, the odds of former President Donald Trump winning the November 5 US Presidential election fuel speculations about the launch of inflation-generating tariffs.
• Investors remain concerned that the spending plans of both Vice President Kamala Harris and the Republican nominee Donald Trump will further increase the deficit.
• The Israeli military carried out air strikes in southern Lebanon and Beirut’s suburbs after Hezbollah fired rockets at two bases near Tel Aviv and west of Haifa.
• This comes on top of the impending Israeli strike against Iran, in retaliation to the latter's ballistic missile attack on October 1 and lends support to the XAU/USD.

Technical Outlook: Gold price technical setup warrants caution for bulls, short-term ascending channel breakdown in play

From a technical perspective, the overnight breakdown below a short-term ascending trend-channel support could be seen as a fresh trigger for bearish traders. Moreover, negative oscillators on hourly charts suggest that the path of least resistance for the Gold price is to the downside. That said, it will still be prudent to wait for a convincing break below the $2,700 mark before positioning for any further losses. The XAU/USD might then accelerate the corrective decline towards the $2,685 intermediate support en route to the $2,672-2,670 strong horizontal resistance breakpoint.

On the flip side, the ascending channel support breakpoint, around the $2,730-2,732 area, now seems to act as an immediate hurdle. The next relevant resistance is pegged near the $2,750 region, above which the Gold price could resume its well-established uptrend and climb further towards the $2,770-2,775 zone before aiming to conquer the $2,800 round-figure mark.

• WTI gains ground due to heightening fears of supply disruptions amid rising uncertainties in the Middle East.
• Israel launched strikes on southern Beirut while US Secretary of State Antony Blinken was touring the region, urging for a ceasefire.
• Oil prices faced challenges as EIA Crude Oil Stocks Change showed an increase of 5.474 million barrels.

West Texas Intermediate (WTI) Oil price recovers its recent losses from the previous session, trading around $71.60 per barrel during Asian trading hours on Thursday. Concerns over the Middle East conflict continue to weigh on investors, heightening fears of potential supply disruptions from the region, which is helping to support crude Oil prices.

On Wednesday, Israeli strikes hit southern Beirut, while US Secretary of State Antony Blinken toured the region, advocating for a ceasefire in both Gaza and Lebanon. Iran-backed Hezbollah intensified its attacks on Israel, deploying "precision missiles" for the first time and launching new types of drones targeting Israeli sites. Hezbollah also claimed to have struck an Israeli military factory near Tel Aviv, per Reuters.

Oil prices came under pressure due to a larger-than-expected build in US stockpiles, as imports increased and gasoline inventories unexpectedly rose. This came after refineries ramped up production following seasonal maintenance. The US Energy Information Administration (EIA) reported a crude oil stock increase of 5.474 million barrels, bringing total inventories to 426 million barrels for the week ending October 18—well above the forecasted rise of 0.7 million barrels.

Meanwhile, the US Dollar Index (DXY), which tracks the US Dollar’s (USD) value against six major currencies, surged to its highest level since late July, reaching 104.57 on Wednesday. This further weakened the demand for dollar-denominated Oil.

Signs of economic resilience and rising inflation concerns have lessened the chances of a significant rate cut by the Federal Reserve in November. Higher borrowing costs could strain the US economy, the world's largest Oil consumer, potentially dampening economic activity and reducing Oil demand.

• The Japanese Yen edges higher on Thursday, though the upside potential seems limited.
• The BoJ rate-hike uncertainty should cap the JPY ahead of the general election on Sunday.
• Bets for a less aggressive Fed policy easing favor the USD bulls and lend support to USD/JPY. 

The Japanese Yen (JPY) is seen oscillating in range against its American counterpart during the Asian session on Thursday and consolidating the previous day's slump to the lowest level since July 31. The near-term bias, meanwhile, seems tilted in favor of the JPY bears amid the prospects of election-related uncertainty in Japan, which raises doubts over the Bank of Japan's (BoJ) ability to hike interest rates further this year. 

Moreover, the recent upswing in the US Treasury bond yields, bolstered by bets for a less aggressive policy easing by the Federal Reserve (Fed) and deficit-spending concerns after the US election, should cap gains for the lower-yielding JPY. Adding to this, the underlying strong bullish sentiment surrounding the US Dollar (USD) suggests that the path of least resistance for the USD/JPY pair remains to the upside. 

Daily Digest Market Movers: Japanese Yen remains vulnerable amid doubts over additional BoJ rate hikes in 2024

• A private-sector survey released earlier this Thursday showed that business activity in Japan's manufacturing and services sectors contracted in October, pointing to weaker overall economic conditions in the country.
• The Au Jibun Bank flash Manufacturing PMI declined to 49.0 in October from the 49.7 previous, marking the fourth straight month of contraction on the back of subdued local and overseas demand, and weak orders.
• Adding to this, the au Jibun Bank flash services PMI contracted for the first time since June and fell to 49.3 during the reported month, while the composite PMI dropped to 49.4 in October from 52 in the prior month. 
• Recent opinion polls indicate that Japan's ruling Liberal Democratic Party (LDP) could lose its majority after the upcoming general election on October 27, fueling uncertainty about the Bank of Japan's rate-hike plans.
• The yield on the benchmark 10-year US government bond shot to a three-month high on Wednesday amid market conviction that the Federal Reserve will proceed with modest interest rate cuts over the next year.
• The odds of former President Donald Trump winning the November 5 US presidential election fuel speculations about the launch of potentially inflation-generating tariffs that will keep the US bond yields elevated.
• The US Dollar retreated a bit from its highest level since late July touched on Wednesday as bulls opt to take some profits off the table following the recent upsurge witnessed since the beginning of this month. 
• The release of flash US PMI prints, along with the US bond yields, will influence the USD price dynamics later during the North American session and provide short-term impetus to the USD/JPY pair. 

Technical Outlook: USD/JPY stalls its upward trajectory near the 61.8% Fibo. level, bullish potential seems intact

From a technical perspective, Tuesday's breakout above the 150.65 confluence hurdle and the 200-day Simple Moving Average (SMA) was seen as a fresh trigger for bullish traders. The subsequent move up, however, stalls near the 61.8% Fibonacci retracement level of the July-September downfall amid a slightly overbought Relative Strength Index (RSI) on the daily chart. The said barrier is pegged near the 153.20 area and should now act as a key pivotal point, which if cleared decisively should pave the way for an extension of over a one-month-old uptrend. The USD/JPY pair might then aim to reclaim the 154.00 mark and climb further towards the 154.30 supply zone. The momentum could extend further towards the 154.75 horizontal zone en route to the 155.00 psychological mark and the July 30 swing high, around the 155.20 region.

On the flip side, any meaningful corrective slide now seems to find decent support near the 152.00 round figure. A convincing break below could drag the USD/JPY pair further towards the 151.45-151.40 intermediate support en route to the 151.00 mark, though the fall might still be seen as a buying opportunity. This should help limit the downside near the aforementioned confluence resistance breakpoint, now turned support, near the 150.65 region, which should now act as a strong base for spot prices. Sustained weakness below, however, will suggest that the upward momentum has run out of steam and shift the near-term bias in favor of bearish traders.

Japan’s Finance Minister Katsunobu Kato said on Thursday that “no comment on FX levels intervention.”

Further comments

Market reaction

USD/JPY was last seen trading at 152.51, down 0.15% so far.

Japan's Deputy Chief Cabinet Secretary Kazuhiko Aoki said on Thursday that he is “closely watching FX moves with a sense of urgency.”

Key quotes

Market reaction

USD/JPY has come under renewed selling pressure, testing 152.50 on these comments. The pair is down 0.14% on the day, at the time of writing.

• The Australian Dollar remains stronger after the release of Purchasing Managers Index data on Thursday.
• Australia's Judo Bank Services PMI inched up to 50.6 in October, marking its ninth consecutive month of expansion.
• Fed Beige Book report indicated that economic activity was "little changed in nearly all Districts.”

The Australian Dollar (AUD) edges higher against the US Dollar (USD) after the release of the domestic Purchasing Managers Index (PMI) on Thursday. Additionally, the AUD/USD pair gained as the USD weakened slightly, driven by a modest dip in US Treasury yields. 2-year and 10-year yields on US Treasury bonds stand at 4.07% and 4.23%, respectively, at the time of writing.

The AUD could get further support from the prevailing hawkish sentiment surrounding the Reserve Bank of Australia (RBA), bolstered by the positive employment data. Earlier this week, RBA Deputy Governor Andrew Hauser noted that the labor participation rate is remarkably high and emphasized that while the RBA is data-dependent, it is not data-obsessed.

The US Dollar faced downward pressure following the release of the Federal Reserve’s (Fed) Beige Book on Wednesday. The latest report indicated that economic activity was "little changed in nearly all Districts," in contrast to August's report, where three Districts reported growth and nine showed flat activity.

Daily Digest Market Movers: Australian Dollar receives support from the hawkish mood surrounding the RBA

• According to the CME FedWatch Tool, there is an 88.9% probability of a 25-basis-point rate cut, with no expectation of a larger 50-basis-point cut.
• Australia's Judo Bank Composite PMI slightly rose to 49.8 in October, up from 49.6 in September, signaling a second straight month of contraction in private sector output. The Services PMI inched up to 50.6 from 50.5, marking its ninth consecutive month of expansion, while the Manufacturing PMI dipped to 46.6 from 46.7, continuing its decline.
• In a post on the social media platform X, Federal Reserve Bank of San Francisco President Mary Daly stated that the economy is clearly in a better position, with inflation having fallen significantly and the labor market returning to a more sustainable path.
• On Monday, Federal Reserve Bank of Minneapolis President Neel Kashkari highlighted that the Fed is closely monitoring the US labor market for signs of rapid destabilization. Kashkari cautioned investors to anticipate a gradual pace of rate cuts over the coming quarters, suggesting that any monetary easing will likely be moderate rather than aggressive.
• The People's Bank of China (PBoC) reduced the 1-year Loan Prime Rate (LPR) to 3.10% from 3.35% and the 5-year LPR to 3.60% from 3.85%, in line with expectations. Lower borrowing costs are anticipated to stimulate China's domestic economic activity, potentially increasing demand for Australian exports.
• National Australia Bank revised its projection for the Reserve Bank of Australia (RBA) in a note last week. "We have brought forward our expectations for the timing of rate cuts, now anticipating the first cut in February 2025, instead of May," the bank stated. They continue to foresee gradual cuts, with rates expected to decrease to 3.10% by early 2026.

Technical Analysis: Australian Dollar remains below 0.6650, close to six-week lows

The AUD/USD pair trades around 0.6640 on Thursday. Technical analysis of the daily chart suggests a short-term bearish outlook as the pair remains below the nine-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) is below 50, reinforcing the bearish sentiment.

Regarding support, the AUD/USD pair could retest its two-month low of 0.6614, last seen on Wednesday. The next key support appears at the psychological level of 0.6600.

On the upside, resistance is expected at the nine-day EMA at 0.6680, followed by the 50-day EMA at 0.6728. A break above these levels could open the door for a potential move toward the psychological resistance of 0.6800.

AUD/USD: Daily Chart

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1286, as compared to the previous day's fix of 7.1245 and 7.1284 Reuters estimates.

• USD/CAD attracts some sellers on Thursday amid a modest USD pullback from a three-month high.
• Renewed buying around Oil prices underpins the Loonie and exerts additional pressure on the pair.
• The BoC’s jumbo rate cut and bets for a less aggressive Fed easing warrant some caution for bears.

The USD/CAD pair edges lower during the Asian session on Thursday and moves away from its highest level since August 5, around the 1.3860-1.3865 zone touched the previous day. Spot prices currently trade around the 1.3825 area, down nearly 0.10% for the day amid a modest US Dollar (USD) downtick, though any meaningful corrective decline still seems elusive. 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, eases from a nearly three-month top as bulls opt to take some profits off the table after the recent strong gains registered over the past four weeks or so. Apart from this, the emergence of fresh buying around Crude Oil prices underpins the commodity-linked Loonie and exerts some downward pressure on the USD/CAD pair. 

Meanwhile, growing acceptance that the Federal Reserve (Fed) will proceed with modest rate cuts over the next year keeps the US Treasury bond yields elevated near a three-month peak. This, along with the US political uncertainty and geopolitical risks stemming from the ongoing conflicts in the Middle East, should continue to act as a tailwind for the safe-haven buck and offer some support to the USD/CAD pair. 

Furthermore, the Bank of Canada's (BoC) decision to lower its key interest rate by 50 basis points (bps) for the first time since the COVID-19 pandemic and the prospects for further rate cuts should cap gains for the Canadian Dollar (CAD). This, in turn, makes it prudent to wait for strong follow-through selling before confirming that the USD/CAD pair has topped out in the near term and positioning for deeper losses.

Market participants now look forward to the release of the flash US PMI prints, which, along with the US bond yields and the broader risk sentiment, will drive the USD demand. Apart from this, Oil price dynamics should contribute to producing short-term trading opportunities. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the USD/CAD pair remains to the upside.