Forex-novosti i prognoze od 28-10-2024

• EUR/USD trades flat near 1.0810 in Tuesday’s early Asian session. 
• The rising bets that the Fed might not opt into aggressive easing might boost the USD. 
• ECB’s Wunsch said there is no urgency for the ECB to speed up policy easing. 

The EUR/USD pair holds steady around 1.0810 on the consolidation of the US Dollar (USD) during the early Asian session on Tuesday. Investors await Germany’s GfK Consumer Confidence data, which is due later on Tuesday. 

The rising expectation of a slower pace of US Federal Reserve (Fed) rate cuts is likely to support the Greenback in the near term. Nonetheless, market players will take more cues from the key US economic data this week, including the advanced  Gross Domestic Product (GDP) for the third quarter (Q3), ISM Manufacturing PMI, inflation and employment data. 

Meanwhile, traders will closely monitor the US presidential election on November 5. According to polling site FiveThirtyEight, Trump's possibility of winning the US election has increased to 52% compared to 48% for Vice President Kamala Harris. The uncertainty surrounding this key event might lift the safe-haven currency like the USD against the Euro (EUR). 

The European Central Bank (ECB) policymakers have had different views on monetary policy in the previous days. Belgian central bank chief Pierre Wunsch said on Monday that there is no urgency for the central bank to cut interest rates quicker, and it could even live with a small. The less dovish comments from ECB Governor Wunsch help limit the shared currency’s losses. However, the Portuguese central bank chief, Mario Centeno, stated that a 50 basis points (bps) rate cut should be among the options on the table in December. 

Scotiabank’s Chief FX Strategist Shaun Osborne noted, “Comments from ECB Governor Wunsch, adding to the raft of voices who have spoken out against upping the pace of rate cuts recently, helped nudge the EUR higher. Moody’s put French debt on negative outlook Friday.”

• NZD/JPY has risen by 0.75% to 91.70 in Monday's session, signaling a bullish resumption.
• Technical indicators show a neutral outlook, with the RSI at 58 and the MACD hovering around the zero line.

NZD/JPY has resumed its upward trajectory after a period of consolidation. In Monday's session, the pair surged to 91.70, suggesting a potential shift in market sentiment. This move could be the beginning of a new bullish phase for NZD/JPY.

While technical indicators currently portray a neutral outlook, they do not contradict the bullish momentum evident in the price action. The Relative Strength Index (RSI) has risen at 58, indicating that buying pressure has stabilized. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram is hovering around the zero line, signaling a lack of clear direction. However, the MACD is beginning to show signs of a bullish crossover, which would align with the positive price action.

The pair has been trading sideways over the past sessions, within a narrow range defined by support at 91.00 and resistance at 92.00. The 20-day Simple Moving Average (SMA), around the mentioned lower boundary will hold as critical support in the event of a pullback as it was defended by the buyers in the last two weeks but if sellers breach it, it might flip the table.

NZD/JPY daily chart

• AUD/USD extended its decline, but a soft US Dollar might help to limit losses.
• Lingering doubts over the effectiveness of China's stimulus measures weighed on AUD despite positive commodity prices.
• Market sentiment indicates a 50% chance of a 25-basis-point RBA rate cut by year-end.

The AUD/USD The AUD/USD pair extended its decline on Monday, falling by 0.31% to 0.6586. The pair broke below key support at 0.6600 and the critical 200-day SMA, suggesting further weakness ahead for the Aussie Dollar. Lingering doubts over the effectiveness of China's stimulus measures weighed on AUD despite positive commodity prices. A hawkish Reserve Bank of Australia (RBA) continues to support the Aussie in the background.

On the US side, markets await key data to be released this week. Markets will get a jobs reports as well as Gross Domestic Product (GDP) revisions. ISM PMI from October data is also due this week.

Daily digest market movers: Australian Dollar declines, markets await higher-tier data from the US

• Despite a subdued US Dollar, doubts over China's stimulus impacted the Australian Dollar.
• A possible USD correction and a hawkish RBA might help the Aussie.
• Deputy Governor Hauser warned against overestimating potential RBA rate cuts.
• On the US side, markets will get a Gross Domestic Product revision, Nonfarm Payrolls and ISM PMIs from October, which will help set the short-term direction for the pair.

AUD/USD technical outlook: Bears in control, RSI oversold and red MACD hint at a possible correction

The Relative Strength Index (RSI) has fallen into the oversold area, indicating that selling pressure is rising but that it might be over-extended. The Moving Average Convergence Divergence (MACD) histogram is red and rising, further suggesting that selling pressure is increasing.

The overall outlook is bearish, indicating that a downward trend is likely to continue in the near term but that a correction is possible. Support levels can be identified at 0.6570, 0.6550 and 0.6530, while resistance levels can be found at 0.6750, 0.6800 and 0.6850.

• Gold holds just below its opening price, constrained by US 10-year Treasury yield rising to 4.272%.
• Traders await US Nonfarm Payrolls, Q3 GDP, and the PCE Price Index, which could influence the Fed's policy outlook.
• Political and geopolitical tensions linger as election polls narrow; though Israel’s conflict with Iran woes begin to fade.

Gold traded slightly below its opening price at the beginning of the week and is down by 0.15%, weighed down by rising US Treasury yields. Market players prepare for a busy economic docket in the United States (US), as the data will be crucial with investors looking for cues for the Federal Reserve’s (Fed) monetary policy path.

The XAU/USD trades at $2,742 after hitting a daily high of $2,747. The yield on the US 10-year Treasury note continued to climb, up by three basis points at 4.272%. This has kept Bullion prices from recording a new all-time high above $2,758 as some analysts eye the $2,800 mark toward the end of the year.

Meanwhile, traders are also eyeing the November 5 US election. According to polling site FiveThirtyEight, Trump's chances of winning the US election have increased to 52% compared to 48% for Vice President Kamala Harris. Despite this, the Democratic nominee still holds a slight lead in most national polls.

Traders are also awaiting a busy economic schedule, which will feature a tranche of job data: JOLTS, ADP Employment Change, Initial Jobless Claims, and Nonfarm Payrolls.

Other data will be revealed like the Gross Domestic Product (GDP) for the third quarter of 2024, the ISM Manufacturing PMI, and the Fed’s preferred inflation gauge — the Personal Consumption Expenditures (PCE) Price Index.

Aside from this, geopolitics came back to the fore over the weekend after Israel launched missiles at several military targets in Iran, avoiding energy and nuclear facilities.

It’s worth noting that Fed officials are in blackout mode as they prepare for the November 7-8 meeting. They will break that period once Chair Jerome Powell  speaks at his press conference.

Daily digest market movers: Gold price dips ahead of busy US docket

• The US Dollar Index (DXY), which tracks the Dollar's value against a basket of six currencies, is flat at 104.27.
• On Tuesday, the US schedule will feature the JOLTS Job Openings report for September, which is expected to show a dip from 8.04 million to 7.99 million.
• At the same time, the Conference Board (CB) is expected to release October’s Consumer Confidence reading, which is likely to improve from 98.7 to 99.3.
• The US Bureau of Economic Analysis will reveal Wednesday's GDP for the third quarter. Estimates suggest the economy grew 3% QoQ, unchanged compared to 2024’s second quarter.
• The Atlanta Fed GDP Now model suggests the economy grew by 3.3% in Q3 2024.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 49 bps of Fed easing by the end of the year.

XAU/USD technical outlook: Gold price drops below $2,750

Gold price uptrend remains intact with no reversal pattern around record highs, though it has consolidated within the $2,700-$2,750 area. A breach of the top of the range will immediately expose the all-time high at $2,758. Once surpassed, the next stop would be the $2,775 area before challenging $2,800.

On the other hand, if sellers move in and push prices below $2,700, the first support would be the September 26 swing high, which turned support at $2,685, followed by the 50-day Simple Moving Average (SMA), which turned support at $2,603.

Momentum suggests the non-yielding metal could consolidate as the Relative Strength Index (RSI) remains bullish but aims lower. Until the RSI clears the latest peak, Gold could’ve had the chance to print record highs. Otherwise, beware of a pullback.

The US dollar treaded water in the upper end of the range despite US yields extending their rebound to new multi-week highs, all ahead of key US data releases and growing speculation prior to the November 5 US election.

Here is what you need to know on Tuesday, October 29:

The US Dollar Index (DXY) alternated gains with losses in quite a narrow range near the 104.30 zone, accompanied by rising yields and a modest uptick in the risk complex. The advanced Goods Trade Balance results are due, seconded by monthly Wholesale Inventories, the FHFA’s House Price Index, the Consumer Confidence gauged by the Conference Board, JOLTs Job Openings, and the API’s weekly report on US crude oil inventories.

EUR/USD reversed some of Friday’s losses and managed to retest the area beyond 1.0800 the figure. Germany’s Consumer Confidence measured by GfK, takes centre stage in Europe.

GBP/USD regained mild upside traction on the back of the inconclusive price development in the US Dollar. The BoE’s Consumer Credit Survey and M4 Money Supply will be published along with Mortgage Approvals and Mortgage Lending figures. 

USD/JPY rose to fresh tops and revisited levels just shy of the key 154.00 barrier. The Unemployment Rate and the Jobs/Applications Ratio will be published.

Unabated concerns surrounding China’s stimulus measures continued to weigh on AUD/USD, motivating spot to break below the ley 0.6600 support. Next on tap in Oz will be the release of the RBA’s Monthly CPI Indicator on October 30.

WTI prices collapsed to the sub-$67.00 zone per barrel on Monday as traders assessed Israel’s attack to Iran over the weekend, which avoided the country’s nuclear facilities and oil industry.

Prices of Gold retreated after two consecutive daily advances on the back of the steady Greenback and rising US yields across the board. Another vacillating session left Silver prices hovering around the $33.70 per ounce on Monday.

• Dow Jones gains 350 points, recovering from last week’s loss, as investors anticipate GDP, Nonfarm Payrolls and PCE Price Index releases.
• Treasury yields climb with the 10-year note yield nearing 4.30%, amid speculation that the Fed could remain less dovish than anticipated.
• Strong performers include 3M (MMM), Goldman Sachs (GS) and McDonald’s (MCD), while Boeing (BA) and Cisco (CSCO) lag in the index.

The Dow Jones Industrial Average (DJIA) has recovered from Friday’s 300-point loss, climbing over 0.84% or 350 points even though US Treasury bond yields continued to rise. Investors are capitalizing ahead of the release of crucial economic data from the United States (US) that will feature the release of Gross Domestic Product (GDP) figures, Nonfarm Payrolls (NFP), and the Federal Reserve’s (Fed) favorite inflation gauge — the Personal Consumption Price Expenditures (PCE) Price Index.

The US 10-year Treasury note yield approaches 4.30%, up by over three-and-a-half basis points, amid speculation that the Fed could turn less dovish than expected. Investors eye the release of earnings reports on five of the “Magnificent Seven” mega caps as Alphabet (GOOG), Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Meta (META) could rock the boat and increase volatility in the DJIA.

Apple (AAPL) revealed its latest Apple AI system, which is available as an update to some products compatible with certain iPhones, iPads and Macs. On Tuesday, Alphabet (GOOG) is expected to unveil earnings after the closing, followed by Meta (META) and Microsoft (MSFT) on Wednesday.

Dow Jones news

Twenty-two of the 30 companies listed on the DJIA are posting gains, led by 3M (MMM), up 4.50% at $130.36 per share. Goldman Sachs (GS) gained 1.92% to $522.44, and McDonald’s (MCD) gained 1.76% to $297.75 at the time of writing.

At the bottom of the pack lies Boeing (BA), which plunged 1.69% to $152.40. Cisco Systems (CSCO) lost 0.74% to $55.33, and International Business Machines (IBM) edged 0.71% lower to $213.15.

Dow Jones price forecast

The Dow Jones remains contained within Friday’s price action, forming an “inside day”, which has bullish implications. If the DJIA clears the October 25 peak at 42,596, the next stop would be 43,000. If surpassed, nothing would be in the bulls’ path to challenge the record high at 43,322.

Conversely, for a bearish scenario, the index should drop below last week’s bottom of 42,043, so sellers could push the Dow Jones toward the 50-day Simple Moving Average (SMA) at 41,848.

Momentum remains bullish as depicted by the Relative Strength Index (RSI), which just pierced above its neutral line. This hints that buyers bought the dip and are eyeing higher levels.

Dow Jones daily chart

• US Dollar Index falls due to profit-taking, still trades above 104.00.
• Economists predict 3.0% growth for US Q3 GDP, which might continue favoring the USD.
• ISM Manufacturing PMI is expected to climb four points to 47.6, while the labor market is expected to show poor results for October.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, declined on Monday. Thisreversed earlier gains amid profit-taking ahead of key economic figures from October to be released later this week.

Despite a robust economy, the US Dollar faces headwinds. DXY breached its 200-day SMA but now consolidates due to overbought conditions. Fed officials remain cautious on inflation, and markets anticipate rate cuts by year-end.

Daily digest market movers: US Dollar retraces from gains ahead of high-tier data

• The US economy is expected to grow at a steady pace in Q3 as indicated by forecasts and economic models such as GDPNow and the New York Fed's Nowcast.
• The S&P Global US Manufacturing PMI rose to a two-month high in October, indicating a slight improvement in the manufacturing sector.
• ISM PMIs from the same month to be released on Friday will give further details.
• The positive economic data suggests that the US economy remains resilient despite global headwinds, supporting the US Dollar's strength.
• Labor market figures are expected to see poor results on Friday with Nonfarm Payrolls estimated below 200K in October, which might weigh on the USD.

DXY technical outlook: DXY overbought, buyers lose momentum

The DXY index briefly surpassed the 200-day SMA last week, but buyers lost momentum due to overextended upward moves. The index is now anticipating sideways movement to correct the overbought conditions.

Despite some gains at the week's end, indicators remain near the overbought zone. Support lies at 104.50, 104.30 and 104.00, while resistance levels exist at 104.70, 104.90 and 105.00.

• Silver price hovers near $34.00 resistance with positive momentum, supported by RSI in bullish territory.
• A breakout above $34.00 could target the YTD high at $34.86, followed by the October 2012 peak at $35.40.
• Key support levels are the October 25 low at $33.09 and October 17 pivot low at $31.32, with further downside to the 50-day SMA at $30.82.

Silver price clings to gains above $33.50 yet struggles to clear the $34.00 mark amid falling through high US 10-year T-note yields at 4.260%. At the time of writing, the XAG/USD trades at $33.79, up by 0.30%.

XAG/USD Price Forecast: Technical outlook

The grey metal remains bullish, though it has failed to clear the October 25 daily peak at $34.01, opening the door to complete a ‘bullish harami’ candle pattern.

Momentum remains positive, with the Relative Strength Index (RSI) in bullish territory and aiming upwards. Therefore, the XAG/USD could test $34.00 in the short term.

If XAG/USD climbs past $34.00, the next resistance would be the year-to-date (YTD) high at $34.86. A breach of the latter will expose the October 2012 peak at $35.40.

Conversely, if Silver price extended its losses below the October 25 swing low of $33.09, this could expose the October 17 pivot low at $31.32. On further weakness, XAG/USD's next support would be the 50-day Simple Moving Average (SMA) at $30.82.

XAG/USD Price Chart – Daily

• Mexican Peso pressured as Trump’s chances in the US election rise.
• Mexico’s recent economic data shows ongoing slowdown with weak Retail Sales and Economic Activity suggesting possible Banxico rate cuts.
• This week’s focus includes Mexico’s Q3 GDP, while US data releases will feature GDP, jobs data, and inflation figures.

The Mexican Peso depreciates against the US Dollar on Monday, extending its losses past the psychological 20.00 figure. The Peso is being undermined by fears of former President Donald Trump’s victory in the US election on November 5, while a tranche of Mexico’s economic data last week suggests the economy is decelerating. The USD/MXN trades at 19.99, up 0.21%.

In 2016, Donald Trump won the election, which boosted the USD/MXN from 18.60 to 20.90. However, that was just the first leg. The rally extended to 22.00 after Trump took office in January 2017. A victory for the former US President would imply imposing tariffs on Mexican imports and restrictive immigration policies, which could hurt the Mexican currency.

Polling site FiveThirtyEight shows that Trump’s odds of winning the US election have risen to 52%, against 48% for Vice President Kamala Harris. Nevertheless, the Democratic nominee remains marginally ahead in most national polls.

Bloomberg Economics reported on an analysis made last month that US federal debt may rise to 116% of Gross Domestic Product (GDP) under Trump’s tax-cut plan. Under Harris’s platform, it would be on a path to 109%.

Mexico’s Retail Sales and Economic Activity data for August were weaker than expected last week, according to INEGI. This, along with a goodish mid-month inflation report in October, could open the door for another interest rate cut by the Bank of Mexico (Banxico) at the upcoming November meeting.

The swaps market suggests Banxico will cut between 175 to 200 basis points over the next 12 months. Mexico’s central bank is expected to lower rates to 10.25% for the upcoming meeting.

Ahead of the week, Mexico’s economic schedule will feature the release of Gross Domestic Product (GDP) figures for Q3 2024, Business Confidence, and S&P Global Manufacturing PMI.

In the US, the economic docket is expected to reveal jobs data, GDP for the third quarter of 2024 on its preliminary reading, the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index and Nonfarm Payrolls (NFP).

Daily digest market movers: Mexican Peso on the backfoot ahead of busy Mexico-US docket

• Mexico’s GDP in Q2 came at 0.2% QoQ and 2.1% YoY. If GDP for the third quarter, on a quarterly and annual basis, misses those marks, it could mean that the economy might be tipped into a recession.
• On Tuesday, the US economic docket will feature US JOLTS for September, which are expected to drop from 8.04 million to 7.99 million.
• At the same time, the Conference Board (CB) is expected to release October’s Consumer Confidence reading, which is likely to improve from 98.7 to 99.3.
• The US Bureau of Economic Analysis will reveal the GDP for the third quarter on Wednesday. Estimates suggest the economy grew 3% QoQ.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 49 bps of Fed easing by the end of the year.

USD/MXN technical outlook: Mexican Peso tumbles as USD/MXN closes into 20.00

The USD/MXN uptrend remains intact despite consolidating near 19.70/20.00 for the last six days. Momentum remains bullish as the Relative Strength Index (RSI) depicts. This means the pair could challenge year-to-date (YTD) peaks as we get closer to November 5, US election day.

If buyers clear the 20.00 figure, they could test the last week peak at 20.09. On further strength, the USD/MXN could aim toward the 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.

BoJ likely to keep base rate unchanged amid easing inflation and mixed economic performance. Global economic and political uncertainty to keep BoJ cautious. We now expect BoJ to hike the base rate in Q1-2025 (vs Q4-2024 previously). Downside risk to USD-JPY could come from any unexpected tweaks to policy guidance. A sharp move in USD-JPY towards 160 may revive calls for BoJ to tighten sooner rather than later, Standard Chartered’s economists Chong Hoon Park and Nicholas Chia note.

BoJ in wait-and-see mode, for now

“We expect the Bank of Japan (BoJ) to keep the base rate unchanged at its 31 October meeting, on mixed economic data and global uncertainty. While the market expects a rate hike later this year or early next year, the BoJ will likely pause for now, allowing more time to assess the domestic and global economic landscape. We now see the BoJ hiking the base rate in Q1-2025 (vs December previously), followed by another hike in Q3-2025 (vs Q4-2025 previously), taking the base rate to 0.75% by end-2025; we estimate the neutral rate at around the 0.75% to 1% level.” 

“The BoJ is likely to refrain from making any immediate policy changes given mixed economic signals, both domestically and globally. While the domestic economic recovery is underpinned by solid consumer spending and rising wages, concerns about weaker exports and global uncertainty are weighing on Japan's outlook. The central bank appears set to prioritise stability, opting to wait for more clarity on global conditions, particularly in the US, before making any decisive moves. We expect the   BoJ to maintain its accommodative stance at the upcoming meeting, allowing the economy more room to absorb any external shocks and for wage growth to solidify inflationary trends further.”  

“Japan's ruling Liberal Democratic Party (LDP), led by Prime Minister Shigeru Ishiba, and its coalition partner Komeito failed to secure a majority in the House of Representatives election, for the first time since 2009. This shift poses further challenges for Ishiba, whose leadership and policy goals, including defence spending and regional growth, now face uncertain prospects. Moreover, the unfavourable election result from the perspective of the ruling coalition is likely to cloud the BoJ’s policy normalisation path moving forward. The LDP may need to resort to more populist measures, such as welfare spending or tax cuts, to stabilise its position.”

• The US economy remains robust with strong GDP and personal consumption expectations.
• The Bank of Canada is expected to cut interest rates again by 50 bps in December due to concerns about economic growth.
• US data might move the pair this week.

The USD/CAD pair moved higher on Monday as positive sentiment toward the US Dollar prevailed. The pair rose to a high above 1.3900, which was the highest level since November 11. The strength of the US Dollar is being supported by the expectations that the Federal Reserve (Fed) might not opt into aggressive easing. Meanwhile, the Bank of Canada (BOC) is expected to cut interest rates again in December due to concerns about economic growth.

The Canadian Dollar remains vulnerable due to expectations that the BoC will maintain its aggressive policy-easing stance at its upcoming December meeting. This comes in the wake of the BoC's recent 50-basis-point (bps) rate cut, its fourth consecutive reduction but the largest in size.

Daily digest market movers: Canadian Dollar recedes as US economic resilience pushes the USD higher

• The US economy is performing well. A Q3 GDP growth forecast of 3.0% SAAR matches Q2, and personal consumption at 3.2% SAAR surpasses Q2's 2.8% according to the GDPNow tracker.
• The Atlanta Fed’s GDPNow model predicts a higher Q3 growth of 3.3% SAAR, with the final update expected on Tuesday and Q4's forecast coming Thursday.
• The New York Fed’s Nowcast model estimates Q3 growth at 2.9% SAAR and Q4 at 2.5% SAAR, with its Q4 forecast to be updated on Friday and Q1 2025 forecast coming in late November.
• Consensus anticipates a rise in ISM Manufacturing PMI to 47.6 in October, supported by the recent increase in S&P Global US Manufacturing PMI to a two-month high of 47.8.
• In addition, Friday’s labor market data will be closely watched, including a Nonfarm Payroll and Unemployment reading.
• Meanwhile, markets continue to bet on two Federal Reserve cuts by the end of 2024.
• BoC cut interest rates by 50 basis points to 3.75% last Wednesday, larger than the usual 25 bps.
• Economists predict another 50 bps cut from the BoC in December due to downside risks to Canadian economic growth.

USD/CAD technical outlook:  Bullish momentum remains, RSI and MACD flash overbought signals

The Relative Strength Index (RSI) for the currently stands at 74, indicating the pair is in overbought territory. The RSI is also showing a mildly rising slope, suggesting that buying pressure is rising. 

The Moving Average Convergence Divergence (MACD) is also showing a bullish outlook with the histogram rising and green. This suggests that buying pressure is building and that the overall outlook for the pair remains positive. However, the overbought nature of these signals opens the door for a correction. The USD/CAD should find support between the 1.3800 and 1.3900 levels before the next bullish run.

The Pound Sterling (GBP) is unchanged on the day as local markets slip into a holding pattern ahead of Wednesday’s budget, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP consolidates on the day

“Chancellor Reeves is expected to loosen fiscal policy somewhat and if she manages to pull that off and maintain credibility with investors, the GBP might benefit.”

“Cable is holding a trading range below 1.30. The short-term pattern of trade lends itself to a potentially bullish resolution of the recent trading range. Spot gains above 1.3005 resistance will add to the positive short-term tone on the intraday chart that developed late last week following the pound’s reversal from 1.2910 (now support).”

“Gains through the low 1.30s target a push on to 1.3070/75.”

EUR/USD dropped back to the upper 1.07s in early Asian trade before crawling back to the low 1.08s, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR edges higher

“Comments from ECB Governor Wunsch, adding to the raft of voices who have spoken out against upping the pace of rates cuts recently, helped nudge the EUR higher. Moody’s put French debt on negative outlook Friday.”

“OATs are, however, outperforming marginally in the day, with the outlook revision no great surprise and markets perhaps relieved that – for now, at least – a rating cut was avoided.”

“Spot is consolidating in a developing range around 1.08. The pattern of trade so far suggests a minor pause in the EUR’s decline before losses resume (potential bear flag pattern). The EUR remains heavily oversold on the intraday and daily oscillator studies which does raise the risk of a short squeeze at some point, however. Support is 1.0780. Resistance is 1.0870.”

• GBP/USD consolidates below 1.3000, with RSI indicating a slight upward shift but lacking the strength to break recent peaks.
• A GBP/USD breakout above 1.3000 could target resistance at 1.3076 and 1.3102, followed by the 50-day SMA at 1.3140.
• Key support levels lie at the 100-day SMA at 1.2969 and last week’s low of 1.2906, with further downside to the 200-day SMA at 1.2803.

The Pound Sterling recovered some ground against the US Dollar, though it failed for the second consecutive trading day to reach 1.3000. This exacerbated a pullback toward the current exchange rate, as the GBP/USD trades at 1.2981, slightly above 0.20% of its opening price.

GBP/USD Price Forecast: Technical outlook

The GBP/USD consolidates at around the bottom trendline of an ascending channel, shy of cracking 1.3000. Momentum has shifted slightly upwards, with the Relative Strength Index (RSI) slope pointing up. However, the RSI remains below the latest peak, which, once cleared, would mean that buyers are moving in.

If GBP/USD clears 1.3000, the next resistance would be the October 18 peak at 1.3076 before challenging the October 15 daily high at 1.3102. Once surpassed, the 50-day Simple Moving Average (SMA) would be up at 1.3140.

On the other hand, sellers need to clear the 100-day SMA at 1.2969 before challenging last week’s lowest point at 1.2906. On further weakness, bears could drive the GBP/USD to test the 200-day SMA at 1.2803.

GBP/USD Price Chart – Daily

• USD/JPY surrenders a majority of its intraday gains after a sharp rally in the opening session.
• The pair gives up gains as US Dollar falls back amid uncertainty ahead of US data.
• The scenario of a coalition government in Japan has diminished BoJ rate hike prospects.

The USD/JPY pair gives up the majority of its intraday gains after facing significant bids near 154.00 in Monday’s North American session. The asset showed a strong upside move in the opening session due to a sharp weakness in the Japanese Yen (JPY) but faced pressure at elevated levels as the US Dollar (USD) retreated after failing to extend rally.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls back after revisiting an almost three-month high of 104.60. The Greenback’s rally appears to have stalled as investors turn cautious ahead of a string of United States (US) economic data such as: JOLTS Job Openings and Personal Consumption Expenditure Price Index (PCE) for September, Q3 Gross Domestic Product (GDP), and the ISM Manufacturing PMI and the Nonfarm Payrolls (NFP) data for October, to be published this week.

The economic data will significantly influence market expectations for the Federal Reserve’s (Fed) likely interest rate action for the remaining two meetings this year. According to the CME FedWatch tool, traders have priced in a usual size rate cut of 25 basis points (bps) in November and are confident that a similar move will be performed in the December meeting.

Market participants are likely to focus more on the economic growth and labor market-related data as Fed officials are confident the inflation remains sustainably on track towards bank’s target of 2%.

Meanwhile, the outlook of the Yen has weakened as the Japanese economy is poised to run by a coalition government after the ruling Liberal Democratic Party (LDP) failed to get majority seats in the snap election. The scenario bodes poorly for forward growth as Shigeru Ishiba won’t be the only caretaker of the economy. This has also weakened hopes of more interest rate hikes from the Bank of Japan (BoJ) for this year.

• USD/CHF has opened a Runaway Gap higher at the open, suggesting the uptrend will continue.
• Volume is low, reducing the chances that the gap represents a point of exhaustion. 

USD/CHF opened a gap higher at the open on Monday (see chart below) and then promptly fell back down. It has since closed the gap. 

Despite the speed of the decline following the gap higher, the short and medium term trend is still probably bullish, which given the old saying that “the trend is your friend” is likely to continue. 

USD/CHF 4-hour Chart 

The gap is probably what would be classified as a “Runaway Gap”. These happen during strong rallies. 

The lack of volume accompanying this gap (yellow rectangle on volume) indicates this is probably not an Exhaustion Gap which comes at the end of the trend. Price is, therefore, likely to continue rising.

A break above the 0.8700 level (October 28 high) would confirm a further extension to the 0.8750 resistance level (August 15 high). 

The Relative Strength Index (RSI) momentum indicator is still not in overbought territory (above 70) suggesting the pair has room for more upside.

• Silver price faces marginal pressure below $34.00 with an array of US data in focus.
• Investors will keenly focus on the US labor market and the economic growth data for fresh interest rate guidance.
• Iran-Israel tensions would keep the downside in the Silver price limited.

Silver price (XAG/USD) trades cautiously below the key resistance of $34.00 in Monday’s North American session. The white metal faces slight pressure as traders brace for an array of United States (US) economic data to be published this week.

Investors will pay close attention to labor market-related data, Personal Consumption Expenditure Price Index (PCE), and the Q3 Gross Domestic Product (GDP) data to get fresh cues about the Federal Reserve’s (Fed) likely interest rate action in the remainder of the year.

Currently, financial market participants expect the Fed to cut interest rates by 25 basis points (bps) in both the policy meetings in November and December. With decent confidence among Fed officials that the disinflationary trend is intact, the labor market and the GDP data will be keenly watched to understand the quantum of economic risks.

The US Dollar Index (DXY), which tracks the Greenback’s value against ix major currencies, retreats after failing to extend its upside above an almost three-week high of 104.60. 10-year US Treasury yields trade sideways near 4.23%.

On the geopolitical front, war between Israel and Iran will continue to keep the Silver price well-supported. Israel launched airstrikes on Iran’s defense-manufacturing capacity over the weekend. After the attack, Israel Prime Minister Benjamin Netanyahu said, “We promised we would respond to the Iranian attack, and on Saturday we struck. The attack in Iran was precise and powerful, achieving all of its objectives”, Home Newsday reported.

The scenario of deepening geopolitical tensions bodes well for precious metals, such as Silver price, as investors consider them a safe-haven bet.

Silver technical analysis

Silver price trades inside Friday’s trading range in North American trading hours on Monday. The white metal strives 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-day Exponential Moving Average (EMA) near $32.55 signals more upside ahead.

The 14-day Relative Strength Index (RSI) stays in the 60.00-80.00, pointing to an active bullish momentum.

Silver daily chart

• The Euro pulls back from post-election highs as the Yen recovers.
• The political uncertainty in Japan puts BoJ tightening plans into question and will weigh on the Yen.
• Later this week, Eurozone GDP and CPI data might boost hopes of a large ECB cut and add pressure on the Euro.

The Euro has failed to find acceptance above 166.00 earlier today and has given away gains. The Yen has trimmed losses as the market digests the results of Japan´s elections and the pair has retreated to rest support at last week’s high, at 194.90.

The Yen dropped across the board during the early Asian season on Monday, weighed by the defeat of the ruling coalition in the Japanese elections. The hung parliament coming out of the elections opens an uncertain period in the world’s fourth-largest economy, leaving support for the BoJ’s monetary tightening plans in the air.

The Bank of Japan is meeting this week and, in the current context, they are widely expected to leave interest rates unchanged. This is likely to keep Yen's recovery limited.

The Euro, however, has weaknesses of its own. German GDP is expected to have contracted for the second consecutive quarter, weighing on the region’s growth.

If these figures are confirmed and are accompanied by a weak inflation reading speculation about a large ECB cut in December will increase, bringing the Euro lower across the board. 

• GBP/JPY opens a Runaway Gap on the chart as it vaults higher. 
• The gap could be a sign the pair is in a strong uptrend which will probably extend.  

GBP/JPY opens a price gap after the open on Monday as it rallies higher following a breakout move from a Right-Angle Triangle pattern last week.

GBP/JPY 4-hour Chart 

The gap on GBP/JPY is probably what is classed as a “Runaway Gap”. These happen during strong rallies. 

The lack of volume accompanying this gap (yellow rectangle on volume) indicates this is probably not an Exhaustion Gap at the end of the trend. Price is, therefore, likely to continue rising.

Given GBP/JPY is in an established short and medium term uptrend it will probably extend in line with the dictum that “the trend is your friend”.

GBP/JPY has met resistance at the level of the key July 20 lower high at 199.40 and pulled back temporarily. This is just below the first upside target at 199.59 (blue shaded rectangle), the 61.8% Fibonacci extrapolation of the height of the Right Angle Triangle (at its widest point) higher. Price will probably eventually reach 199.59. 

A break above 199.40 would add confirmation of more upside to the target at both 199.59 and 201.97, the 100% extrapolation of the height of the Triangle. 

The Relative Strength Index (RSI) momentum indicator has exited the overbought zone (above 70) suggesting the pair will probably pullback for a while before renewing its uptrend. 

There is a good chance the price will fall and fully close the Runaway Gap before heading higher again. The bottom of the gap could provide a low risk entry point for traders wishing to enter the uptrend at an optimum point. 

With only one week to go before the elections, the Harris bounce in the polls is fading, Rabobank’s Senior US Strategist Philip Marey notes.

Donald Trump or Kamala Harris?

“A Trump presidency would likely lead to a universal tariff and even higher tariffs on China. With support from Congress, he would cut taxes, deregulate the economy and reduce immigration.”

“A Harris presidency would be an extension of Biden’s policies with targeted tariffs on China, reducing health care costs and trying to cut taxes for the middle class, while raising them for the wealthy and corporations. However, two new Harris-specific policy plans focus on stopping price gouging in the food industry and dealing with the housing market shortages.”

“Simulations with a macroeconometric model suggest that Trump’s universal tariff would lead to a rebound in inflation. This could stop the Fed’s cutting cycle in its tracks. In contrast, Harris’ policies would lead to a continued decline in inflation to the Fed’s 2% target and allow the Fed to continue its cutting cycle next year.”

• The US Dollar stalls below 1.3900 with the upside trend intact.
• Investors are trimming USD longs ahead of key US data releases.
• Weak Canadian data and lower Oil prices are limiting CAD's recovery.

The US Dollar is wavering below the 1.3900 level on Monday’s European morning session. A somewhat softer US Dollar is weighing on the pair, although the lower Oil prices are keeping Cad recovery attempts limited.

The Dollar is witnessing some profit-taking on Monday, as the market readies for a batch of first-tier US indicators, which will determine the size of next week’s Fed rate cut.

The Q3 US GDP is expected to highlight the US exceptionality, with a steady 3% yearly growth in the context of a global economic slowdown. In this context, market speculation of a Trump victory in the November 5 elections are keeping underpinning the US Dollar.

Lower Oil prices and weak data will weigh on the CAD

On the other hand, crude prices, Canada’s main export have depreciated more than $4 from Friday’s close on easing concerns about a regional war in the Middle East. This is likely to put a lid on the Canadian Dollar’s recovery attempts.

Later today, BoC Governor Tim Macklem will meet the press and he is unlikely to support the CAD. The weak retail consumption and housing prices seen on Friday suggest that the bank will keep lowering interest rates to support economic growth.

The Canadian Dollar (CAD) is trading little changed on the day, with spot ignoring the sharp drop in crude prices—rather surprisingly, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD/CAD holds range despite slump in crude oil

“Perhaps markets feel a lot of bad news is already priced in to the CAD at this point. At the very least, the plunge in WTI is perhaps preventing the CAD from participating in the broader rebound seen in most of the major currencies since the dollar’s overnight peak. Speaking Friday afternoon, Governor Macklem downplayed the likely impact of the government’s immigration reforms on the economy.”

“Macklem said the plans would have a modest effect on growth while the impact on inflation would be limited. The governor noted that there was uncertainty about how quickly changes would play out and that the bank would take more account of the changes when it “gains more confidence in exactly what’s going to happen”.

“Spot edged to a minor new high for this move up in overnight trade but gains stalled and some modest slippage in the USD into our session may solidify the top on the USD in the low 1.39 area in the short run at least. A retest of the recent peak at 1.3945/50 remains a risk but there are still signs on the charts indicating that the USD rally is very stretched here. Key support is 1.3840 ahead of 1.3750.”

The JPY slumped at the outset of trading overnight in response to the results of Japan’s elections on Sunday, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

JPY slides after LDP loses majority

“The ruling LDP and its coalition partner lost their majority in the lower house, raising concerns about the shape and policy direction of the next government. Markets have also trimmed BoJ tightening expectations marginally (helping boost local stocks).”

“USD/JPY traded through the upper 153s in early dealing before falling more than a big figure, helped by a drop in US Treasury yields and a general pullback in broader USD strength. Spot remains below our estimated fair value of 154.09 today, however.”

US Dollar (USD) positions are net long after a two-week dip into negative territory. Euro (EUR) positions are net short for the first time in 15 weeks. Pound Sterling (GBP) net long positions have decreased for the third week in a row and JPY net long positions have decreased for four consecutive weeks, Rabobank’s FX analysts Jane Foley and Molly Schwartz note.

EUR positions are net short for the first time in 15 weeks

“USD positions are net long after a two-week dip into negative territory, driven by an increase in long positions. In the spot market the USD has been the strongest performing G10 currency month-to-date ahead of the November 5 US presidential election. EUR positions are net short for the first time in 15 weeks, driven by an increase in short positions. At the same time, EUR long positions are at their lowest level since March 2020. This month, the ECB announced its decision to cut the policy rate 25bp from 3.50% to 3.25% and the market is split over the chances of a 50 bps move in December.”

“GBP net long positions have decreased for the third week in a row, driven by a decrease in long positions. UK CPI inflation data printed cooler than expected at 1.7% y/y, and the market has priced in 96% of a 25bp cut at the November 7th meeting at the time of writing. GBP is still the best performing G10 currency against USD year-to-date, returning 2.66%. JPY net long positions have decreased for four consecutive weeks, driven by an increase in short positions. The market is pricing in a no-change decision for the October 31st meeting, and market pricing suggests only 5bp worth of hikes by year-end.”

The US Dollar (USD) is trading mixed against the majors after dropping back from a retest of last week’s multi-week high early in Asian trade, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Key DXY support is 103.93

“Global stocks are firmer and crude prices are sharply lower following Israel’s strike on Iran. Markets are relieved that Iran’s oil facilities were not hit. WTI is down more than 6% on the session at writing, weighing on the MXN and pushing the USD nearer to key resistance at 20.09/10.”

“It’s payrolls week and wait for the US non-farm number Friday is likely to dampen trading to some extent over the course of the week. Estimates reflect the anticipated impact of severe weather October but there may also be cyclical factors at play in dampening job growth. Markets may look through a soft report to some extent, given the weather effect, but a very low print may force markets to reprice Fed risks again towards a more aggressive November rate cut again.”

“Early trading patterns so far this week suggest a more challenging technical environment for the dollar generally may be developing as DXY resistance in the mid-104s capped gains. Key DXY support is 103.93.”

Increasing momentum suggests the US Dollar (USD) is likely to rise further, potentially reaching 7.1600. In the longer run, upward momentum is building, but USD must break and remain above 7.1600 before further sustained gains are likely, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD has to break above 7.1600 to stay afloat

24-HOUR VIEW: “Last Friday, we expected USD to trade in a range between 7.1120 and 7.1380. USD subsequently traded in a 7.1232/7.1375 range, closing at 7.1346 (+0.15%). In early Asian trade today, USD rose sharply. The increasing momentum suggest USD is likely to rise further, potentially reaching 7.1600. To maintain the buildup in momentum, USD must remain above 7.1300 with minor support at 7.1375.”

1-3 WEEKS VIEW: “We shifted to a neutral stance last Friday (25 Oct, spot at 7.1250), indicating that ‘upward momentum has largely faded, and USD is likely to trade in a range, probably between 7.0800 and 7.1500.’ USD then closed at 7.1346 but it rose sharply in Asian trade today. While upward momentum is building, USD must break and remain above 7.1600 before further sustained gains are likely. The likelihood of USD breaking clearly above 7.1600 will remain intact, provided that 7.1200 is not breached in the next few days.”

A brief period of US dollar weakness late last week came to an abrupt end on Friday, when new polls on the US presidential election suggested a significantly increased likelihood of a victory for Donald Trump. A Trump victory is probably the central scenario for most market participants by now, Commerzbank’s FX analyst Head of FX and Commodity Research Ulrich Leuchtmann notes.

Currency market is ignoring the risk of Trump-dependent Fed

“A strong dollar is not a value judgment on current or future US policy — not even on US economic policy. Nevertheless, the US import tariffs cause the US dollar to trade stronger than it would without them. The US tariffs give goods produced in the US an advantage over goods from the rest of the world: the former can be sold in the US without tariff surcharges. But because the USD exchange rates are largely responsible for the relative price between US goods and goods from the rest of the world, exchange rates must adjust to reflect this advantage.”

“Trump has repeatedly made it clear that he believes he can make better monetary policy decisions than the experts on the Board of Governors and the FOMC. This populist hubris is what sets him apart from his rival for the presidency and, in my view, makes him a greater threat to Fed independence than any president before him. Some of them occasionally wanted to influence the Fed, albeit only for purely tactical reasons.

“If the Fed were to have to ask Trump for permission to raise interest rates, higher inflationary pressure in the US would no longer be a USD-positive argument, but rather a USD-negative one. The effects of tariffs on USD exchange rates would be reversed. The currency market is currently ignoring this risk.”

Potential for the US Dollar (USD) to rise to the major resistance at 153.40; the major resistance at 154.00 is likely out of reach for now. In the longer run, 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.

The next level to monitor is 153.40

24-HOUR VIEW: “We expected USD to trade in a range between 151.20 and 152.55 last Friday. JPY subsequently traded in a 151.44/152.37 range, closing at 152.30. USD opened on strong note in early Asian trade today. While the sudden and sharp rise appears to be running ahead of itself, there is potential for USD to rise to the major resistance at 153.40. The major resistance at 154.00 is likely out of reach for now. On the downside, support levels are at 152.40 and 152.00.”

1-3 WEEKS VIEW: “We have expected a higher USD since early this month. As we tracked the advance, in our most recent narrative from last Thursday (24 Oct, spot at 152.60), we indicated that ‘upward momentum remains strong, and the next level to monitor is 153.40, followed by 154.00.’ There is no change in our view. Overall, only a breach of 151.50 (‘strong support’ level previously at 151.00) would signal an end to the USD strength.”

The weekend election in Japan saw the Liberal Democratic Party (LDP) lose its ruling majority in parliament for the first time since 2009, ING’s FX analyst Chris Turner notes.  

Very little chance of a rate hike

“The vote seems to be a sign of diffidence from the electorate in response to a series of LDP funding scandals. While the LDP still commands the largest number of votes in parliament it now seems there will be a period of uncertainty as political parties try to horse-trade into power.”

“Presumably, the political uncertainty may weigh on corporate investment decisions, though some argue that whoever takes power, some increased fiscal stimulus could be coming and that's why the Nikkei 225 rallied 1.8% overnight. More immediate for the yen will be Thursday's Bank of Japan meeting.”

“The market sees very little chance of a rate hike, although at ING we are forecasting a hike in December. With volatility likely to rise further into next week (exactly the wrong conditions for the carry trade), we do not favour chasing USD/JPY higher from these levels. Let's see whether USD/JPY today closes above or stalls at some key resistance near 153.50.

• The Dollar retraces the Asian session's gains and returns to the mid-range of 152.00.
• Investors are taking US Dollar profits ahead of key US releases this week.
• Political uncertainty in Japan suggestts that the BoJ will stand pat on Thursday.

The US Dollar has retraced most of the ground taken following the release of the Japanese election results, retreating from three-month highs at 153.75 to 152.50 so far.

The Yen dropped across the board during Monday’s Asian session as the elections in Japan delivered a significant defeat to the ruling party. The result opens an uncertain political scenario and puts into question the government’s support for the BoJ’s normalisation plans.

This scenario practically confirms that the Bank of Japan will keep interest rates on hold at its Thursday’s meeting.

The Dollar eases ahead of key US releases

The US Dollar, on the other hand, has opened the week on a somewhat softer tone. Investors might be trimming some USD longs, getting ready for a busy week, with US GDP. the PCE Prices Index and the Nonfarm Payrolls report, scheduled on the coming days.

The technical picture shows the broader bullish tone intact although the bearish divergence on the 4-hour RSI warns about a deeper correction. Supports are at Friday’s low, 151.60 ahead of 150.70. Resistances are 153.75 and 155.10.

As long as 0.6010 is not breached, the New Zealand Dollar (NZD) could dip below 0.5970 before stabilisation is likely. In the longer run, there is no significant increase in momentum, but the weakness in NZD has not stabilised. The next level to watch is 0.5950, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The next level to watch is 0.5950

24-HOUR VIEW: “We indicated last Friday that NZD ‘could drift lower, but it is unlikely to break clearly below 0.5985.’ The anticipated decline exceeded our expectations, as NZD dropped to a low of 0.5975. Despite the decline, downward momentum has not increased that much. However, as long as 0.6010 (minor resistance is at 0.5995) is not breached, NZD could dip below 0.5970 before stabilisation is likely. The next support at 0.5950 is unlikely to come into view.”

1-3 WEEKS VIEW: “We have held a negative view in NZD since early this month. In our latest narrative from last Thursday (24 Oct, spot at 0.6005), we indicated that ‘the potential for further declines could be limited.’ We also indicated that “the levels to watch are 0.5985 and 0.5970.” Last Friday, NZD fell to a low of 0.5975. Despite the decline, there is no significant increase in momentum. However, only a breach of 0.6035 (‘strong resistance’ level previously at 0.6060) would mean that the weakness has stabilised. The next level to watch is 0.5950.”

• Gold weakens after the China Gold Association highlights a drop in the consumption of Gold for jewelry. 
• The rising price of Gold is posited as the main reason behind the reduction in demand. 
• XAU/USD remains within the confines of a mini range, consolidating within an overall bullish trend.  

Gold (XAU/USD) falls over half a percent to trade in the $2,730s on Monday but remains within the confines of the previous week’s mini range. The precious metal loses ground on reports that demand from China, its largest market, is softening. 

The precious metal, however, remains underpinned by safe-haven flows due to the ongoing conflict in the Middle East, which intensified over the weekend with Israel’s bombing of Iran, although the effect was offset by the decision only to target military installations and crucially not Oil and nuclear facilities. 

Gold gains a further boost from increasing uncertainty over the outcome of the US presidential election and the overall downtrend in interest rates globally, which, given it is non-interest paying, enhances the yellow metal’s attractiveness to investors vis-a-vis other assets. 

Gold drops after report shows softening Chinese demand 

Gold edges lower on Monday after data released by the China Gold Association (CGA) showed a fall in demand from the world’s largest Gold consumer in the first three quarters of 2024, compared to the same period a year ago. 

Total consumption was 742 tons between January and September, which is 11.18% lower than the same period last year.

Consumption of Gold jewelry in China fell by 27.53%, to 400 tons when compared to the same period in 2023, the CGA reported. 

Demand for Gold bars and coins, however, increased 27.14%, to 283 tons compared to 2023. Gold used in industrial processes, meanwhile, reached 59 tons, a decrease of 2.78%.

The high price of Gold was given as the main reason for the fall in demand, “In the first three quarters, the price of Gold continued to rise, and the consumption of Gold jewelry was significantly affected,” the report says. 

Trading on the Shanghai Gold Exchange, however, increased by 47.49% to 46,500 tons (23,200 tons on one side), due to traders participating in the rally. Interest in ETFs also increased.

“The domestic Gold ETF holdings rose to 91.39 tons, an increase of 29.93 tons from the end of 2023, an increase of 48.69%,” added the report. 

Technical Analysis: Gold continues in a sideways band

Gold trades in a mini range between $2,708 and $2,758 after peaking at the latter level and rolling over.

That said, the yellow metal is in a steady uptrend on all time frames (short, medium and long), which, given the technical principle that “the trend is your friend,” the odds favor more upside. 

XAU/USD 4-hour Chart

A break above the top of the range at $2,758 would help confirm a continuation up to the next big-figure target level, which lies at $3,000 (round number and psychological level). 

“Economic news from the euro area was not particularly relevant for the EUR/USD exchange rate, Commerzbank’s FX analyst Head of FX and Commodity Research Ulrich Leuchtmann notes.

EUR optimism in EUR/USD long positions may be risky

“I like to look at the performance of a currency against the G10 average. It's a simple measure, but it helps me. Over the course of this month, this concept indicates that there has been no idiosyncratic EUR weakness at all, but that the US dollar has been able to gain quite significantly. The fact that EUR/USD is lower today than at the beginning of the month is purely a USD effect and has nothing to do with any alleged EUR weakness.”

“The euro was even able to gain moderately recently. You just don't see it in EUR/USD because the greenback is rising so spectacularly. Whether last week's eurozone PMIs are a negative surprise or a positive surprise depends on what was expected before the data were published. The fact that the euro was able to gain against the G10 average after the PMIs was an indication that extremely pessimistic economic prospects for the eurozone were circulating among market participants in the run-up to the data, which were not confirmed by the data.”

“In other words, the euro is relatively robust in the face of not-too-bad eurozone news. You just have to be careful. Expressing EUR optimism in EUR/USD long positions may be overly risky due to the USD risks. Other currencies may be more suitable as the short side of a EUR-bullish trade.”

• EUR/CAD appears to be extending a final third c wave of an abc pattern. 
• The pair is trading within a range and such a move would take price up to the range ceiling. 

EUR/CAD appears to be extending the final “c wave” of an abc “zig-zag” price pattern within the confines of a multi-month range (see chart below). 

Assuming the up leg extends as expected it should reach a length that is equal to the length of wave “a” or a Fibonacci 61.8% extension of a. This suggests an initial target at 1.5045 followed by 1.5088 in a bullish scenario. 
 

EUR/CAD 4-hour Chart 

A break above 1.5045 would confirm the move up to 1.5088. 

The Moving Average Convergence Divergence (MACD) momentum indicator has risen above the zero line and is mildly supportive of the bullish outlook. 

• USD/CHF falls back from 0.8700, following the US Dollar’s retreat.
• This week, the US Dollar will be guided by a slew of US economic data.
• Swiss Franc bulls will strengthen after a Bullish Flag breakout.

The USD/CHF pair falls sharply after testing the round-level resistance of 0.8700 in Monday’s European session, the highest level seen in more than two months. The Swiss Franc pair traced the US Dollar’s (USD) move, which retreated after revisiting an almost three-month high, with the US Dollar Index (DXY) falling from 104.60.

The US Dollar struggles to extend its upside move as investors turn cautious with an array of United States (US) economic data in the pipeline. This week, market participants will focus on the Q3 Gross Domestic Product (GDP), the Personal Consumption Expenditure Price Index (PCE) for September, and the Nonfarm Payrolls (NFP) for October, which will influence market speculation for Federal Reserve (Fed) interest rate path.

Signs of significant job demand and economic growth will weaken the Fed dovish bets for the December meeting as traders have priced in a 25 basis points (bps) interest rate cut in November. On the contrary, soft numbers would do the opposite. Meanwhile, a majority of Fed officials are confident that the disinflation trend is intact towards the bank’s target of 2%.

In the Swiss region, market participants expect the Swiss National Bank (SNB) to continue reducing interest rates further as inflationary pressures remain within striking distance of 2% for a longer period.

USD/CHF forms a Bullish Flag chart pattern on a daily timeframe. The above-mentioned pattern reflects an inventory adjustment process that follows the ongoing trend after the completion, which in this case is up.

Upward-sloping 20-day Exponential Moving Average (EMA) near 0.8613, suggests a strong uptrend.

The 14-period Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, indicating a strong upside momentum.

More upside would appear if the Swiss Franc pair breaks above the intraday high of 0.8700. A breakout move will drive the asset towards the August 15 high of 0.8750 and the July 25 low of 0.8777.

In an alternate scenario, a downside move below the September 12 low of 0.8550 will drag the asset toward the psychological support of 0.8500, followed by the October 2 low of 0.8450.

USD/CHF daily chart

• The Mexican Peso is weakening as the probability of a Donald Trump victory in the election increases. 
• Trump’s threat to impose tariffs on Mexican imports may be difficult to implement due to highly integrated supply chains. 
• USD/MXN starts a new up leg of a bullish ‘abc’ pattern move. 

The Mexican Peso (MXN) edges lower in its most heavily-traded pairs on Monday, extending the weakness witnessed on Friday. The US election risk is a growing factor for the Peso as polls show a very tight race for the White House. A victory for Republican nominee Donald Trump would be negative for the Peso due to his tough talk on tariffs on Mexican imports. Further weakness may be due to Mexican domestic political risk as the government seeks to impose judicial reform, making judges electable and limiting the judiciary's influence in constraining the legislature. 

Recent below-par macroeconomic data from Mexico has not helped the MXN. Economic Activity and Retail Sales missed expectations in August, and core annualized half-month inflation showed a further decline in October. This suggests a greater chance the Bank of Mexico (Banxico) will cut interest rates by 25 basis points (bps) (0.25%) at its meeting in November. 

Inflows from the carry trade, however, may counterweight negative factors as the Japanese Yen (JPY) weakens due to the ruling Liberal Democratic Party (LDP) party losing its majority in elections over the weekend. 

Mexican Peso subject to election risk 

The Mexican Peso is facing considerable risk from the increasingly ambiguous outcome of the US presidential election on November 5. 

When Trump won the 2016 election, the Mexican Peso depreciated substantially, with USD/MXN rising from 18.60 Mexican Pesos per US Dollar (USD) to 20.90 after the result. The exchange rate rose even higher, to almost 22.00 after Trump took office in January 2017, according to El Financiero.

Trump now has a slightly higher 52% chance of winning compared to Vice President Kamala Harris’ 48%, according to the statistical model of leading US election website FiveThirtyEight, even though the Democratic nominee is still marginally ahead in the polls. The inconsistency is because of the electoral college system and the greater weight that a few key swing states have in deciding the outcome.

Trump’s tariff threat may in reality be difficult to implement

The risk to the Mexican Peso from a Trump re-election mainly stems from his championing of putting tariffs on foreign imports. However, an estimated 15% of all US imports now come from Mexico, and their supply chains are so intertwined that it may be difficult to impose such sanctions in reality. 

Product eco-systems across North America (NA) are now deeply integrated as a result of the 1994 NAFTA free trade agreement and the more recent USMCA accord. Most imports are now composed of parts from all three countries, which would make it difficult for Trump to actually tariff them without also harming the US economy. 

“You really can’t talk about a US-made car or a Canadian-made car or a Mexican-made car. These autos are really North American (NA),” says David Eaton, Director for Business Development at CPKC Mexico. “The car’s parts and components cross the border 1000s of times before a car is made,” he says in an interview with Bloomberg News’ David Westin. 

“USMCA says that 70% or 75% of the content or value of a car must meet with NA content requirements to get duty free treatment,” continues Eaton. 

Instead of buying rolled steel from Brazil, auto manufacturers in Mexico now make steel using Iron Ore from the US in order to comply with USMCA requirements. If Trump rips up the agreement, he won’t only be damaging Mexico but also inflicting a wound on the US.

Many US companies already have huge factories based in Mexico, producing finished products using raw materials or parts made in the US or Canada. The toy manufacturer Mattel, for example, which owns the Barbie brand, makes most of its toys in Mexico using resin brought in from the US Gulf Coast, according to Westin. 

As such, the risk from tariffs may not, in reality, materially affect Mexican-US trade as much as feared, leading to more modest depreciation for the Peso.

Technical Analysis: USD/MXN begins new up leg 

USD/MXN appears to have begun a fresh leg higher after a mild pullback. This leg is probably the “c wave” of a bullish “abc” pattern, which began life at the October 14 swing low. This wave will probably reach the Fibonacci 61.8% of the length of wave a, giving an upside target of 20.29. Such a move would gain confirmation from a break above the high of wave b at 20.09.
 

USD/MXN Daily Chart 

USD/MXN is also probably in an uptrend on a short, medium and long-term basis and is trading in a rising channel. Given the technical dictum “the trend is your friend,” the odds favor a continuation higher.

In addition, the original break above 19.83 (October 1 high) has already confirmed a probable move up, with a target in the vicinity of the September 10 high at 20.13.

The Euro (EUR) has had a torrid month, but at least today's drop in oil prices should be welcome. The problem, however, for EUR/USD is that rate differentials continue to widen. The two-year swap differential has now pushed out to 158bp – the widest since April this year, ING’s FX analyst Chris Turner notes.  

EUR/USD now is prone to some more consolidation

“At the top of the agenda will be Wednesday's release of third-quarter GDP data. This could show Germany entering a shallow technical recession and the eurozone continuing to grow at a weak 0.2% QoQ. That data is quickly followed up by the flash CPI release for October, where headline inflation is expected to stay under 2.0% YoY and core is expected to have dropped to 2.6% from 2.7%.”

“None of this should change the market's mindset that the ECB has shifted to a more dovish policy and wants to get rates down to neutral as quickly as possible. The ESTR curve continues to price in a 35bp rate cut at the ECB meeting in December. And this could easily swing towards 50bp should soft eurozone data or a US Republican victory (and protectionism) materialise.” 

“Perhaps the best to be expected of EUR/USD now is some more consolidation in the 1.0765-1.0850 range.”

The Australian Dollar (AUD) could decline further; the significant support level at 0.6585 might not be easy to break. In the longer run, AUD is expected to continue to decline; the level to watch is a significant support at 0.6585, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Level to watch is a significant support at 0.6585

24-HOUR VIEW: “We expected AUD to trade in a sideways range of 0.6620/0.6660 last Friday. Our view was incorrect, as AUD fell to a low of 0.6601, closing on a soft note at 0.6605 (-0.54%). The increase in momentum suggests AUD could decline further, but it the significant support level at 0.6585 might not be easy to break. To keep the momentum going, AUD must stay below 0.6645 with minor resistance at 0.6625.”

1-3 WEEKS VIEW: “Our update from last Thursday (24 Oct, spot at 0.6635) still stands. As highlighted, AUD ‘is expected to continue to decline, and the level to watch is a significant support at 0.6585.’ Overall, only a breach of 0.6670 (‘strong resistance’ level previously at 0.6685) would mean that the weakness that started early this month has stabilised.”

• US Dollar consolidates near multi-month highs as the market braces for key US economic releases.
• Hopes of gradual Fed easing and speculation of a Trump win are buoying the USD.
• The US Dollar is on track to its best monthly performance in the last two years.

The US Dollar (USD), as measured by the US Dollar index DXY, opens the week with moderate losses as investors brace for an eventful week. The third quarter’s US Gross Domestic Product (GDP), the Personal Consumption Expenditures (PCE) Price Index, and the Nonfarm Payrolls (NFP) report are all out in the coming days.

The broader trend, however, remains positive as investors dial back hopes of aggressive interest rate cuts by the Federal Reserve (Fed). A raft of strong US economic data and speculation of former US President Donald Trump winning the US presidential election on November 5, with his inflationary policies, are lifting US Treasury yields and dragging the US Dollar higher.

The US economy remains robust, with the Atlanta Fed's GDPNow model tracking Q3 growth at 3.4% and the New York Fed's Nowcast model projecting 3.0% growth for Q3 and 2.6% growth for Q4.

Daily digest market movers: The US Dollar consolidates as investors await growth and labour data

• The Greenback is trading within the previous week’s range, near three-month highs, and on track to a 4% rally in October, on its strongest monthly performance in two years.
   
• The solid labour figures have consolidated the idea that the US economy is outperforming the rest of the major economies, which will force the Fed to slow down its easing cycle.
   
• The CME FedWatch tool is pricing a 96% chance of a 25 basis point (bps) cut next week. Two weeks ago, the market was split between a 25 or a 50 bps cut in November.
   
• The US economy is expected to show a steady 3% yearly growth in the third quarter. In the current global context, these are solid numbers, consistent with a tight labour market and steady inflation.

DXY technical outlook: DXY corrects lower with the broader upside trend intact

The DXY index remains moving within a bullish channel with higher highs and higher lows in the 4-hour chart. The pullback from the 104.55 highs seen on Monday is considered a correction.

The 4-hour Relative Strength Index (RSI) indicator shows some bearish divergence, but there is no sign of a trend shift yet, with price action standing well above the 4-hour 50 Simple Moving Average (SMA).

Immediate support is at 103.95, where the mentioned 50 SMA meets the price, ahead of 103.40 (last week’s low). On the other side, there is an important resistance at the 104.55-104.80 range, and above here, at 105.20.

USD/JPY rose, following hung parliament outcome. According to Japan’s NHK public TV, LDP coalition is set to lose a 233-majority in the 465 seat lower house. USD/JPY was last seen at 152.55 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Near term risks skewed to the upside

“LDP coalition only garnered 215 votes and would urgently need to find partners. The Constitutional Democratic Party of Japan, led by centrist leader/ former PM (2011-12) Yoshihiko Noda made huge gains to 148 votes. He can push to seek a coalition with other opposition groups, but it was last known that his party has had little success finding partners.”

“A hung parliament means that LDP coalition may face challenges passing policies in parliament. Uncertainty would weigh on Japanese equities and JPY in the interim. BoJ meeting (Thu) is likely a non-event as policymakers are likely to hold off rate increases until there is greater clarity with government and economic policies. Slowing BoJ policy normalisation and Fed in no hurry to cut, alongside US election risks may imply that USDJPY may well stay supported in the interim.”

“Bullish momentum on daily chart intact while RSI is again rising towards overbought conditions. Near term risks skewed to the upside. Resistance at 155 and 156.50 (76.4% fibo). Support at 151.50 (200 DMA), 150.60/70 levels (50% fibo retracement of Jul high to Sep low, 100 DMA). We cautioned that verbal intervention could kick in only if USD/JPY trades quickly up to 155/156 levels but we doubt there will be actual intervention.”

Ishiba Shigeru was supposed to be the savior a month ago. After scandals and public discontent forced his predecessor Fumio Kishida to resign, the plain-speaking backbencher was brought in to clean up the party and regain the public's trust. Now he faces the possibility of one of the shortest tenures of any Japanese prime minister in decades, Commerzbank’s FX analyst Volkmar Baur notes.

JPY is being pushed down by the political uncertainty

“His party and its long-time coalition partner, Komeito, have lost their majority in the lower house. It is unclear how the government will be formed in the coming weeks. In case of doubt, the election procedure is designed to allow a minority government to be formed – the prime minister-designate would only need a simple majority in the second round of voting. However, it is also unclear whether Ishiba will be forced to resign as a result of the disastrous election result for the LDP, and whether a coalition of opposition parties will be formed to form a majority without the LDP.”

“JPY has already weakened significantly against the US Dollar this morning and may continue to do so for the duration of the political uncertainty. A rate hike by the Bank of Japan at its meeting on Thursday now seems very unlikely, and political uncertainty in the US could be added to the mix next week. Potential policy decisions there, which could also affect Japan as an export nation, now face a political environment that makes strategic responses impossible.”

“In the medium term, however, a minority government or an unstable multi-party coalition could be cyclically positive for the JPY. Such a government would likely pursue populist policies, increase fiscal spending and postpone fiscal consolidation. In this case, the Bank of Japan may feel compelled to raise interest rates more aggressively.”

• The Assie ticks up but so far remains dangerously close to the two-month low at 0.6580.
• The US Dollar is trimming some gains, as investors brace for a data-packed week in the US.
• Ongoing concerns about China’s weak outlook are likely to weigh on a potential Aussie recovery.
   

Australian Dollar is going through a mild recovery on Monday’s early European session, favoured by a somewhat softer US Dollar as investors brace for a data-packed week in the US.

Data released on Friday support the idea that further Fed easing will be gradual. Durable Goods orders contracted less than forecasted with Non-Defence Capital Goods ex Aircraft beating expectations. The Michigan Consumer Sentiment Index also improved beyond expectations.

Investors, however, are likely to grow cautious ahead of a batch of key US indicators with Q3 GDP on Wednesday, the PCE Prices Index on Thursday and the Nonfarm Payrolls report on Friday.

In Australia, the impact of the hawkish rhetoric from the RBA is being offset by ongoing concerns about China. Data released this weekend revealed that industrial profits fell 27% year-on-year highlighting the erratic recovery of Australia’s main trading partner and hindering a significant Aussie rebound.

• The Oil price plunges more than 5% as Israel didn’t attack Oil facilities in Iran over the weekend.
• Investors await the Q3 GDP data from the Eurozone and the US to get cues about the current status of global economic health.
• US Trump vowed to hike import tariffs by 60% on China.

West Texas Intermediate (WTI), futures on NYMEX, dives vertically to near $67.00 in Monday’s European session. The Oil price weakens significantly as Israel did not attack Iran’s Oil and energy facilities in its retaliation move, which has diminished tight supply risks.

Israel launched a few airstrikes on Iran’s defense-producing facilities over the weekend in an attempt to weaken its capacity for retaliation. After the attack, Israel Prime Minister Benjamin Netanyahu said, “We promised we would respond to the Iranian attack, and on Saturday we struck. The attack in Iran was precise and powerful, achieving all of its objectives”, Home Newsday reported.

Broadly, the Oil price has been under pressure by its vulnerable demand outlook amid growing global economic risks. For the economic health checkup, investors will focus on the flash Q3 Gross Domestic Product (GDP) data from the Eurozone and the United States (US), which will be published on Wednesday.

On an annualized basis, the Eurozone and the US economy are estimated to have grown by 0.8% and 3%, respectively. The scenario of a lower-than-expected growth rate will have a negative impact on the Oil price.

Meanwhile, the Oil price is also facing pressure from former US President Donald Trump’s promise of hiking tariffs by 60% on imports from China if he wins the presidential elections against current Vice President Kamala Harris.

Consolidating Euro (EUR) continued to trade near recent lows amid broad USD strength and somewhat dovish ECB-speaks. EUR was last seen at 1.0812, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Momentum remains bearish

“Vasle said that ECB should not hurry to lower rates or spend too long contemplating how far and how quickly they should fall. Vujcic said that he is open to any discussion in Dec. Simkus wants rate cut but cannot justify 50bp move.”

“Knot said that given the downward surprise of both headline and core CPI in 3Q, inflation may drop faster than expected. He also added that data point to increasing risk of disappointing growth in the near and medium term.”

Momentum remains bearish though there are signs of it fading while RSI is still near oversold conditions. Support 1.0780, 1.0740 (76.4% fibo). Resistance at 1.0830 (61.8% fibo retracement of 2024 low to high), 1.0870 (200 DMA), 1.0910/30 levels (21, 100 DMAs).

The Dollar Index (DXY) is back at its strongest level since early August and one could easily forget that the Fed had started its easing cycle with a surprisingly large 50bp rate cut in September. Driving this USD strength has been the macro divergence story and investors seemingly positioning for Republican success next week, ING’s FX analyst Chris Turner notes.  

DXY looks to stay bid

“This week will focus on jobs data, price data and a broad look at activity in the first release of US third-quarter GDP data on Wednesday. On jobs, job opening JOLTS data on Tuesday and the October payrolls report on Friday could come in a little softer than expected – although hurricanes may have played a role here and investors may not overreact to soft numbers.”

“On price data, Thursday's release of the September core PCE price data could show an unwelcome 0.3% MoM reading. And when it comes to broader activity, most expect the US to have posted a very decent 3%+ QoQ annualised GDP on Thursday, again led by strong consumption. Even though we strongly favour the Fed cutting two more times this year, this week's data may not substantially alter the pricing of just 39bp of further Fed easing this year.”

“So far it seems that October's run-up in US Treasury yields has been largely driven by growth and rate expectations, not fiscal concerns. And we would imagine the US Treasury would like to keep a low profile with this announcement ahead of elections next week. While acknowledging that the dollar has come a long way very quickly this month, it is hard to see the dollar – yet – reversing those gains. This means DXY looks to stay bid in the 104-105 range for now.”

The Pound Sterling (GBP) is expected to trade sideways between 1.2930 and 1.2990. In the longer run, downward momentum is slowing; should GBP break above 1.3000, it would indicate that GBP is not declining further, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

GBP expected to trade between 1.2930 and 1.2990

24-HOUR VIEW: “GBP traded sideways between 1.2959 and 1.2998 last Friday, narrower than our expected range of 1.2930/1.3000. The price action did not result in an increase in either downward or upward momentum. Today, GBP is expected to continue to trade sideways, probably between 1.2930 and 1.2990.”

1-3 WEEKS VIEW: “In our most recent narrative from last Thursday (24 Oct, spot at 1.2915), we indicated that ‘The price action indicates GBP could decline further to 1.2860.’ Since then, GBP has not been able to make further headway on the downside. Downward momentum is slowing, and should GBP break above 1.3000 (no change in ‘strong resistance’ level), it would indicate that GBP is not declining further.”

US Dollar (USD) rose, alongside the rise in UST yields. Dollar Index (DXY) was last at 104.26 levels. US data, including durable goods orders, Uni of Michigan sentiment surprised to the upside, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum remains bullish

“RSI eased lower from overbought conditions. While the recent run up continues to look stretched technically, the move higher may still extend in the interim. That said, we do also caution that the subsequent snapback may also be sharp, on any triggers or data surprises. Resistance at 104.60 (61.8% fibo), 105.20 levels. Support at 103.80 levels (200 DMA, 50% fibo), 102.90/103.20 levels (21, 100 DMAs, 38.2% fibo retracement of 2023 high to 2024 low) and 101.90 (50 DMA).”

“This week marks the start of a busy, eventful 2 weeks with JOLTS job openings, consumer sentiment (Tuesday); ADP employment (Wednesday); core PCE (Thursday) and NFP (Friday) before US elections (5 November) and FOMC (7 November) the following week. Between now and then, we should see 2-way trades in USD.”

“While top side may look stretched technically, any pullback may also be shallow due to interests to buy USD (proxy for Trump hedges) ahead of US elections. Traditional polls remain too close to call while prediction market pointed to Trump lead.”

• EUR/USD moves higher as investors focus on a slew of economic data from both the US and the Eurozone.
• The German economy is expected to have contracted by 0.3% in the third quarter on an annual basis, while the Eurozone as a whole is seen growing by 0.8% YoY.
• Risk-aversion could stay afloat amid uncertainty over the US presidential election.

EUR/USD rises slightly above 1.0800 in European trading hours on Monday. The major currency pair broadly remains sideways ahead of a data-packed week in which traders will get economic growth and inflation data for both the United States (US) and the Eurozone, two key metrics that usually determine the path of interest rates, a crucial driver for currencies.

In the Eurozone, investors are likely to pay closer attention to the economic growth data because inflation is expected to remain near the European Central Bank’s (ECB)  target of 2%. Economists expect the Eurozone economy to have grown by 0.8% on year, higher than the 0.6% expansion seen in the second quarter. When compared with 2Q 2024, economists expect the Eurozone to have grown by 0.2% in Q3, the same pace as the previous quarter.  

A major contribution to the Eurozone economy is expected to have come from Spain and other economies as the economy of its largest nation, Germany, is forecasted to have declined by 0.3% in Q3 compared with the same quarter a year earlier.

At the sidelines of the International Monetary Fund (IMF) meeting last week, ECB policymaker and President of the Deutsche Bundesbank Joachim Nagel emphasized the need to implement the growth package, which has already been announced by the German government, to prevent the economy from getting worse.

"This would make an important contribution to strengthening the forces of growth. But anything that could go beyond that in 2025 would certainly be welcome from the central bank point of view," Nagel said, Reuters reported.

On the interest rate outlook, Nagel said: “We shouldn’t be too hasty,” adding that the decision in December will be based on a slew of indicators such as the US presidential election outcome and inflation data. His comments came after a few ECB officials had supported a larger-than-usual 50-basis points (bps) interest rate cut in December.

Daily digest market movers: EUR/USD gains as US Dollar falls back

• EUR/USD gains in Monday’s European session as the US Dollar retreats after revisiting an almost three-month high. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls back from 104.60. However, the outlook of the US Dollar remains firm as investors are expected to stay risk-averse with the United States (US) presidential election just a week away.
• Central bankers, in various discussion panels at the sidelines of the IMF meeting last week, discussed possible consequences of former US President Donald Trump winning against current Vice President Kamala Harris. Traders seem to be taking this scenario as a positive for the US Dollar as Trump vowed to hike tariffs by 10% on all economies, except for China, which would face even higher tariffs of 60%.
• Apart from the uncertainty over the US election, the US Dollar will also be guided by a string of US data to be published this week. Market participants will mainly focus on the JOLTS Job Openings and the Nonfarm Payrolls (NFP) data to get cues about job demand, and the Q3 GDP data for the current status of economic health.

Technical Analysis: EUR/USD holds above 1.0750

EUR/USD continues to hold above the upward-sloping trendline near 1.0750, which is plotted from the October 3, 2023, low at around 1.0450 on the daily time frame. 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) remains in the 20.00-40.00 range, indicating a strong bearish momentum.

On the downside, the major pair could see more weakness towards the round-level support of 1.0700 if it slips below 1.0750. Meanwhile, the 200-day EMA near 1.0900, and the psychological figure of 1.1000 emerge as key resistances.

Silver prices (XAG/USD) fell on Monday, according to FXStreet data. Silver trades at $33.35 per troy ounce, down 1.05% from the $33.70 it cost on Friday.

Silver prices have increased by 40.13% 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 81.87 on Monday, up from 81.53 on Friday.

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The Euro (EUR) is under mild downward pressure; it is likely to drift lower, but is unlikely to break the support at 1.0760. In the longer run, should EUR break above 1.0840, it would signal the end of the decline that started early this month, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR unlikely to break the support at 1.0760

24-HOUR VIEW: “After EUR rebounded strongly last Thursday, we highlighted on Friday that ‘The rebound appears to be running ahead of itself, and instead of continuing to rise, EUR is more likely to trade in a 1.0790/1.0840 range.’ Our view was not wrong, as EUR traded between 1.0793 and 1.0839, closing at 1.0793 (-0.31%). There has been a slight increase in momentum. Today, EUR is likely to drift lower, but any decline is unlikely to break the support at 1.0760 (there is another support level at 1.0775). Resistance is at 1.0810; a breach of 1.0825 would indicate that the current mild downward pressure has faded.”

1-3 WEEKS VIEW: “We continue to hold the same view as last Friday (25 Oct, spot at 1.0825). As highlighted, should EUR break above 1.0840, it would signal the end of the decline that started early this month. Until then, there is still a chance for EUR to decline further. That said, there is a pair of strong support levels at 1.0760 and 1.0740.”

Russia’s central bank (CBR) has always been a credible and prudent central bank in the emerging market world. Its past decisions when the CB hiked rates right after government figures demanded rate cuts from time to time (CBR would need to reverse the FX volatility which resulted from such government demand) where always admired. Impeccable credentials notwithstanding, CBR might be overdoing monetary tightening, Commerzbank’s FX analyst Tatha Ghose notes.

RUB isn’t affected by interest rate decisions

“CBR hiked its key rate by 200bp to 21.0% on Friday. This was within range of estimates, but the majority of analysts had predicted only 100bp. What is more, the central bank maintained extra-hawkish language going into its 20 December meeting, clearly signalling the possibility of another hike then. This possibility was further backed up by upward revision to the bank’s official key rate forecasts for the coming years. CBR officially delayed its timeframe for achieving the inflation target from 2025 to 2026. One of the main reasons for this changed outlook is, supposedly, above-trend economic growth.”

“This picture begins to make less sense now. A lot of this growth is sectorally unbalanced, with continuing shrinkage of the private sector in favour of state commodity, energy and wartime production. These latter sectors are being strategically pushed at the moment and defence, for example, has access to capital from the government directly, therefore immune to CBR’s interest rate hikes. Most private forecasters and institutions anyway see GDP growth decelerating to the 1.5% range next year from c.3.5% this year.”

“Is CBR’s reaction function truly proportionate to the inflation problem at hand? We could always argue that a prudent central bank should choose to keep interest rates arbitrarily high until any inflation overshoot has been stamped out. But somehow, given the background of inflation in present-day Russia, this argument for raising rates seems less compelling. The USD/RUB and EUR/RUB technical fixes are not affected by interest rate decisions these days. USD/RUB was trading at around 96.48 before the announcement and, in fact, ended the day higher at 97.35 despite all the hawkish development.”

• Silver price attracts sellers as recent US data reinforces the odds of nominal rate cuts by the Fed.
• The US Dollar receives support as Treasury yields continue to gain ground.
• The downside of the Silver could be restrained due to political uncertainty around the US presidential election.

Silver price (XAG/USD) is under pressure as the US Dollar (USD) and Treasury yields continue to rally, driven by recent robust US economic data released on Friday. Silver price hovers around $33.50 per troy ounce during Monday’s European trading hours.

The dollar-denominated Silver faces challenges due to solid US Dollar (USD) amid higher Treasury yields. A higher US Dollar makes Silver expensive for buyers with foreign currency. The US Dollar Index (DXY), which measures the USD against six major currencies, trading near 104.30. Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.12% and 4.28%, respectively.

Friday's data release showed the US Michigan Consumer Sentiment Index rose to 70.5 in October from 68.9, beating forecasts of 69.0. Additionally, Durable Goods Orders declined by 0.8% month-over-month in September, a smaller drop than the expected 1.0%.

Political uncertainty around the US presidential election may lend some support to Silver. In the past three weeks, allies of former President Donald Trump faced at least 10 legal setbacks in key battleground states, which could influence the November 5 race between Trump and his Democratic opponent, Vice President Kamala Harris.

The safe-haven appeal of Silver may be limited, however, by easing geopolitical tensions. Following Israel's airstrikes on Iranian missile and air defense sites early Saturday, which were less aggressive than expected, Iran has downplayed the impact. Supreme Leader Ayatollah Ali Khamenei remarked that the incident "should neither be downplayed nor exaggerated."

• EUR/GBP gains some positive traction after comments from ECB’s Pierre Wunsch.
• Bets for more aggressive ECB rate cuts might keep a lid on any meaningful gains.
• Traders also prefer to wait for the German and Eurozone CPI reports later this week. 

The EUR/GBP cross attracts some buyers following an intraday dip to the 0.8315 region at the start of a new week and reverses a major part of Friday's modest decline. Spot prices climb to a fresh daily high during the first half of the European session and currently trade around the 0.8340 area, up just over 0.10% for the day. 

The shared currency gets a minor lift following comments from the European Central Bank (ECB) policymaker Pierre Wunsch, saying that a temporary and small undershoot of the inflation target due to energy price swings is acceptable. Wunsch added that it is premature to discuss the December policy decision and that there is no urgency in further accelerating the easing of monetary policy. This, in turn, is seen as a key factor offering some support to the EUR/GBP cross. 

Apart from this, the uptick could be attributed to some technical buying in the vicinity of the 0.8300 pivotal support, which has been acting as a strong base for spot prices since late September. Any meaningful upside, however, seems elusive in the wake of bets for more aggressive interest rate cuts by the ECB, bolstered by a fall in the Eurozone consumer inflation below the central bank's 2% target for the first time since June 2021 and sluggish economic growth.

The British Pound (GBP), on the other hand, might continue to draw support from expectations that the Bank of England's (BoE) rate-cutting cycle is more likely to be slower than in the Eurozone. This might further contribute to capping the upside for the EUR/GBP cross in the absence of any relevant economic data. Traders might also prefer to wait for this week's release of flash German and Eurozone CPI prints on Wednesday and Thursday, respectively.

• NZD/USD has marked the three-month low at 0.5957 on Monday.
• The US Dollar appreciates due to market caution ahead of the upcoming US presidential election.
• The RBNZ is widely anticipated to deliver another 50-basis-point rate cut in November.

NZD/USD trims its daily losses, trading around 0.5970 during the European hours on Monday. The US Dollar (USD) receives support due to market caution ahead of the upcoming US presidential election in November.

Over the past three weeks, allies of former President Donald Trump have faced at least 10 court defeats in key battleground states that could impact the outcome of the November 5 election between Republican candidate Trump and his Democratic opponent, Vice President Kamala Harris.

The downside risks for the NZD/USD pair is bolstered as the US Dollar (USD) strengthens as recent positive economic data from the United States (US) has fueled expectations for a more cautious stance from the Federal Reserve (Fed) in November.

The US Dollar receives support from the higher Treasury yields. The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 104.30 with 2-year and 10-year yields on US Treasury bonds standing at 4.12% and 4.28%, respectively, at the time of writing.

The New Zealand Dollar (NZD) faces pressure as the Reserve Bank of New Zealand (RBNZ) is anticipated to implement another 50-basis-point rate cut in its final policy meeting of the year in November. Markets are even factoring in a potential 75-point cut.

Meanwhile, China's Vice Minister of Finance, Liao Min, announced on Monday that the country would increase countercyclical adjustments in its macroeconomic policies to support economic recovery in the fourth quarter, expressing confidence in achieving the 5% growth target. Any positive developments from these initiatives could boost the NZD, given China’s significance as a major trading partner for New Zealand.

• AUD/JPY strengthens due to increased uncertainty over the BoJ rate-hike plans.
• The LDP coalition secured only 215 of the 465 lower house seats, missing the 233-seat majority threshold.
• The Australian Dollar gains support due to the hawkish mood surrounding the Reserve Bank of Australia.

The AUD/JPY pair recovers its recent losses seen over the past two sessions, trading around 101.20 during early European hours on Monday. The upward movement in AUD/JPY could be linked to growing uncertainty surrounding the Bank of Japan's (BoJ) rate-hike plans, now compounded by Japan’s ruling coalition losing its parliamentary majority.

In Sunday's election, Japan's long-standing ruling coalition lost its majority in the lower house for the first time since 2009, casting doubt on the BoJ's capacity to proceed with further rate hikes. The Liberal Democratic Party and its coalition partner, Komeito, secured only 215 of the 465 lower house seats, missing the 233-seat majority threshold. Meanwhile, the main opposition, the Constitutional Democratic Party of Japan (CDPJ), gained 148 seats, up from 98.

The Australian Dollar (AUD) finds support following hawkish remarks from the Reserve Bank of Australia (RBA). The RBA emphasized that the current cash rate of 4.35% is sufficiently restrictive to bring inflation within its 2%-3% target range while sustaining employment levels, making an imminent rate cut unlikely.

Last week, RBA Deputy Governor Andrew Hauser underscored Australia’s robust labor participation rate and clarified that, while the RBA is data-dependent, it avoids over-reliance on specific figures. Traders remain cautious as they await key domestic inflation data due on Wednesday, which could influence the RBA’s future monetary policy stance.

• The Pound Sterling trades in a tight range near 1.2950 against the US Dollar ahead of a string of US economic data.
• Investors will pay close attention to US NFP for October and Q3 GDP.
• The UK budget and market speculation for the BoE interest rate path will influence the Pound Sterling.

The Pound Sterling (GBP) consolidates in a tight range near 1.2950 against the US Dollar (USD) in Monday’s London session. The GBP/USD pair trades sideways, with investors focusing on a slew of United States (US) economic data this week and the United Kingdom (UK) Autumn Forecast Statement, which will be announced on Wednesday.

The US Dollar Index (USD), which gauges Greenback’s value against six major currencies, revisits an almost three-month high at around 104.60 on Monday.

Investors will pay close attention to the US preliminary Q3 Gross Domestic Product (GDP) and the Nonfarm Payrolls (NFP) data for October, which will exhibit the current status of economic growth and labor demand, respectively. The economic data will significantly influence market speculation regarding the Federal Reserve (Fed) interest rate outlook for the remaining year.

The Fed started its policy-easing cycle with a larger-than-usual interest rate cut of 50 basis points (bps) in September as officials were worried about growing economic risks, with confidence over inflationary pressures remaining on track to the bank’s target of 2%.

For the remainder of the year, traders see the central bank reducing interest rates by 25 basis points (bps in November and December, according to the CME FedWatch tool.

Meanwhile, the uncertainty over the US presidential election will continue to support the US Dollar. In meetings at the week-long International Monetary Fund (IMF) event last week, financial experts vividly discussed the outcome of the US elections and possible consequences. As former President Donald Trump has vowed to raise tariffs on all nations, central bankers are worried that it could ramp up costs associated with global supply chain mechanism if he wins against current Vice President Kamala Harris.

Daily digest market movers: Pound Sterling could face pressure by BoE dovish bets

• The Pound Sterling exhibits a slight outperformance against its major peers on Monday ahead of the Labor’s first budget. The budget is less likely to offer higher spending by the administration as high inflation is still a major issue for the government. The Chancellor of the Exchequer will also respect commitments made in their election manifesto.
• According to Sky News, the government will honor its commitments and will not raise income tax and national insurance but is expected to hike employers’ national insurance by up to 2 percentage points. The Labor Party is expected to offer a large boost to housing affordability.
• Meanwhile, growing speculation for the Bank of England (BoE) to cut interest rates in all two remaining meetings of the year could dampen the Pound Sterling’s appeal. Market expectations for BoE to cut interest rates by 25 bps in November and December have been prompted by BoE Governor Andrew Bailey’s dovish commentary in discussions at the sidelines of the IMF meeting last week. 
• “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,” Bailey said.

Technical Analysis: Pound Sterling consolidates above 1.2900

The Pound Sterling stays in tight range above the round-level support of 1.2900 against the US Dollar (USD) in European trading hours on Monday. The GBP/USD pair remains at make or a break near the lower boundary of a Rising Channel chart formation around 1.2900 on the daily timeframe. 

A bear cross, represented by the 20- and 50-day Exponential Moving Averages (EMAs) near 1.3080, suggests more weakness ahead.

The 14-day Relative Strength Index (RSI) remains in the 20.00-40.00 range, indicating 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 round-level resistance of 1.3100.

FX option expiries for Oct 28 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

• 1.0750 739m
• 1.0775 720m
• 1.0800 1.2b
• 1.0875 733m
• 1.0900 1.9b

USD/JPY: USD amounts                     

• 151.00 760m

USD/CHF: USD amounts     

• 0.8700 409m

AUD/USD: AUD amounts

• 0.6550 901m
• 0.6600 620m
• 0.6660 1.6b

USD/CAD: USD amounts       

• 1.3850 956m
• 1.3855 1.4b
• 1.3975 1.3b

EUR/GBP: EUR amounts        

• 0.8500 1.2b

• USD/CAD trades with mild negative bias near 1.3885 in Monday’s early European session. 
• Lower crude oil prices might weigh on the Loonie. 
• The BoC Governor Macklem's speech will take center stage on Monday. 

The USD/CAD pair trades with mild losses around 1.3885 on Monday during the early European trading hours. Nonetheless, the downside seems limited as the fall in crude oil prices could weigh on the commodity-linked Canadian Dollar (CAD) and create a tailwind for the pair. Traders will focus on Bank of Canada (BoC) Governor Macklem's speech on Monday for fresh impetus. 

The US Dollar (USD) gains ground near a three-month top amid signs of strength in the US economy and bets that the US Federal Reserve (Fed) will proceed with modest rate cuts over the year. Financial markets have priced in a 97.7% chance that the Fed will cut rates by 25 basis points (bps) in November, according to the CME FedWatch tool. Additionally, bets on Donald Trump winning the US presidential election lift US bond yields and support the Greenback. 

Crude oil prices fall on Monday amid easing geopolitical tensions in the Middle East, which undermines the CAD as Canada is the major crude oil exporter to the United States. Furthermore, the downbeat Canadian Retail Sales for August exert some selling pressure on the Loonie. Data released by Statistics Canada on Friday showed that Retail Sales increased by 0.4% MoM in August from a rise of 0.9% in July, below the market consensus of 0.5%. 

 

Here is what you need to know on Monday, October 28:

The Japanese Yen struggles to find demand to start the week as markets assess the outcome of the Japanese general election. The Federal Reserve Bank of Dallas' Texas Manufacturing Business Index for October will be the only data featured in the US economic docket. Later in the American session, the US Treasury will hold 2-year and 5-year note auctions.

Japan’s Liberal Democratic Party, which has been in power since 1955, has lost its majority for the first time in 15 years at Sunday's national election, prompting concerns about the world's fourth-largest economy and the uncertainty over the make-up of the next government. According to NHK, the ruling Liberal Democratic Party and its coalition partner Komeito won just 215 of the lower house's 465 seats, falling short of the 233 required for a majority. The main opposition, the Constitutional Democratic Party of Japan (CDPJ) won 148 seats, a significant increase from 98.

USD/JPY started the week with a bullish gap following this development and touched its highest level in nearly three months near 154.00. At the time of press, the pair was trading slightly below 153.50, rising about 0.7% on the day. Highlighting the selling pressure surrounding the Japanese Yen, the EUR/JPY cross was last seen gaining more than 0.6% at 165.50 and GBP/JPY was up 0.7% at 198.70.

Following Thursday's correction, the US Dollar (USD) Index regained its traction and closed in positive territory on Friday, gaining more than 0.8% for the week. Early Monday, the index edges higher toward 104.50. Meanwhile, US stock index futures trade in positive territory, reflecting an improving risk mood.

EUR/USD extended its downtrend on Friday and registered losses for the fourth consecutive week. The pair trades in a tight range near 1.0800 in the European morning on Monday.

GBP/USD lost its recovery momentum on Friday and ended the day marginally lower. The pair stays in a consolidation phase at around 1.2950 to begin the European session.

Gold gathered bullish momentum and posted daily gains after falling below $2,720 in the European session on Friday. XAU/USD struggles to gather directional momentum and moves sideways below $2,750 early Monday.

European Central Bank (ECB) policymaker Pierre Wunsch said on Monday,  that “it is premature to discuss December policy decision.”

Additional quotes

Market reaction

As of writing, EUR/USD is holding steady below 1.0800, awaiting fresh directional catalysts.

• GBP/JPY strengthens to near 198.75 in Monday’s early European session, adding 0.70% on the day. 
• Political uncertainty in Japan exerts some selling pressure on the JPY. 
• The hawkish comments from the BoE policymaker underpin the Pound Sterling. 

The GBP/JPY cross gains momentum to around 198.75 during the early European session on Monday. The Japanese Yen (JPY) edges lower amid political uncertainty after Japan’s ruling Liberal Democratic Party (LDP) lost its majority at Sunday's national election. 

Japan’s ruling coalition has lost its parliamentary majority at Sunday's national election, raising uncertainty about the next government’s makeup and the Bank of Japan's (BoJ) rate hike plan, weighing on the Japanese Yen (JPY). The BoJ interest rate decision on Thursday will be closely watched. Although Governor Ueda preemptively ruled out a rate hike for this meeting, markets expect a possible rate hike in December or January. 

Nearly 86% of economists polled by Reuters anticipate the Japanese central bank to leave its rates unchanged at its October meeting on Thursday. Izumi Devalier, chief Japan economist at Bank of America, noted that while political uncertainty and instability could delay rate hikes, the BoJ cannot ignore sustained weakness in the JPY.

On the other hand, Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann, an outspoken hawk, said on Thursday, "It would be premature to cut rates if you have structural persistence in the relationship between wages and price formation.” The hawkish remarks from the BoE policymaker could provide some support to the Pound Sterling (GBP) in the near term. 

• EUR/USD tests the upper boundary to re-enter the descending channel pattern.
• If the 14-day RSI falls below the 30 level, it would signal an oversold condition.
• A return to the descending channel could lead the pair to navigate the region around channel’s lower boundary at 1.0670.

EUR/USD inches lower for the second successive day, trading around 1.0780 during the Asian session on Monday. A review of the daily chart shows that the pair tests the upper boundary to return to the descending channel pattern. which could reinforce a bearish bias for the pair.

The 14-day Relative Strength Index (RSI), a key momentum indicator, is slightly above the 30 level. A drop below this threshold would indicate an oversold condition, suggesting the possibility of an upward correction for the EUR/USD pair in the near future.

On the downside, the immediate support appears at the upper boundary of the descending channel at 1.0770 level. A return to the descending channel could put pressure on the pair to navigate the region around the psychological level of 1.0600.

A break below the psychological level of 1.0600 could increase selling pressure, pushing the pair toward testing the lower boundary of the descending channel around the 1.0670 mark.

In terms of resistance, the EUR/USD pair may encounter an immediate barrier around the nine-day Exponential Moving Average (EMA) at 1.0826, followed by the psychological level of 1.0900.

EUR/USD: Daily Chart

• GBP/USD drifts lower to 1.2945 in Monday’s early European session, down 0.11% on the day. 
• The negative view of the pair remains in play below the 100-day EMA and bearish RSI indicator. 
• The first downside target is located at 1.2870; the immediate resistance level emerges at 1.3000. 

The GBP/USD pair extends the decline to around 1.2945 during the early European session on Monday. A bullish US Dollar (USD) on the back of bets for a less aggressive easing by the Federal Reserve (Fed) drags the pair lower. In the absence of top-tier economic data released from the UK and the US, the USD price dynamics will continue to play a key role in influencing the pair. 

GBP/USD keeps the bearish vibe unchanged as the major pair holds below the key 100-period Exponential Moving Average (EMA) on the daily timeframe. The downward momentum is also supported by the Relative Strength Index (RSI), which stands below the 50-midline near 37.70, supporting the sellers in the near term. 

The lower limit of the Bollinger Band at 1.2870 acts as an initial support level for GBP/USD. A decisive break below this level could see a drop to 1.2763, the low of August 13. The additional downside filter to watch is 1.2665, the low of August 8. 

On the upside, the first upside barrier emerges at the 1.3000 psychological level. A move past the mentioned level could clear the way for a climb to the next potential bullish target at 1.3071, the high of October 18. The next hurdle is seen at 1.3185, the high of September 5. 

GBP/USD daily chart

• EUR/JPY jumps to a three-month top amid the heavily offered tone surrounding the JPY.
• Japan’s political development raises doubts over more BoJ rate hikes and weighs on the JPY.
• Bets for aggressive ECB policy easing undermine the Euro and cap the upside for the cross.

The EUR/JPY cross opens with a modest bullish gap on Monday and touches a three-month top during the Asian session, albeit it struggles to capitalize on the move beyond the 166.00 mark. Spot prices currently trade around the 159.65-159.70 region, up over 0.75% for the day, and now seem to have confirmed a bullish breakout above a technically significant 200-day Simple Moving Average (SMA). 

The loss of a parliamentary majority for Japan's ruling coalition in weekend elections adds to a layer of uncertainty over the Bank of Japan's (BoJ) rate-hike plans. This, along with a generally positive risk tone, weighs heavily on the safe-haven Japanese Yen (JPY) and turns out to be a key factor that provides a goodish lift to the EUR/JPY cross. That said, the recent verbal intervention by Japanese authorities holds back the JPY bears from placing aggressive bets. 

In fact, Japan's Economy Minister Ryosei Akazawa said on Friday that it is important for currencies to move in a stable manner reflecting fundamentals and that a weak yen has various impacts on the economy. This comes on top of the comments from Japan's vice finance minister for international affairs, Atsushi Mimura, earlier this month, saying that excess volatility in the market is undesirable and that authorities are closely watching FX moves with a high sense of urgency.

Apart from this, some safe-haven demand stemming from the ongoing conflicts in the Middle East and the risk of a broader war in the region acts as a tailwind for the JPY. The shared currency, on the other hand, is undermined by firming expectations for a more aggressive policy easing by the European Central Bank (ECB) amid signs of easing inflationary pressures and economic weakness. This contributes to keeping a lid on the EUR/JPY cross and warrants caution for bulls. 

Nevertheless, a breakout and acceptance above the very 200-day SMA, for the first time since late July supports prospects for a further near-term appreciating move. This, in turn, suggests that any intraday pullback might be seen as a buying opportunity and remain limited near the said resistance breakpoint amid absent relevant market-moving economic releases and ahead of the BoJ monetary policy meeting later this week.

• USD/CHF extends its gains as recent US data fade the likelihood of a bumper rate cut by the Fed.
• Former President Donald Trump’s allies have faced at least 10 court defeats that could impact the outcome of the election.
• The Swiss Franc could experience a decrease in safe-haven demand due to the easing tensions in the Middle East.

USD/CHF continues to gain ground as the US Dollar (USD) strengthens as recent positive economic data from the United States (US) has fueled expectations for a more cautious stance from the Federal Reserve (Fed) in November. The USD/CHF pair reaches two-month highs around 0.8700 during the Asian hours on Monday.

On Friday, data showed that the US Michigan Consumer Sentiment Index increased to 70.5 in October, up from 68.9 previously, surpassing the expected forecast of 69.0. In addition, Durable Goods Orders fell by 0.8% month-over-month in September, which was a smaller decline than the anticipated 1.0% drop.

The US Dollar receives support from the higher Treasury yields. The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 104.50 with 2-year and 10-year yields on US Treasury bonds standing at 4.12% and 4.27%, respectively, at the time of writing.

Regarding US presidential election, Over the past three weeks, allies of former President Donald Trump have faced at least 10 court defeats in key battleground states that could impact the outcome of the November 5 election between Republican candidate Trump and his Democratic opponent, Vice President Kamala Harris.

The Swiss Franc (CHF) may encounter difficulties as expectations rise for another interest rate cut by the Swiss National Bank (SNB) at its upcoming December meeting. Traders are likely to keep an eye on the Consumer Price Index (CPI) for October, set to be released later this week.

Additionally, the Swiss Franc could experience a decrease in safe-haven demand due to the easing of geopolitical tensions following Israel's airstrikes on Iran early Saturday. These strikes, aimed at missile and air defense sites, were less aggressive than many had anticipated. Iran has downplayed the damage, with Supreme Leader Ayatollah Ali Khamenei stating that the attack "should neither be downplayed nor exaggerated."

Gold prices fell in India on Monday, according to data compiled by FXStreet.

The price for Gold stood at 7,384.79 Indian Rupees (INR) per gram, down compared with the INR 7,426.85 it cost on Friday.

The price for Gold decreased to INR 86,134.78 per tola from INR 86,625.38 per tola on friday.

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.)

• Silver kicks off the new week on a weaker note, albeit manages to hold above the $33.00 mark.
• The technical setup warrants caution for bears and before positioning for any further losses.
• A sustained break below the $33.00 mark should pave the way for some meaningful correction.

Silver (XAG/USD) attracts fresh sellers during the Asian session on Monday and currently trades around the $33.30 area, down nearly 1.25% for the day. The white metal, however, manages to hold above a one-week low, around the $33.10-$33.00 area, set on Friday, warranting some caution for bearish traders.

Moreover, technical indicators on the daily chart – though have been losing positive traction – are holding in positive territory. This further makes it prudent to wait for a convincing break below the $33.00 mark before positioning for an extension of last week's pullback from the highest level since October 2012. Some follow-through selling below the $32.75-$32.65 resistance-turned-support will reaffirm the negative bias and make the XAG/USD vulnerable. 

The subsequent downfall might expose the $32.20-$32.15 intermediate support before the white metal drops to the $32.00 round figure and the $31.70-$31.65 region. The downward trajectory could extend further and drag the XAG/USD towards the $31.00 mark en route to the $30.50 area and the monthly swing low, close to the $30.00 psychological mark tested on October 8.

On the flip side, the $33.65 horizontal zone now seems to have emerged as an immediate hurdle, above which the XAG/USD is likely to reclaim the $34.00 mark and climb further towards the $34.30-$34.35 supply zone. The momentum could extend further and allow bulls to make a fresh attempt to conquer the $35.00 psychological mark before aiming to challenge the October 2012 swing high, around the $35.35-$35.40 region.

Silver 4-hour chart

• USD/CAD appreciates as the commodity-linked CAD receives downward pressure from lower crude Oil prices.
• WTI Oil price has dropped over 4% due to an easing in geopolitical tensions in the Middle East.
• CME FedWatch Tool suggests a 92.8% chance of a 25-basis-point rate cut by the Fed in November.

The USD/CAD pair continues its winning streak, rising for the fourth consecutive day and trading around 1.3900 during the Asian session on Monday. The Canadian Dollar (CAD) is facing pressure from declining Oil prices, as Canada is the largest crude Oil exporter to the United States (US).

West Texas Intermediate (WTI) crude Oil price has dropped over 4%, currently trading around $68.40. This decline is attributed to easing geopolitical tensions after Israel's targeted airstrikes on Iran early Saturday, which focused on missile and air defense sites and were less severe than anticipated.

On Friday, Statistics Canada reported a 0.4% increase in Retail Sales for August, totaling $66.6 billion. Sales rose in four out of nine subsectors, primarily driven by gains in motor vehicle and parts dealers. However, Core Retail Sales, which exclude gasoline stations, fuel vendors, and motor vehicle and parts dealers, fell by 0.4% in August.

Traders will be closely watching the speech by Bank of Canada (BoC) Governor Tiff Macklem, who is set to participate in a fireside chat at The Logic Summit in Toronto on Monday.

The upside of the USD/CAD pair could be attributed to the stronger US Dollar (USD) following the recent positive economic data from the United States (US), which has fueled expectations for a more cautious stance from the Federal Reserve (Fed) in November.

According to the CME FedWatch Tool, there is a 92.8% probability of a 25-basis-point rate cut by the Fed in November, with no expectation of a more substantial 50-basis-point cut.

The US Michigan Consumer Sentiment Index rose to 70.5 in October from 68.9 previously, exceeding the forecast of 69.0. Additionally, Durable Goods Orders dropped by 0.8% month-over-month in September, a smaller decline than the anticipated 1.0% decrease.

• Gold price kicks off the new week on a weaker note amid sustained USD buying interest. 
• Bets for smaller Fed rate cuts and deficit-spending concerns push the US bond yields higher.
• Easing fears of a further escalation of the Israel-Iran conflict undermines the XAU/USD. 

Gold price (XAU/USD) fails to capitalize on Friday's late rise back closer to the $2,750 area and opens with a modest bearish gap at the start of a new week. The US Dollar (USD) buying remains unabated in the wake of a fresh leg up in the US Treasury bond yields, bolstered by the growing acceptance that the Federal Reserve (Fed) will proceed with smaller rate cuts, and undermines the commodity. Apart from this, a generally positive risk tone is seen as another factor exerting pressure on the precious metal. 

The downside for the Gold price, however, remains cushioned in the wake of safe-haven demand stemming from Middle East tensions and US election jitters. Traders might also prefer to wait on the sidelines ahead of this week's important US macro releases – the Advance Q3 GDP report, the Personal Consumption Expenditures (PCE) Price Index and the closely-watched Nonfarm Payrolls (NFP) report. This, in turn, warrants caution before placing aggressive bearish bets around the XAU/USD. 

Daily Digest Market Movers: Gold price is pressured by rising US bond yields and a bullish USD

• The US Dollar added to its recent strong gains registered over the past four weeks and climbed to its highest level since July 30 amid bets for a less aggressive policy easing by the Federal Reserve. 
• According to the CME Group's FedWatch Tool, the markets have nearly fully priced in the possibility of a regular 25 basis points rate cut by the US central bank at its November policy meeting. 
• The latest poll indicates a tight race between Vice President Kamala Harris and the Republican nominee Donald Trump amid deficit-spending concerns after the November 5 US presidential election.
• Moreover, the US macro releases on Friday added to a string of recent upbeat data and suggested that the economy remains on strong footing, validating market bets for smaller Fed rate cuts.
• The US Census Bureau reported that Durable Goods Orders in the US declined by 0.8% in September, lower than the 1% fall expected, while new orders excluding transportation increased by 0.4%. 
• Adding to this, the University of Michigan's Consumer Sentiment Index reached a six-month high of 70.5 in October, better than both the preliminary result and the previous month's reading. 
• The yield on the benchmark 10-year US government bond stands firm near a three-month high touched last week, which is seen benefiting the USD and weighing on the non-yielding precious metal. 
• Iran on Saturday indicated that it would not retaliate against Israeli strikes on military targets across its territory if a deal is reached for a ceasefire agreement in the Gaza Strip and Lebanon. 
• China’s Vice Minister of Finance, Liao Min, said on Monday that the country will step up countercyclical adjustments of its macro policies to bolster economic recovery in the fourth quarter.

Technical Outlook: Gold price remains confined in  one-week-old range below the all-time high

From a technical perspective, last week's repeated failures to find acceptance or build on momentum beyond the $2,748-2,750 area warrant some caution for bullish traders. Moreover, the recent range-bound price action witnessed over the past week or so points to indecision among traders over the next leg of a directional move. Hence, it will be prudent to wait for a sustained strength beyond the said barrier or a convincing break below the short-term trading range support near the $2,720-2,715 zone, before positioning for a firm near-term trajectory. 

Meanwhile, some follow-through buying beyond the $2,748-2,750 region should allow the Gold price to retest the all-time peak, around the $2,658-2,659 area touched earlier this month. The subsequent move up could lift the XAU/USD towards the $2,770 zone, representing a nearly four-month-old ascending trend-line resistance, en route to the $2,800 round-figure mark.

On the flip side, weakness below the $2,720-2,715 region is likely to find decent support near the $2,700 mark, which if broken decisively should pave the way for deeper losses. The gold price might then accelerate the corrective fall towards intermediate support near the $2,675 area and eventually drop to the $2,657-2,655 horizontal support.

• WTI loses ground due to easing geopolitical tensions in the Middle East.
• Israel's attack on missile and air defense sites in Iran proved to be less aggressive than many had anticipated.
• OPEC+ plans to roll back its production cuts in December, with aiming to boost output by 180,000 barrels per day.

West Texas Intermediate (WTI) Oil prices fell by more than 4%, trading around $68.40 during the Asian session on Monday. This decline can be linked to easing geopolitical tensions following Israel's targeted airstrikes on Iran early Saturday, which were primarily aimed at missile and air defense sites and turned out to be less aggressive than many had expected.

Israeli jets carried out three waves of strikes before dawn on Saturday, targeting missile factories and other locations near Tehran and in western Iran. Despite this, Iran has downplayed the damage, with Supreme Leader Ayatollah Ali Khamenei stating that the attack "should neither be downplayed nor exaggerated." The oil market appears to interpret the Israeli strike and Iran's response as a sign of de-escalation from the previously heightened tensions, per Reuters.

The OPEC+ group, comprising the Organization of the Petroleum Exporting Countries and allies such as Russia, is still on track to begin rolling back some of its production cuts in December, aiming to increase output by 180,000 barrels per day (bpd). This will mark the first step in a series of output increases planned for 2025.

Demand in Asia, which accounts for about two-thirds of global seaborne crude imports, has been weak throughout 2024. The October arrivals are expected to follow this trend. A significant portion of this decline can be attributed to China, the world's largest crude importer, which has experienced a drop of 350,000 bpd in crude arrivals during the first nine months of this year compared to the same period in 2023.

• The Indian Rupee gains ground in Monday’s Asian session. 
• Lower crude oil prices underpin the INR, but persistent Indian foreign outflows could cap its upside. 
• Investors await the advanced US GDP growth numbers for Q3 on Wednesday ahead of NFP data. 

The Indian Rupee (INR) trades firmer on Monday despite the stronger US Dollar (USD). The fall in crude oil prices provides some support to the local currency as India is the world's third-largest oil consumer. However, the upside of the INR might be limited amid sustained foreign outflows from domestic stocks and the expectation of a slower pace of the US Federal Reserve (Fed) rate cuts. 

Investors will keep an eye on the advanced US Gross Domestic Product (GDP) Annualized for the third quarter (Q3), which is due on Wednesday. The Core Personal Consumption Expenditures (PCE) Price Index for September will be released on Thursday. On Friday, the highly anticipated US Nonfarm Payrolls (NFP) will be in the spotlight. 

Daily Digest Market Movers: Indian Rupee recovers, the potential upside seems limited

• India’s economic growth is estimated to reach between 7.0% and 7.2% in the fiscal year 2024-25, according to Deloitte India’s latest Economic Outlook. 
• The preliminary estimates showed that India’s HSBC Manufacturing Purchasing Managers Index (PMI) rose to 57.4 in October versus 56.5 prior. The Services PMI increased to 57.9 in October from a one-year low of 57.7 in September.  
• The US Michigan Consumer Sentiment Index rose to 70.5 in October from 68.9 in the previous reading, beating expectations. 
• The Durable Goods Orders declined by 0.8% MoM in September, above the market consensus of a 1% decline. Durable Goods Orders excluding transportation increased 0.4% in September.
• US rate futures have priced in a 97.7% possibility that the Fed will cut rates by 25 basis points (bps) in November, according to the CME FedWatch tool. 

Technical Analysis: USD/INR’s constructive outlook remains in play

The Indian Rupee weakens on the day. According to the daily chart, the bullish outlook of the USD/INR pair remains intact, with the price holding above the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) stands above the midline near 60.00, suggesting that further upside looks favorable. 

Sustained trading above the upper boundary of the ascending trend channel of 84.20 could pave the way to 84.50, en route to the 85.00 psychological level. 

On the flip side, the initial support level emerges at the lower limit of the trend channel near 84.05. The next contention level is seen at 83.75, the 100-day EMA. 

• The Australian Dollar depreciates due to increased risk aversion ahead of the US presidential election.
• The Aussie Dollar may regain its ground due to the hawkish RBA’s policy outlook.
• The US Dollar gained ground due to the increased likelihood of a less dovish stance by the Fed in November.

The Australian Dollar (AUD) continues its decline for the second straight session on Monday. However, hawkish comments from the Reserve Bank of Australia (RBA) may limit further losses for the AUD/USD pair. Traders are cautious as they await key domestic inflation data set for release on Wednesday, which could impact RBA’s monetary policy outlook.

The Reserve Bank of Australia noted that the current cash rate of 4.35% is sufficiently restrictive to bring inflation within the 2%-3% target range while also supporting employment. As a result, the RBA is unlikely to consider a rate cut as soon as next month.

The US Dollar (USD) strengthens as recent positive economic data from the United States (US) has fueled expectations for a more cautious stance from the Federal Reserve (Fed) in November. According to the CME FedWatch Tool, there is a 92.8% probability of a 25-basis-point rate cut by the Fed in November, with no expectation of a more substantial 50-basis-point cut.

Daily Digest Market Movers: Australian Dollar depreciates due to increased risk aversion

• Over the past three weeks, allies of former President Donald Trump have faced at least 10 court defeats in key battleground states that could impact the outcome of the November 5 election between Republican candidate Trump and his Democratic opponent, Vice President Kamala Harris.
• The heightened uncertainty surrounding the Middle East conflict may have strengthened the safe-haven appeal of the US Dollar (USD). Israel's targeted attack on Iran early Saturday, conducted in coordination with Washington and limited to missile and air defense sites, was more restrained than many had anticipated.
• The US Michigan Consumer Sentiment Index rose to 70.5 in October from 68.9 previously, exceeding the forecast of 69.0. Additionally, Durable Goods Orders dropped by 0.8% month-over-month in September, a smaller decline than the anticipated 1.0% decrease.
• S&P Global has released its preliminary October US Purchasing Managers Index (PMI) readings, showing positive momentum across sectors. The Composite PMI rose to 54.3, up from the previous 54.0. The Services PMI exceeded expectations at 55.3, compared to the forecasted 55.0, and saw a slight increase from the previous 55.2. Meanwhile, the Manufacturing PMI also came in stronger at 47.8, above the expected 47.5, and improving from the prior reading of 47.3.
• 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.
• RBA Deputy Governor Andrew Hauser highlighted, last week, the country's strong labor participation rate and stressed that, although the RBA relies on data, it is not overly fixated on it.

Technical Analysis: Australian Dollar moves below 0.6600 within the descending channel

The AUD/USD pair trades around 0.6600 on Monday, with daily chart technical analysis suggesting a short-term bearish outlook. The pair is trending lower within a descending channel pattern, and the 14-day Relative Strength Index (RSI) is approaching 30, reinforcing the bearish sentiment.

On the support side, the AUD/USD pair may test the region near the lower boundary of the descending channel, around the 0.6560 level.

Regarding resistance, the immediate barrier is at the psychological level of 0.6600, followed by the upper boundary of the descending channel at 0.6630. A breakout above this level could allow the pair to test the nine-day Exponential Moving Average (EMA) at 0.6652.

AUD/USD: Daily Chart

• The Japanese Yen weakens in reaction to political development after Sunday’s election.
• The uncertainty over the BoJ’s rate-hike plan weighs heavily on the JPY amid a bullish USD.
• Bets for a less aggressive Fed policy easing and rising US bond yields underpin the buck.

The Japanese Yen (JPY) drops to a fresh three-month low against its American counterpart during the Asian session on Monday after Japan’s longtime ruling party lost its majority for the first time in 15 years at Sunday's national election. The outcome fueled speculations that the coalition government might pressure the Bank of Japan (BoJ) to take policy normalization slowly, which, in turn, is seen weighing heavily on the JPY. This, along with the underlying strong bullish tone surrounding the US Dollar (USD), lifts the USD/JPY pair beyond the mid-153.00s. 

Meanwhile, the incoming US macro data continues to point to a still resilient economy and reaffirms market expectations that the Federal Reserve (Fed) will proceed with smaller rate cuts over the year. Furthermore, rising odds of Donald Trump winning the presidency and deficit-spending concerns after the US election trigger a fresh leg up in the US Treasury bond yields. This assists the USD Index (DXY) in standing firm near its highest level since July 30 and suggests that the path of least resistance for the lower-yielding JPY remains to the downside. 

Daily Digest Market Movers: Japanese Yen is weighed down by domestic political uncertainty

• Japan's ruling coalition lost its parliamentary majority in Sunday's election for the first time since 2009, raising doubts over the Bank of Japan's ability to hike interest rates further and leading to a bearish weekly gap opening for the Japanese Yen. 
• Public broadcaster NHK reported that Prime Minister Shigeru Ishiba's Liberal Democratic Party (LDP) and its coalition partner Komeito won 215 of 465 seats in the lower house, falling short of the 233 required for a majority and down from 279 held. 
• Bets for smaller rate cuts by the Federal Reserve, along with concerns that spending plans of Vice President Kamala Harris and the Republican nominee Donald Trump will increase the deficit, lead to an extended sell-off in the US bond market. 
• The yield on the benchmark 10-year US government bond stands firm near a three-month high touched last week, lifting the US Dollar closer to its highest level since July 30 and contributing to driving flows away from the lower-yielding JPY. 
• In the latest geopolitical developments, Israel carried out precise strikes on military targets across Iran over the weekend in retaliation to the latter's barrage of ballistic missiles fired earlier this month and months of continuous attacks.
• Meanwhile, Iran indicated that it will not retaliate to Israeli strikes if a deal is reached for a ceasefire agreement in Gaza and Lebanon, easing fears of a further escalation of tensions in the Middle East and a broader conflict in the region.
• China’s Vice Minister of Finance, Liao Min, said on Monday that the country will step up countercyclical adjustments of its macro policies to bolster economic recovery in the fourth quarter and is confident of achieving the 5% growth target.

Technical Outlook: USD/JPY needs to consolidate before the next leg of appreciating move

From a technical perspective, the recent breakout through the 200-day Simple Moving Average (SMA) and a subsequent move beyond the 61.8% Fibonacci retracement level of the July-September downfall could be seen as a fresh trigger for the USD/JPY bulls. This further validates the near-term positive outlook for the pair and supports prospects for additional gains beyond the 154.00 mark, towards the next relevant hurdle near the 154.35-154.40 supply zone. The momentum could extend further towards reclaiming the 155.00 psychological mark en route to the late July swing high, around the 155.20 region.

Meanwhile, the Relative Strength Index (RSI) on the daily chart has just started moving into overbought territory and warrants some caution for bullish traders. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for any further appreciating move. Any corrective pullback, however, now seems to find decent support near the 153.20-153.15 area ahead of the 153.00 mark and the Asian session low, around the 152.75 region. Some follow-through selling, however, could drag the USD/JPY pair to the 152.00 round figure.

• NZD/USD weakens to near 0.5970 in Monday’s early Asian session. 
• Expectation of slower pace of Fed rate reductions boosts the US Dollar. 
• Fresh stimulus policies from China might help limit the NZD’s losses. 

The NZD/USD pair trades with mild losses around 0.5970 on Monday during the Asian trading hours. The firmer Greenback amid stronger US economic data and the less dovish stance of the US Federal Reserve (Fed) undermine the pair. 
 
Meanwhile, the USD Index (DXY), which tracks the US Dollar (USD) against a basket of currencies, currently trades near a three-month top of 104.50. US rate futures have priced in a 97.7% possibility that the Fed will cut rates by 25 basis points (bps) in November, according to the CME FedWatch tool. 

Data released by the US Census Bureau on Friday showed that Durable Goods Orders in the US declined by 0.8% in September, beating the estimation of a 1.0% decrease. Durable Goods Orders excluding transportation increased 0.4% in September. Finally, the University of Michigan's Consumer Sentiment Index rose to 70.5 in October, the highest in six months, better than the previous reading and the consensus.  

The Reserve Bank of New Zealand (RBNZ) lowered its Official Cash Rate (OCR) in August and cut another OCR in October. The RBNZ is expected to deliver another 50 basis points (bps) reductions at its final monetary policy of the year on November 27, with markets pricing some risk of a 75-point move. This, in turn, weighs on the Kiwi against the USD. 

Traders will keep an eye on the additional fresh stimulus measures from Chinese officials to boost the economy. On Monday, China’s Vice Minister of Finance Liao Min stated that China will step up countercyclical adjustments of its macro policies to bolster economic recovery in the fourth quarter, which will lay a solid foundation for achieving the annual growth target of around 5% this year. Any positive developments from fresh plans could lift the New Zealand Dollar (NZD), as China is a major trading partner to New Zealand. 

• EUR/USD may struggle, as recent US data has increased the odds of the Fed taking a less dovish stance in November.
• The heightened uncertainty surrounding the Middle East and the US presidential election supports the safe-haven US Dollar.
• ECB’s Klaas Knot emphasized the importance of "keeping all options open" to manage potential risks to growth and inflation.

The EUR/USD pair holds steady around 1.0790 during Monday's Asian trading hours, following losses in the previous session. However, the pair may encounter headwinds from a stronger US Dollar (USD), as recent upbeat economic data from the United States (US) has strengthened expectations for a less dovish approach from the Federal Reserve (Fed) in November.

On Friday, data showed the US Michigan Consumer Sentiment Index rose to 70.5 in October from 68.9 previously, exceeding the forecast of 69.0. Additionally, Durable Goods Orders dropped by 0.8% month-over-month in September, a smaller decline than the anticipated 1.0% decrease.

Additionally, heightened uncertainty surrounding the Middle East conflict may have strengthened the safe-haven appeal of the US Dollar (USD). Israel's targeted attack on Iran early Saturday, conducted in coordination with Washington and limited to missile and air defense sites, was more restrained than many had anticipated.

The USD is also bolstered by uncertainty surrounding the upcoming US presidential election. Former President Donald Trump’s Republican allies recently faced at least 10 court losses in battleground states that could influence the outcome of the November 5 election.

European Central Bank (ECB) Governing Council member Klaas Knot emphasized on Saturday the importance of "keeping all options open" to manage potential risks to growth and inflation. "Retaining full optionality would act as a hedge against the materialization of risks in either direction to the growth and inflation outlook,” Knot noted, adding, “We believe that our meeting-by-meeting and data-dependent approach has served us well,” according to Reuters.

On Monday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1307, as compared to Friday's fix of 7.1090 and 7.1311 Reuters estimates.

China’s Vice Minister of Finance, Liao Min, said on Monday that China will step up countercyclical adjustments of its macropolicies to bolster economic recovery in the fourth quarter, which will lay a solid foundation for achieving the annual growth target of around 5% this year.

Key quotes

Market reaction

At the time of writing, AUD/USD was down 0.12% on the day at 0.6598.

Bank of Canada (BoC) Governor Tiff Macklem said on Friday that if population growth slows faster than assumed, the headline Gross Domestic Product (GDP) will be lower.  

Key quotes 

Market reaction

At the time of writing, USD/CAD was up 0.06% on the day at 1.3895. 

• GBP/USD edges lower at the start of a new week amid broad-based USD strength.
• Expectations for a less aggressive Fed policy easing continue to underpin the USD.
• Bets for more BoE rate cuts weigh on the GBP and exert pressure on the major. 

The GBP/USD pair kicks off the new week on a softer note and trades around the 1.2960-1.2955 region, just below the 100-day Simple Moving Average (SMA) during the Asian session. Spot prices, however, remain within striking distance of the lowest level since August 16, near the 1.2900 mark touched last week and seem vulnerable to prolonging a one-month-old downtrend amid a bullish US Dollar (USD). 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, stands firm near a three-month peak and looks to build on its gains registered over the past four weeks amid bets for a less aggressive easing by the Federal Reserve (Fed). In fact, market participants seem convinced that the US central bank will lower borrowing costs by 25 basis points in November as the incoming US macro data continue to suggest that the economy remains on strong footing. 

The US Census Bureau reported on Friday that Durable Goods Orders in the US decreased by 0.8% in September, slightly better than expectation for a decline of 1%. Additional details of the report showed that new orders excluding transportation increased 0.4% during the reported month. Furthermore, the University of Michigan's Consumer Sentiment Index reached a six-month high of 70.5 in October, better than both the preliminary result and the previous month's reading. 

The data validates the view that the Fed will proceed with modest rate cuts over the year, which, in turn, triggers a fresh leg up in the US Treasury bond yields and continues to underpin the USD. The British Pound (GBP), on the other hand, is undermined by rising bets for more interest rate cuts by the Bank of England (BoE) in November and December, bolstered by a fall in the UK Consumer Price Index to the lowest level since April 2021 and below the central bank's 2% target. 

The aforementioned fundamental backdrop suggests that the path of least resistance for the GBP/USD pair is to the downside. Even from a technical perspective, the recent repeated failures to near the 1.3000 psychological mark support prospects for an extension of the downfall from the 1.3435 area, or the highest level since February 2022 touched last month.

The European Central Bank (ECB) Governing Council member Klaas Knot said on Saturday that the ECB should keep its options open regarding future interest rate moves, per Reuters.  

Key quotes

 "It is important that we keep all options open. Retaining full optionality would act as a hedge against the materialization of risks in either direction to the growth and inflation outlook.”

"We believe that our meeting-by-meeting and data-dependent approach has served us well.”

"We will have to see whether that was a little bit over-enthusiastic or not. We will only know once we do our own calculations again in December.”

"On the one hand, policy restriction may be reduced more quickly if incoming data indicates a sustained acceleration in the speed of disinflation or a material shortfall in the economic recovery.” 

Market reaction 

At the time of press, the EUR/USD pair was up 0.01% on the day at 1.0795.  

Japan’s longtime ruling party has lost its majority for the first time in 15 years at Sunday's national election, prompting concerns about the world's fourth-largest economy and the uncertainty over the make-up of the next government, per Reuters. 

According to NHK, the ruling Liberal Democratic Party and its coalition partner Komeito won just 215 of the lower house's 465 seats, falling short of the 233 required for a majority. The main opposition, the Constitutional Democratic Party of Japan (CDPJ) won 148 seats, a significant increase from 98.  

Market reaction

 The USD/JPY pair is trading 0.55% higher on the day at 153.13, as of writing.

• Gold price loses momentum to around $2,735 in Monday’s early Asian session. 
• Geopolitical risks and uncertainty around US presidential elections boost the yellow metal. 
• Bets for a smaller Fed rate cut weigh on the USD-denominated Gold price. 

Gold price (XAU/USD) edges lower to near $2,735, snapping the two-day losing streak during the early Asian session on Monday. However, the downside of the precious metal might be limited amid the ongoing geopolitical tensions and uncertainties surrounding the US presidential election. 

Israeli Prime Minister Benjamin Netanyahu said that Saturday’s attack on Iran severely damaged Tehran’s defenses. Meanwhile, Iranian officials vowed an “appropriate response” Sunday, while saying they do not seek a wider war, per CNN. The geopolitical risks and uncertainty around the upcoming US presidential election could provide some support to traditional safe-haven assets like Gold. 

The purchases of Gold reserves among central banks and increasing demand from investors have lifted the price of yellow metal. The World Gold Council suggested that the central banks worldwide purchased more than 1,000 tonnes of gold during each of the last two years, and China ranks atop the list of nations seeking to bolster their gold reserves. 

On the other hand, a slower pace of rate reductions from the US Federal Reserve (Fed) amid the stronger US economic data undermines the yellow metal. According to the CME FedWatch tool, traders are now pricing in nearly 97.7% that the Fed will cut rates by 25 basis points (bps) in November.