Forex-novosti i prognoze od 31-10-2024

• Gold dips from all-time high amid strong US jobs data and steady core inflation.
• Investors remain risk-averse ahead of November 5 US election, polls show a narrow race between Trump and Harris.
• Nonfarm Payrolls and Fed’s upcoming rate decision keep traders cautious.

Gold price retreated from all-time high on Thursday as traders failed to capitalize on falling US Treasury bond yields. Nevertheless, the precious metal is set to end the month with gains of over 4% and to remain above the $2,700 threshold.

The XAU/USD trades at $2745, down 1.49%. The US 10-year Treasury bond yield dropped almost two basis points to 4.284%.

Risk aversion is the name of the game ahead of the US Presidential Election on November 5. Meanwhile, the release of the Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, alongside a strong jobs report, weighed on the precious metal price.

In the meantime, the latest opinion polls show that the race for the White House is narrowing between the Republican candidate, former US President Donald Trump, and the Democratic candidate, Vice President Kamala Harris.

US data from the Bureau of Economic Analysis (BEA) showed that headline inflation dipped. However, the core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, remained unchanged in October compared to September's level.

The US Department of Labor revealed that the number of Americans filing for unemployment benefits in the week ending October 26 dipped to its lowest level in five months.

Geopolitical tensions remain high in the Middle East, even though US Secretary of State Anthony Blinken stated “good progress” towards a ceasefire in Lebanon. Meanwhile, the Israeli military revealed the movement of ballistic missiles in Iran, hinting that a truce is far from being reached.

Bullion traders await the Nonfarm Payrolls report and have priced in a 95% chance of the Fed cutting interest rates by 25 basis points next week.

Daily Digest Market Movers: Gold price retreats amid goodish US data

• The US Dollar Index (DXY), which tracks the Dollar's value against a basket of six currencies, dropped 0.18% at 104.08.
• The US headline PCE decreased from 2.3% to 2.1% year-over-year (YoY), moving closer to the Fed’s 2% target. However, the Core PCE, which excludes volatile items, remained unchanged at 2.7% YoY, slightly above forecasts of 2.6%.
• US Initial Jobless Claims for the week ending October 26 fell from 228K to 216K, coming in below the forecast of 230K.
• Data from the Chicago Board of Trade, based on the December fed funds rate futures contract, indicates that investors estimate 49 basis points (bps) of Fed easing by the end of the year.

XAU/USD Technical Outlook: Gold price retreats below $2,750 as bulls take a breather

Gold retreated from record highs, yet it remains bullishly biased. If XAU/USD bulls keep the spot price above $2,700, look for further gains once it clears the psychological $2,750 figure, ahead of the all-time high at $2,790. A breach of the latter, and the $2,800 threshold is up for grabs.

On the other hand, if sellers move in and push prices below $2,708 where the October 23 daily low lies, it will expose the $2,700 mark. Up next is the September 26 swing high, which turned support at $2,685, followed by the 50-day Simple Moving Average (SMA) at $2,603.

Momentum suggests the non-yielding metal could consolidate as the Relative Strength Index (RSI) remains bullish. This means that buyers are gathering momentum.

• US PCE Prices Index remained steady in September, as well as the core measure.
• US jobless claims fell to 216K in the week of October 25.
• Retail Sales in Australia grew in September slightly below expectations.

The AUD/USD declined by 0.45% to 0.6545 in Thursday's session, remaining near an 11-week low of 0.6540 ahead of the US Nonfarm Payrrolls data on Friday. This decline comes after the recent surge in US inflation and mid-tier economic data.

Additionally, Retail Sales in Australia grew marginally in September, falling below expectation, which seems to be weighing on the Aussie Dollar.

Daily digest market movers: Australian Dollar declines amid weakening weakening economy and steady USD

• On the Aussie front, Retail Sales somewhat tanking in September is making investors dump the AUD as it may prompt a more dovish stance from the Reserve Bank of Australia.
• On the other hand, Market expectations for the upcoming Federal Open Market Committee (FOMC) meeting next week currently suggest a 25 -basis-point rate cut, influenced by recent economic indicators.
• A key focus for investors will be October’s NFP data, with forecasts indicating 113K new jobs were added, a notable drop from September’s 254K.
• The latest US jobless claims report showed a decline to 216K for the week of October 25, contradicting predictions of a rise to 230K, which underscores ongoing labor market resilience.
• The core PCE Price Index, closely monitored by the Federal Reserve, held steady at 2.7% in September, despite projections of a decrease to 2.6%.
• Additionally, the broader PCE Price Index grew at 2.1% annually in September, down slightly from August’s 2.2% and below the anticipated 2.2% rate.

AUD/USD technical outlook: Pair remains bearish, indicators oversold

The daily Relative Strength Index (RSI) is currently at 30, which is in the oversold area. The RSI's slope is declining sharply, suggesting that selling pressure is rising. The Moving Average Convergence Divergence (MACD) is flat and in the red, indicating that selling pressure is flat. Both suggest that the selling pressure might have become over-extended and that a consolidation is coming.

• Mexican Peso appreciates after Q3 GDP growth of 1% QoQ, surpassing expectations.
• Peso remains vulnerable to US election results, as Trump’s tariff threats on Mexican auto imports weigh on sentiment.
• Upcoming Mexican data on Business Confidence and employment, along with US Nonfarm Payrolls and ISM Manufacturing PMI, could influence USD/MXN.

The Mexican Peso appreciated over 0.60% against the US Dollar on Thursday after posting losses for the fourth straight day. Upbeat Gross Domestic Product (GDP) figures revealed in Mexico outweighed upbeat data from the United States (US), which failed to boost the Greenback. The USD/MXN trades at 20.01 after hitting a daily high of 20.18.

Mexico’s economy in the third quarter of 2024 grew 1% QoQ, above the consensus of 0.8%, revealed the Instituto Nacional de Estadistica Geografia e Informatica (INEGI). Meanwhile, annual GDP expanded by 1.5%, above estimates of 1.2% but missed the second quarter's 2.1% growth.

Despite posting solid gains, the Mexican currency will remain pressured by the outcome of the US Presidential Elections. Former President Donald Trump's victory at the November 5 election could weigh on the Peso after his comments that he would impose 200% tariffs on automobiles manufactured in Mexico.

Joaquin Monfort, an Analyst at FX Street, mentioned, “The election model on polling website FiveThirtyEight gives Trump a 52% chance of winning versus Vice President Kamala Harris’ 48%.” However, Monfort added that the latest opinion polls favor Harris, who leads 48.1% to 46.7% of former President Donald Trump.

Across the north of the border, US data revealed that headline inflation dipped, revealing the US Bureau of Economic Analysis (BEA). However, the core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, remained unchanged in October compared to September’s data.

Other data showed that the number of Americans filing for unemployment benefits in the week ending October 26 dipped to its lowest level in five months.

Ahead of the week, the Mexican economic schedule will feature Business Confidence figures, employment data, and the S&P Global Manufacturing PMI for October. On the US front, traders are eyeing the US Nonfarm Payrolls for October and the Institute for Supply Management (ISM) Manufacturing PMI.

Daily digest market movers: Mexican Peso rises after strong GDP figures

• The USD/MXN remains adrift to political turmoil in Mexico after the approval of the controversial judiciary reform. Eight of the eleven Supreme Court judges announced their resignation effectively in August 2025.
• Money market futures hint that the Bank of Mexico (Banxico) is expected to cut rates between 175 to 200 basis points over the next 12 months.
• The US headline PCE retreated from 2.3% to 2.1%YoY, approaching the Fed’s goal of 2%. However, excluding volatile items, the so-called Core PCE remained unchanged at 2.7% YoY, exceeding forecasts of 2.6%.
• US Initial Jobless Claims for the week ending October 26 fell from 228K to 216K, below forecasts of 230K.
• ADP National Employment Change in October rose by 233K, above estimates of 115K and September’s 159K.
• 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 recovers as USD/MXN eyes 20.00

The USD/MXN uptrend remains in place, though sellers had stepped in, ahead of the upcoming US election week. Despite this, unless they clear the 20.00 psychological figure, buyers could remain hopeful of higher prices.

If USD/MXN tumbles below 20.00, the next support would be the October 24 daily low of 19.74, followed by the 50-day Simple Moving Average (SMA) at 19.62.

Otherwise, if USD/MXN stays above 20.00, the next resistance would be the year-to-date (YTD) high of 20.22. Once cleared, up next would be the psychological 20.50 level, September 28, 2022, high at 20.57, and August 2, 2022, peak at 20.82. Once surpassed, the next stop would be March 8, 2022, swing high at 21.46.

Oscillators indicate that buyers are gathering steam, as displayed by the Relative Strength Index (RSI) above its neutral line, clearing previous highs reached on September 10 and August 22.

The US Dollar lost additional momentum on Thursday, primarily as the Japanese yen gained strong support following a slightly hawkish tone from the BoJ meeting, preventing the dollar from recovering any upward traction. Friday’s release of the US labour market report is expected to be pivotal for determining the Fed’s near-term rate path.

Here is what you need to know on Friday, November 1:

The US Dollar Index (DXY) deflated to multi-day lows and flirted with the critical 200-day SMA in the 103.80 region. The publication of October’s Nonfarm Payrolls will take centre stage, seconded by the final S&P Global Manufacturing PMI, the ISM Manufacturing PMI, and Construction Spending.

EUR/USD picked up further upside impulse and traded closer to the key barrier at 1.0900 the figure amidst sticky inflation figures in the bloc and shrinking bets for a jumbo rate cut by the ECB in December.

GBP/USD faced increasing selling pressure and receded to fresh two-month lows in the 1.2840 zone despite the US Dollar’s offered stance and the perceived as favourable release of the Autumn Budget on Wednesday. The Nationwide Housing Prices are due seconded by the final S&P Global Manufacturing PMI.

USD/JPY plummeted to weekly lows and retested the sub-152.00 region after the BoJ kept rates unchanged but left a potential hike on the table for later in the year. The final Jibun Bank Manufacturing PMI will be published.

AUD/USD left behind the initial weakness and advanced modestly, although another test or surpass of the 0.6600 hurdle remained elusive. The final Judo Bank Manufacturing PMI will be unveiled along with Producer Prices, Home Loans, and Investment Lending for Homes.

Prices of WTI rose markedly and managed to reclaim the key $70.00 mark per barrel and above in response to prospects for strong US demand and speculation that the OPEC+ could delay its planned oil output boost in December.

Gold prices retreated to three-day lows near $2,730 per ounce troy on the back of some profit taking, while the broader outlook is seen constructive. Silver prices followed suit and tumbled to multi-day lows near $32.50 per ounce.

• US Dollar continues struggling as buyers take a breather.
• US PCE Prices Index fell to 2.1% yearly in September, while the core inflation remains steady at 2.7%.
• US Jobless Claims fall to 216K, against market expectations of an increase to 230K.

The US Dollar Index (DXY) trades softer on Thursday despite persistent inflation in the United States, as measured by the Personal Consumption Expenditure (PCE) Prices Index. Additionally, the number of Initial Jobless Claims decreased more than expected for the last week of October, but the Greenback continues struggling for traction in the latter half of the week.

The DXY index has displayed a mixed path amid conflicting economic data. Strong ADP Employment Change figures and upwardly revised September ADP data were offset by downwardly revised Q3 GDP growth. The upcoming Nonfarm Payrolls (NFP) report on Friday could significantly impact the DXY's direction.

Daily digest market movers: US Dollar eases on profit-taking despite strong data

• The US PCE Prices Index rose moderately by 2.1% YoY in September, lower than the previous 2.2% but below the consensus of 2.2%.
• Core PCE, more relevant for the Fed, remained steady at 2.7%, against market expectations of a decline to 2.6%.
• Despite market consensus expecting an increase to 230K, Initial Jobless Claims fell to 216K in the week of October 25.
• Economists predict the the NFP to hit 113K new payrolls in October, significantly lower than September's 254K. The Unemployment Rate is anticipated to remain unchanged at 4.1%.
• Market participants will closely monitor employment data for insights into the Fed's interest rate decision-making.
• As for now, markets are expecting a 25 bps cut at next week’s Federal Open Market Committee meeting next week.

DXY technical outlook: DXY index consolidates near 104.50 support

The DXY index remains consolidating, possibly preparing to retest the 200-day SMA support at 103.50. The Relative Strength Index (RSI) remains elevated near overbought territory but is trending down. The Moving Average Convergence Divergence (MACD) indicator is generating smaller green bars, indicating a weakening momentum.

Supports: 104.50, 104.30, 104.00Resistances: 104.70, 104.90, 105.00

• Dow Jones index pressured by rising Treasury yields and significant losses in Microsoft (-5.37%) and Meta (-4%) amid disappointing mega-cap tech guidance.
• Sentiment turns cautious as investors brace for the US presidential election, VIX up over 11%.
• Key support levels for DJIA lie at 41,564 and the 100-day SMA at 40,856, while resistance remains at 42,122 and the October 31 high of 42,460.

The Dow Jones Industrial Average (DJIA) plummeted over 200 points or more than half a percentage point during the North American session on Thursday. US Treasury bond yields spiked, sparked by a jump in global bond yields as traders digested the UK budget. At the same time, Microsoft (MSFT) and Meta (META) dropped by over 5.8% and 4% each, while investors braced for the release of Apple (APPL) and Amazon (AMZN) earnings reports.

Sentiment shifted sour as investors prepare for next week's US election, while US data hinted the Federal Reserve (Fed) wouldn’t need to take aggressive steps to ease policy as jobs data was solid. The US 10-year Treasury note rose as high as 4.333% in the session, while the US Dollar Index (DXY) clung to the 104.00 figure.

Quincy Krosbye of LPL Financial said, “The market overall has been disappointed with mega-tech guidance.” He added that the US presidential election on November 5 would bring more uncertainty, causing a spike in volatility. The CBOE Volatility Index (VIX) rises over 11.46% to 22.67 at the time of writing.

The US Personal Consumption Expenditures (PCE) Price Index dipped in October from 2.2% to 2.1% YoY as expected. Meanwhile, the Fed’s favorite inflation gauge, the core PCE, rose by 2.7% annually, unchanged from September, decreasing traders' hopes for a more dovish US central bank.

Other data showed that Initial Jobless Claims for the week ending October 26 fell to a five-month low. It came at 216K, below estimates of 230K and the previous reading of 227K.

After the data, the CME FedWatch Tool shows odds for a 25 bps rate cut by the Fed reaching 95%, down from 97% a day ago. This would leave rates in the 4.50%-4.75% range.

Dow Jones news

On Wednesday, Microsoft revealed its fiscal Q1 2025 earnings. The company revealed that earnings per share (EPS) were $3.30, exceeding estimates of $3.11, and revenue was $65.59 billion, above forecasts of $64.51 billion. Digging deep into the data, cloud revenue rose to $38.9 billion, above estimates of $38.11 billion, while Intelligent Cloud revenue was $24.09 billion.

At the same time, Amgen (AMGN) earnings beat estimates, but revenue fell short of Wall Street’s consensus. EPS was $5.58 (consensus of $5.11), while revenue was expected at $8.52 billion but was reported at $8.50 billion.

Although the DJIA extends its losses, Verizon (VZ) is up 2.69% at $42.39 a share, followed by Amgen, up 2.69% at $320.59, and Walt Disney (DIS), gaining 1.12% at $96.15. The three main losers are Microsoft, losing over 5.37% to $409.30, followed by Amazon, down 3.12% at $186.72, and Boeing (BA) fell 3.09% at $149.52.

Dow Jones price forecast

The Dow Jones Industrial Average dropped below 42,000 points and extended its losses toward 41,692, below the 50-day Simple Moving Average (SMA) at 41,928. If bears push the DJIA below the 50-day SMA, look for further losses, as they could test the September 2 high turned support at 41,564. If surpassed, traders could test 41,000 ahead of the 100-day SMA at 40,856.

Conversely, if buyers reclaim 42,000, look for a test of the October 30 low, which turned resistance at 42,122. Once cleared, the next stop would be the October 31 high at 42,460.

Otherwise, if the Dow extends its losses below 42,000, then 41,500 would provide the first support.

The momentum shifted to bearish even though the Relative Strength Index (RSI) remains bullish. Nevertheless, it’s aiming downward, accelerating to clear its neutral line.

Dow Jones daily chart

• USD/CAD regains footing as anticipation for another Bank of Canada interest rate cut mounts due to flat economic growth in August.
• US PCE core inflation remains at 2.7% in October, slightly above market expectations.
• US Initial Jobless Claims fell to 216K in the week ending October 25, below the market’s consensus.

The USD/CAD pair gained traction on Thursday, rising by 0.15% to 1.3920. This uptick came as markets digest the United States Personal Consumption Expenditures (PCE) Price Index from September and weekly US Jobless Claims unexpectedly fell.

The Canadian Dollar (CAD) remains under pressure following the Bank of Canada's (BoC) decision to aggressively cut interest rates by 50 basis points (bps) to 3.75%, a larger-than-expected move. The market anticipates further policy easing by the BoC at its next meeting in December, contributing to the CAD's weakness. The dovish bet also rose due to soft Canadian Gross Domestic Product (GDP) data released on Thursday.

Daily digest market movers: CAD weak due to soft GDP figures

• Flat economic performance in Canada, with GDP remaining stagnant in August and growing by a mere 0.1% in July, weighs on the Canadian Dollar .
• Subdued economic growth in Canada is expected to prompt the BoC to lower interest rates again in December.
• On the US front, the US PCE grew at a steady 2.1% yearly pace in October, down from September's 2.2%.
• Core inflation was maintained at 2.7%, above the market consensus expectation of 2.6%.
• US Jobless Claims unexpectedly fell to 216K in the week of October 25, indicating a robust labor market. 230K was expected.
• For Friday, economists estimate a modest 113K job creation figure in the October Nonfarm Payrolls number, lower than the previous month's 254K.
• The Unemployment Rate is projected to remain steady at 4.1%.

USD/CAD technical outlook: Pair trades sideways with bullish bias

The USD/CAD is trading sideways with a slightly bullish bias. The Relative Strength Index (RSI) is at 76, in the overbought area, suggesting that buying pressure is intense. The Moving Average Convergence Divergence (MACD) is flat, suggesting that buying pressure is taking a breather. This combination of signals indicates that the pair is poised to consolidate in the next several sessions. 
 

• EUR/GBP bounces off key lows and rallies strongly. 
• Too soon to say whether the pair is reversing trend or correcting, however, upside is strong so far. 

EUR/GBP has bounced off key support (gray dashed line) at multi-year lows and risen over a percentage point to trade above 0.8400 on Thursday. 

EUR/GBP 4-hour Chart 

The pair has risen very steeply over the last two days and this could be a sign the short-term trend is reversing and turning higher. If so the bias will be to the upside given the technical analysis principle that “the trend is your friend”. It is too early to be sure this is the case however. 

It is also possible to characterize EUR/GBP as merely correcting back and forming a common three-wave abc correction in the process. This would imply price will roll over after wave c ic completed and possibly even fall back down to the 0.8300 lows. 

The speed and strength of the rally over the last 48 hours, however, suggests EUR/GBP may not just be forming an abc correction, but that it could be completely reversing trend and turning bullish. Ultimately, evidence is required to be confident of such a reversal.

The Relative Strength Index (RSI) momentum indicator entered the overbought zone (above 70) this period, however, we will not know whether it remains there until the current candle closes. At the moment that looks likely. 

If RSI closes above 70 then it will be a sign for long-holders not to add to their positions, since there is a material risk of the price pulling back.

Hurricanes and the Boeing strike are the name of the game in October, and we expect this combination of shocks to heavily (but temporarily) distort this month's jobs figures. Underlying this, though, high-frequency data was already pointing to a slower month of hiring than September, TDS’ analysts note,

US elections may cause further USD rallies

“Given the crowded data and event schedule, markets may struggle with the reaction to the payroll report unless it is significantly above or below consensus. We expect rates to bull steepen if our forecast for a notably weaker payroll report proves correct, but the upcoming US election and FOMC meeting could blunt the impact of a data surprise.”

“Given the unique and noisy circumstances of this report, markets should not draw any meaningful signal and as US data in aggregate has been relatively more resilient. Our positioning indicators now flag the USD as long which does pose a risk to further USD strength.”

“Catalysts for further USD rallies now lie in the outcome of US elections particularly if the risk of a Trump Presidency is realized with tariffs and tax cuts.”

• GBP/USD breaks below the 100-day SMA at 1.2975, with further downside possible if it closes below the 1.2900 mark.
• Key support lies at 1.2885, with the 200-day SMA at 1.2807 as the next target for sellers.
• Resistance emerges at 1.2950/60, with RSI signaling bearish momentum approaching oversold conditions, potentially capping a rebound.

The Pound Sterling dropped to a new two-month low of 1.2885 against the Greenback during the session, as UK Gilts rose sharply following the budget release. However, the GBP/USD has recovered some ground yet is losing over 0.30% and trades at 1.2918.

GBP/USD Price Forecast: Technical outlook

The GBP/USD has broken below the 100-day Simple Moving Average (SMA) at 1.2975, extending its losses below the ascending channel support trendline, paving the way for further downside.

Although the 1.2900 figure was cleared, Pound sellers must achieve a daily close below it. In that outcome, the GBP/USD's next support would be 1.2885, the day’s low, followed by the 200-day SMA at 1.2807.

Conversely, if buyers keep the GBP/USD afloat above 1.2900, the first resistance would be a previous support trendline at around 1.2950/60 before bulls can test 1.2999.

Oscillators favor further GBP/USD downside, as the Relative Strength Index (RSI) deepened its fall in bearish territory, about to reach oversold conditions.

GBP/USD Price Chart – Daily

• AUD/USD resumes its autumnal descent after a brief pullback. 
• The pair is close to oversold levels, however, with increased risks of a recovery evolving. 

AUD/USD continues its October fall after a brief pull back. The pair is in a short and medium-term downtrend which, given the technical maxim that “the trend is your friend” is likely to extend south. 

AUD/USD Daily Chart

Despite the recent run of weakness, the Aussie pair is very close to reaching oversold levels (below 30) according to the Relative Strength Index (RSI) momentum indicator. If it enters oversold on a closing basis it will be a sign advising short holders not to add to their bearish bets as there is an increasing risk of a recovery. The pair looks a little over extended and the meat of the decline appears to have run its course. 

Support from previous key lows lies at 0.6465 - 0.6475 (May 1 swing low, cluster of closes in early August), and if the pair falls to that level it will probably bounce, consolidate or possibly even reverse trend. 

• NZD/USD prints a fresh over 11-week low below 0.5950 as the US Dollar rebounds.
• The US Dollar bounces back in the aftermath of the lower US Initial Jobless Claims data.
• Investors expect the RBNZ to cut interest rates further this year by 50 bps to 4.25%.

The NZD/USD pair refreshes a more than 11-week low slightly below 0.5950 in North American trading hours on Thursday. The Kiwi pair weakens as the US Dollar (USD) bounces back after the release of the United States (US) Initial Jobless Claims data for the week ending October 25. The initial reaction from the US Dollar was bearish after the data release, however, it recovers quickly as claims came in surprisingly lower than expected.

The US Dollar Index (DXY), which tracks the Greenback’s value against ix major currencies, rebounds from the day’s low of 103.80 and turns flat, at the time of writing.

Individuals claiming jobless benefits for the first time were lower at 216K against estimates of 230K and the former reading of 228K. This has diminished fears of labor demand slowing in the near term. On Wednesday, unexpectedly upbeat ADP Employment Change data also pointed to an improvement in the job market. The agency reported that 233K workers were hired by the private sector in October, significantly higher than 159K in September.

For more cues on the current labor market health, investors will focus on the US Nonfarm Payrolls (NFP) data for October, which will be published on Friday.

Meanwhile, the New Zealand Dollar (NZD) remains under pressure on expectations that the Reserve Bank of New Zealand (RBNZ) will cut interest rates gain by a larger-than-usual size of 50 basis points (bps) in its monetary policy meeting on November 27. This would push the Official Cash Rate (OCR) lower to 4.25%.

• USD/CAD exhibits mild correction after revisiting 1.3950.
• Lower US Initial Jobless Claims and higher private payrolls have signaled an improvement in labor market health.
• Canadian economic growth remained flat in August, as expected.

The USD/CAD pair struggles to establish above the key support of 1.3900 in Thursday’s North American session. A one-sided rally in the Loonie pair appears to have paused, with investors focusing on the United States (US) Nonfarm Payrolls (NFP) data for October, which will be published on Friday.

Economists expect the economy to have added 113K fresh payrolls, significantly lower than 254K in September. The Unemployment Rate is expected to have remained steady at 4.1%. Investors will pay close attention to the employment data as it will significantly influence market expectations for the Federal Reserve (Fed) interest rate path, given that officials are confident about inflation remaining on track to the bank’s target of 2%.

Meanwhile, a few job-related indicators have pointed to an improvement in labor market conditions. Initial Jobless Claims for the week ending October 25 came in lower at 216K than estimates of 230K. Wednesday’s ADP Employment Change data showed a robust addition of payrolls by the private sector.

In the Canadian region, flat economic performance is expected to keep the Canadian Dollar (CAD) on the backfoot. Statistics Canada reported that the monthly Gross Domestic Product (GDP) was flat in August, as expected. While the economy grew by 0.1% in July. Subdued economic performance is expected to prompt the Bank of Canada (BoC) to cut interest rates again in its monetary policy meeting in December.

USD/CAD faces mild correction after revisiting the two-year high of 1.3950. The near-term outlook of the Loonie pair remains firm as the 20-day-Exponential Moving Average (EMA) near 1.3800 is sloping higher.

The 14-day Relative Strength Index (RSI) takes a breather after turning oversold around 75.00. However, the overall status of the RSI (14) points to a strong bullish momentum.

More upside would appear if the asset breaks above the immediate high of 1.3950. The scenario will pave the way for the psychological resistance of 1.4000 and the round-level resistance of 1.4100.

On the contrary, a downside move below October 29 low of 1.3875 will expose the asset to October 15 high near 1.3840, followed by the round-level figure of 1.3800.

USD/CAD daily chart

• Sticky PCE Prices Index data and an unexpected decline in Jobless Claims have provided support to the US Dollar.
• Earlier today a hawkishly-tilted Ueda had pushed the Dollar the weekly lows right below 152.
• The pair consolidates near highs with all eyes on the NFP report.

The Dollar’s reversal witnessed during Thursday’s Europen session has found support at the 152.00 area. The pair has returned to levels close to 153.00 supported by sticky inflation and lower Jobless Claims data.

The US PCE Prices Index has kept growing at a 2.1% yearly pace, as widely expected. The core reading, with higher relevance from the monetary perspective, has remained steady at 2.7% against expectations of a 2.6% reading.

Beyond that, US Jobless claims declined to 216K in the week of October 25, against market expectations of an increase to 230K, from the upwardly revised 228K in the previous week (227K initially reported).

In Japan, BoJ’s Governour, Kazuo Ueda gave a fresh boost to the Yen earlier today. The bank kept interest rates unchanged but Ueda reiterated its commitment to normalizing monetary policy, hinting at a rate hike in December.

From a technical perspective, the pair remains moving within a horizontal range with investors awaiting Friday's NFP data.  Immediate support at 151.65. Below here, the next support is 150.60. Resistances are the previous support, at 152.77, and October’s peak, at 153.85.
 

Clearly, the market has now nearly priced out the entire rise in supply risk premia associated with the conflict in the Middle East. Traders have concluded that this chapter of the conflict has ended, but at the very least, this geopolitical equilibrium is fragile. The adage ‘show me the lost barrels’ continues to win out on a more cautious approach, particularly as the market's focus shifts to the OPEC's upcoming decision which could potentially bring back unwanted barrels to market, TDS’ Senior Commodity Strategist Daniel Ghali notes.

OPEC's upcoming decision can bring back unwanted barrels

“Our return decomposition framework suggests that recent reports suggesting the group is considering a further delay to their planned production hikes have supported prices over the last session, but kicking the can may no longer be sufficient to bolster prices and may instead only help crude prices find a floor.”

“In turn, barring a further escalation in the conflict, the onus remains on the demand-side of the equation to sustainably lift prices from their current levels. Nascent signs of reflationary tailwinds in the cross-section of commodities prices have provided a cross-current, but the magnitude of these trends remains to be seen.”

“In the near-term, our simulations of future prices suggest that future CTA flow is fairly distributed, such that potential flows are no longer asymmetric. Overall, this set-up does not point to a mispricing of risks worth engaging in without a geopolitical edge.”

• EUR/MXN appears to be breaking out of the top of a Bull Flag price pattern. 
• Such patterns signal the likelihood of more upside evolving. 

EUR/MXN is in a medium and long-term uptrend within which it appears to have completed a Bull Flag continuation pattern. These patterns are bullish and are composed of a steep rally, known as the “flagpole”, followed by a rectangular or square consolidation phase, called the “flag square”.  

EUR/MXN Daily Chart 

In the case of EUR/MXN the flagpole probably began life on August 15, leading to a rally up to a peak on September 5 before which price fell and began forming the flag square section. This now looks complete and the price is actually in the process of breaking out of the top of the flag – a sign it is about to start rallying higher again. 

A break above the 22.07 September 26 high would provide confirmation for the pattern and likely lead to a continuation up to a preliminary target at 22.40, the September 5 peak followed by 22.52 (flat gray dashed line on chart), the actual target calculated using the pattern. The target is calculated by extrapolating the length of the flagpole higher, in the usual method for forecasting these patterns. 

•  Initial Jobless Claims rose to 216K, down from the previous week's 228K.
• Continuing Jobless Claims climbed to 1.862M in the week ending October 18.

US citizens filing new applications for unemployment insurance rose to 216K for the week ending October 25, as reported by the US Department of Labor (DoL) on Thursday. This print came in below the consensus forecast and the previous week's tally of 228K (revised from 227K).

The report also highlighted a seasonally adjusted insured unemployment rate of 1.2%, while the four-week moving average retreated to 236.50K, marking an decrease of 2.250K from the prior week’s revised average.

Moreover, Continuing Jobless Claims shrank by 26K to reach 1.862M for the week ending October 18.

Market reaction

The Greenback extends its weekly leg lower and drags the US Dollar Index (DXY) to multi-day lows in the 103.90-103.85 band, a region also coincident with the key 200-day SMA.

• Gold edges lower after topping at a new record high of $2,790 on Thursday. 
• The yellow metal sees downside pressure from rising US Treasury bond yields following stronger US employment data. 
• Hopes of a Middle East ceasefire and the probability of a Trump victory are also weighing on Gold.   

Gold (XAU/USD) pulls up and reverses from its new record high of $2,790 on Thursday. The precious metal is pulling back partly due to rising US Treasury bond yields, which reflect elevated interest rate expectations. These, in turn, reduce the attractiveness of  non-interest-paying assets such as Gold. 

Strong US ADP employment data on Wednesday helped provide an antidote to the weak US JOLTS Job Openings data released earlier in the week because it suggested the US labor market was not in as bad shape as feared. This is reducing bets the Federal Reserve (Fed) will need to slash interest rates to boost employment. The market-based probabilities, using the price of interest-rate swaps as a guide, forecasts an almost 100% chance of a 25 basis point (bps) or 0.25% cut by the Fed in November but a 70% probability in December.  

Bond yields might be further rising because of the increasing odds of the Republican nominee Donald Trump winning the race to the White House. Trump’s preference for lower taxes, higher government borrowing and tariffs on foreign imports would probably be inflationary for the economy and lead the Fed to keep interest rates higher for longer.

This, and the emergence of a glimmer of hope on the horizon for a ceasefire in the Middle East – thereby lowering safe-haven demand for the yellow metal – is creating a headwind for Gold price in its onward march higher. 

Gold dips as bearish factors coalesce

Gold price is backing off from the record highs it scaled on Wednesday as the chances of a Trump presidency steadily increase.

Polling website FiveThirtyEight’s prediction model gives Trump a 52% chance of winning versus Vice President Kamala Harris’ 48%. Betting website OddsChecker offers fractional odds of 11/18 (or 62.1%) for a Trump win against 28/17 (or 37.8%) for a Kamala Harris victory. The latest opinion polls, however, still place Harris marginally in the lead with 48.1% versus 46.7% for Trump. 

In addition, Gold may be falling on reduced safe-haven flows amid hopes of a ceasefire in the Middle East. The US has sent a new envoy to broker a peace deal between Israel Hamas and Hezbollah. Early signs suggest Israel is open to negotiation after successfully pushing back Hezbollah from southern Lebanon, decapitating its hierarchy and severely reducing Hamas’ capabilities in Gaza, according to Bloomberg News. The threat of Iran opening a direct front against Israel, however, remains a potential spoiler. 

That said, the war in Ukraine continues to fuel geopolitical risks after the escalation of North Korean troops entering the war on the side of Russia. 

Gold could also continue to see gains as the US Dollar leaks lower, despite rising bond yields (normally bullish for the Greenback) because Gold is mostly priced and traded in USD. The US Dollar Index (DXY) is down over a tenth of a percent on Thursday – down almost a third of a percent overall this week so far – trading just below 104.00.

Technical Analysis: Gold pulls back after breaking to new highs

Gold has broken out of the mini range it was stuck in between $2,708 and $2,758 and risen up to a new all-time high of $2,790 on Wednesday. 

Overall, 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,” tilts the odds in favor of more upside. 

XAU/USD Daily Chart

The break above the top of the range helps confirm a continuation up to the next target level, probably at the big-figure $3,000 level (round number and psychological level). 

A deeper pullback would find support initially from the top of the old range at $2,758, then $2,750. The overall uptrend, however, would be likely to resume afterward. 

A break above $3,000 would activate the next upside target at $3,050. 

• The US Dollar depreciates for the second consecutive day and approaches support at 0.8645.
• The focus today is on the US PCE Prices Index but the highlight of the week is Friday's NFP report.
• A break of 0.8645 would confirm a double top at 0.8700.

The US Dollar is on the back foot on Thursday, with investors bracing for the release of October’s PCE Prices Index data. The USD/CHF is testing the support area at 0.8645 after being rejected at the 0.8700 area.

The US PCE Prices Index is expected to show that inflationary pressures kept cooling at a gradual pace in October. If there are no surprises, these figures would endorse the idea of a 25 bps cut next week.

US Nonfarm Payrolls might accelerate US Dollar's correction

The week’s highlight, however, is Friday’s NFP report, which is expected to show a significant decline in job creation. A too-weak reading might trigger speculation of steeper rate cuts by the Fed, which would hurt the US Dollar.

From a technical perspective, a break of 0.8645 would confirm a double-top formation at 0.8700. This figure is a common indicator of a trend shift and would increase bearish pressure towards 0.8615.

Resistances are 0.8700 and 0.8745.

The UK budget update largely conformed to expectations. The government will raise taxes and borrowing significantly but will also spend heavily on priority projects, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

GBP is trading firmer

“UK markets largely took the news in their stride. UK Gilts weakened in the budget aftermath but losses reflected the generally weaker tone of fixed income markets (where core European bonds actually performed worse).”

“UK rates markets continue to anticipate a November rate cut from the BoE but, with the budget expected to give the economy a lift relative to its prior state, expectations for a December follow up have been pared back significantly. Rate sentiment continues to weigh on Gilts today but may add to GBP underpinning in the short run at least.”

“Choppy markets yesterday have muddied the near-term outlook for the GBP. While spot is holding within its recent trading range, heavy selling pressure yesterday has left a dent in the intraday and daily charts which may stifle the week-long grind higher in Cable from the low 1.29s. Intraday support does look firm around 1.2935 but a move above 1.3043, yesterday’s high, is needed to give the pound a clearer technical lift now.”

Eurozone CPI rose 2.0% this month, according to the preliminary estimate released earlier. That is a little above the forecast of 1.9% and above September’s 1.7% read, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

EUR nudges higher on the day

“The data helped sway market pricing further towards a 25bps ECB cut in December (29bps of easing now priced in) and narrow 2Y EZ/US spreads a little further to provide the EUR with a small tailwind.”

“Consolidation signals from earlier this week are developing into a little more obvious technical strength for the EUR on the short-term chart. EUR gains through 1.0840/45 yesterday suggest a short-term low is in while gains through 1.0875 should allow for the EUR rebound to develop a little more momentum to test the low/mid 1.09s.”

• Silver prices depreciate for the second consecutive day to approach support at $33.10.
• A softer US Dollar is keeping precious metals from retreating further.
• Confirmation below $33.10 would increase bearish pressure toward $32.10.

Silver Prices (XAG/USD) are trading lower for the second consecutive day on Thursday, with price action approaching a key support area at $33.10.following Wednesday’s reversal at the $34.50 area.

The lower high posted on Wednesday and price action breaking below the 4 H 50 SMA suggest that the pair might have reached the end of its bullish cycle and is ready for a corrective reversal.

On the other hand, the US Dollar is showing a moderately bearish tone over the last sessions.  This will likely keep precious metals from retreating further until the US PCE prices index and especially Friday’s NFP report are out. 

A clear break of the previous resistance, now turned support at the mentioned $33.10 area would confirm that view and add selling pressure towards the 38.6% Fibonacci retracement of the September-October bullish run, at $32.10 ahead of $31.30.

To the upside, resistance levels remain at $34.50, and the long-term high, at $34.85.
 

• EUR/JPY retrieves half of its intraday losses as BoJ Ueda didn’t provide meaningful cues about more rate hikes in December.
• The BoJ left its key borrowing rates steady at 0.25% in its October policy meeting.
• High GDP growth and hot inflation in the Eurozone have strengthened the Euro.

The EUR/JPY pair recovers some of its intraday losses in the European trading hours on Thursday. The cross faced sharp selling pressure in the Asian session after the Bank of Japan’s (BoJ) interest rate decision in which it left interest rates unchanged at 0.25%, as expected.

The asset has bounced back after BoJ Governor Kazu Ueda’s commentary in an early European session in which he refrained from providing any significant cues about whether the central bank will raise interest rates again in the last monetary policy meeting of this year in December. “We will scrutinize data available at the time at each policy meeting, and update our view on the economy and outlook in deciding policy,” Ueda said, The Japan Times reported.

The Japanese economy needs to be vigilant to domestic recovery and the impact of the United States (US) economy on them due to presidential elections on November 5 in which the traders seem to be pricing in the victory of former President Donald Trump over current Vice President Kamala Harris.

Though investors have underpinned the Euro (EUR) against the Japanese Yen (JPY) on Thursday, the shared currency is more than 6% higher versus the Yen in the past six weeks. Still, the Euro is outperforming its major peers on Eurozone robust preliminary Q3 Gross Domestic Product (GDP) growth and flash hot inflation data for October.

The Eurozone economy expanded at a faster-than-expected pace of 0.9% compared to the same quarter of the preceding year against 0.6% growth in the previous quarter. Meanwhile, the flash Harmonized Index of Consumer Prices (HICP) accelerated at a faster pace to 2% from 1.7% in September.

The Canadian Dollar (CAD) is modestly softer on the session amid weak risk appetite but it is at least holding recent ranges, Scotiabank’s Chief FX Strategist Shaun Osborne notes.   

CAD pinned back in range

“My fair value model is unchanged at 1.3931 today which may herald a minor reprieve for the CAD, especially if we do see a broader pullback in the USD develop. Scope for CAD gains is, however, fundamentally quite limited in the short run. Industry-level GDP is expected to come in flat for August, in line with the flash estimate released with the July data (+0.2% M/M).”

“Sluggish growth should already be factored into the CAD at this point so an on expectations outcome may not have too much impact on spot. Still, the contrast between Canadian and US growth momentum will underscore the cyclical headwinds which will limit scope for CAD gains now.”

“There is no obvious relenting in the USD uptrend and spot got pretty close to a retest of the August peak (1.3947) yesterday before drifting back. Another potential inside range signal is developing on the daily chart today, however, and the USD rise remains very, very stretched, according to the daily studies. Resistance remains 1.3945/50. Support is 1.3890/95.”

The risk mood has spilled over into FX where high beta currencies are underperforming somewhat while the Japanese Yen (JPY) and Swiss Franc (CHF) are leading gains among the majors, Scotiabank’s Chief FX Strategist Shaun Osborne notes.   

JPY outperforms on the day

“The JPY got an added kicker from BoJ Governor Ueda who kept the door open to higher policy after today’s hold decision. Ueda noted that the domestic political backdrop would not stop the central bank from tightening policy.”

“Swaps reflect a little more risk of a 10bps tightening (8.5bps priced in) for the December BoJ decision.”

It’s month-end and there is a clear whiff of risk aversion across (most) markets this morning. There is a lot of red across the equity screens after disappointing earnings data from Microsoft and Meta, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

USD mixed to softer overall

“US growth data came in a little shy of expectations yesterday but the general trend in positive US data surprises is extending overall and, under the hood, the Q3 GDP data looked pretty solid, with real final sales to domestic purchasers (ex-ing out government, inventories and net exports) rising 3.2%.”

“Today brings ECI, weekly claims and personal income/spending and core PCE data at 8.30ET (plus the Chicago PMI at 9.45ET). Spending is expected to be up 0.4% M/M while the core PCE is forecast to rise 0.3% in the month but slow to 2.6% in the year. While G10 FX is mixed, the DXY retains a somewhat softer undertone despite the positive data run.”

“It’s marginal but the index is putting a little more pressure on noted support at 103.93. After the DXY’s three failures at 104.55 over the past week, a break under support would suggest a drop in the index to 103.3 or so. Some consolidation in FX would not surprise ahead of next week’s major event risk.”

Headline inflation rose more-than-expected to the ECB's inflation target at 2.0% in October. Core inflation and core services inflation remained unchanged, while the unemployment rate was revised to a record low at 6.3%, Nordea’s economists Anders Svendsen and Tuuli Koivu note.

Most ECB speakers argue inflation victory within sight

“The ECB had clearly stated that inflation was expected to rise towards year-end due to base effects, yet markets reacted to higher inflation in Germany and Spain yesterday. Because what matters most to the ECB, we think, is the seasonally-adjusted momentum in core services prices, and those were also the ones that increased in yesterday’s German release.”

“When we’re still not too worried, it is because those increases were likely temporary, driven by two specific categories, and because of the news from the German car industry about factory closures, adding weakness to the labour markets going forward and lowering the risk to too high wage growth. Most ECB speakers including President Lagarde have argued that inflation victory is within sight.”

If the ECB is to cut rates by 50bp it will most likely be because of uncertainty over the growth and the labour markets rather than too low inflation. Today's release of the uneployment rate was revised to a record-low at 6.3%! It still looks like the ECB will have a big downward revision to its inflation projection to do at it’s December meeting, which will keep markets speculating about a 25 or 50bp rate cut.”

The Mexican economy grew surprisingly strongly in the third quarter, according to the first estimate. Instead of 0.6%, according to the Bloomberg median, it grew by almost 1% quarter-on-quarter, the highest rate in a year, Commerzbank’s FX analyst Michael Pfister note.

Risk of Trump becoming president weighs on peso

“This was probably mainly due to a surprisingly strong increase in agricultural products, which seem to have recovered from the natural disasters in the first half of the year. However, one should not hope that this means the end of Mexico's period of weakness. It is more likely that this was an outlier and that growth in the coming quarter will be more in line with the recent trend.”

“Despite the surprisingly good figures, the Mexican peso did not really benefit from them. In fact, USD/MXN hit a two-year high shortly after the data was released. For now, the peso is focused on other things: the more likely it becomes that Donald Trump will become the new US president, the more the peso will come under pressure.”

“This is because significant tariffs against Mexico become much more likely. So it should come as no surprise that the exchange rate is unlikely to react to Mexican news in the coming days.”

• The US Dollar is losing steam ahead of the release of the US PCE Price Index report.
• A moderately hawkish BoJ Governor Kazuo Ueda and better-than-expected Eurozone GDP figures have weighed on the USD.
• Failure to break the 104.55 resistance has brought 103.90 support into focus. 

The US Dollar Index (DXY) edges down on Thursday, extending the mild losses seen over the last four sessions. Still, the US Dollar (USD) remains near three-month highs and is on track to close its best monthly performance in more than two years. 

US macroeconomic data continues endorsing the rhetoric of a strong economy in a period of global slowdown, which gives the USD a competitive advantage against the rest of the major currencies.

The ADP employment report beat expectations on Wednesday, easing concerns about a deterioration of the labour market and improving investors’ expectations about Friday’s Nonfarm Payrolls (NFP) report.

Daily digest market movers: The US Dollar is lacking momentum ahead of key releases

• Eurozone Consumer Prices Index (CPI) data for October has revealed higher-than-expected inflationary pressures, following a positive surprise in the Q3 GDP. These data dampen hopes of aggressive interest-rate cuts by the ECB, supporting the Euro (EUR).
   
• The Bank of Japan (BoJ) kept interest rates unchanged on Thursday but Governor Kazuo Ueda signaled further monetary normalization if conditions are met. This has given some oxygen to a battered Japanese Yen (JPY), adding pressure to the USD.
   
• The US ADP Employment showed a 233K increase in private-sector payrolls in October, well above the 115K expected. September's reading was revised up to 159K from 143K.
   
• Q3 US Gross Domestic Product data, also released on Wednesday, missed estimates with a 2.8% annualized growth. The figures fell short of the 3% expected but they are still consistent with a solid economy.
   
• Wednesday’s data bolstered the case for gradual easing by the Federal Reserve (Fed) but did not add anything new to significantly alter the outlook about the future path of interest rates. The immediate positive impact on the Dollar faded shortly afterward.
   
• The Personal Consumption Expenditures (PCE) Price Index, the Fed’s inflation data of choice, is expected to show that price pressures continued to ease, with the core reading down to 2.6% yearly from 2.7% in September. The data will be published at 12:30 GMT.
   
• The main attraction will be Friday’s Nonfarm Payrolls (NFP) report, which is expected to show a significant decline in new payrolls. If these figures are confirmed, the US Dollar could correct further. 

DXY technical outlook: Approaching support area at 103.90

The DXY index maintains its bullish bias intact but failure to break the resistance area above 104.55 has increased the bearish pressure, sending prices to test the bottom of the recent range at 103.90.

The 4-hour Relative Strength Index (RSI) shows a bearish divergence, and price action has crossed below the 50-period Simple Moving Average (SMA). These are negative signs. Further depreciation below 103.90 would confirm a deeper correction and bring 103.40 into focus. Resistances remain at at the 104.55-104.75 area and 105.20.

 

• AUD/USD turns sideways after refreshing an 11-week low near 0.6540 ahead of US NFP data.
• The uncertainty over the US presidential elections has weakened the appeal of risk-sensitive assets.
• Inflationary pressures in Australia decelerated sharply in the third quarter of the year.

The AUD/USD pair trades sideways above more than 11-week low of 0.6540 in Thursday’s European session. The Aussie asset consolidates as investors await United States (US) Nonfarm Payrolls (NFP) data for October, which will influence market expectations for the Federal Reserve (Fed) interest rate path in the remainder of the year.

Market sentiment remains risk-averse as investors turn cautious ahead of US presidential elections on November 5. While national polls have indicated tough competition between former President Donald Trump and current Vice President Kamala Harris, traders seem to be pricing in Trump’s victory. Trump is expected to implement protectionist policies, which will have a significant impact on nations that are leading trading partners of the US.

S&P500 futures have posted significant losses in the European session, exhibiting the weak risk appetite of investors. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops slightly below 104.00.

The US NFP report is expected to show that the economy added 115K jobs lower than 254K in September, with the Unemployment Rate remaining steady at 4.1% on Friday. Investors will also focus on the US ISM Manufacturing PMI for October, which is expected to have contracted again but at a slower pace to 47.6 from 47.2 in September.

In the Aussie region, slower-than-expected inflation growth in the third quarter of the year has pushed back market expectations for the Reserve Bank of Australia (RBA) keeping its Official Cash Rate (OCR) at its current levels for a longer period. Year-on-year Consumer Price Index (CPI) decelerated at a faster-than-expected pace to 2.8% from 3.8% in the previous quarter of the year. Annual Trimmed Mean CPI, which is RBA’s preferred inflation gauge, grew slower by 3.5%, as expected.

• The Yen trims losses after Ueda hinted at further monetary tightening.
• US PCE Prices Index and Friday's NFP report will set the Dollar's direction.
• USD/JPY is approaching an important support area above 151,65.

The Dollar has extended its pullback against a somewhat stronger Yen on Thursday as the Bank of Japan Governour, Kazuo Ueda hinted at a further interest rate hike “if conditions are met”.

The BoJ maintained its benchmark interest rate at 0.25%, as widely expected, but Ueda reiterated that the Bank remains committed to normalizing its monetary policy. The Yen appreciated across the board following the press release.

US data will set the Dollar's near-term direction

The focus today is on the US PCE Prices Index release, which is expected to show that inflation continued easing towards the Fed’s 2% target rate.

The highlight of the week, however, will be Friday’s Nonfarm Payrolls. The market consensus anticipates a significant decline although the strong ADP has improved market expectations.

The pair is now approaching the support area above 151.65. Below here, the next support is 150.60. Resistances are the previous support, at 152.77 and October’s peak, at 153.85. 
 

The Hungarian forint’s depreciation is accelerating relative to eastern European peers, especially after a negative Q3 GDP reading. Against the euro, the forint has surpassed the 405 level and seems headed towards the 410 mark. Commerzbank’s EUR/HUF forecast is 415.0 for end-2025. But, this current development does not seem to be just an orderly progression towards such a target, Commerzbank’s FX analyst Tatha Ghose notes.

MNB’s hawkish stance is justified

“The forint is prone to greater volatility and high-beta swings during risk-off episodes, and can get somewhat out of hand, needing emergency responses by MNB. In such scenarios, exchange rate pass-through can become a dominant inflation driver – hence, MNB should like to arrest developments early.”

“What we mean by intervention is that MNB might have to come out and further tweak its monetary policy guidance verbally – possibly warning about a reversal into rate hikes in case the situation worsens.”

“If things were to progress in this direction, government backing in the media would be crucial. Any contradictory remarks by government officials could have a rapidly destabilising effect. Thereafter, in the event that market conditions continued to worsen for external reasons, and EUR/HUF reached say 420, actual rate hikes would become necessary. Even if they would not be strictly necessary for inflation targeting, they would be necessary for the exchange rate – because this would be the market’s way of testing the central bank.”

• The core Personal Consumption Expenditures Price Index is expected to rise 0.3% MoM and 2.6% YoY in September.
• Markets expect the Fed to lower the policy rate by 25 basis points at the next policy meeting.
• Already released quarterly PCE inflation data could diminish the impact of the monthly prints.

The United States Bureau of Economic Analysis (BEA) is set to release the Personal Consumption Expenditures (PCE) Price Index data for September, which is the Federal Reserve’s preferred measure of inflation, at 12:30 GMT.

Although PCE inflation data is usually seen as a big market-mover, this time its impact could be limited due to the fact that quarterly PCE inflation figures were already released within the Gross Domestic Product (GDP) report on Wednesday.

Anticipating the PCE: Insights into the Federal Reserve's key inflation metric

The core PCE Price Index, which excludes volatile food and energy prices, is projected to rise 0.3% in August on month, at a stronger pace than the 0.1% increase recorded in August. Over the last twelve months, the core PCE inflation is expected to edge lower to 2.6% from 2.7%. Meanwhile, the headline annual PCE inflation is seen retreating to 2.1% from 2.2% in the same period. 

On Wednesday, the BEA reported that the PCE Price Index and the core PCE Price Index rose 1.5% and 2.2%, respectively, on a quarterly basis in the third quarter.

Previewing the PCE inflation report, “core PCE is projected to rise 0.3% m/m and print at 2.6% y/y vs. 2.7% in August,” BBH analysts expect, adding that“risks are skewed to the upside because CPI inflation in September ran hot.”

The CME Group FedWatch Tool shows that markets have already fully priced in a 25 basis points (bps) rate cut in November. At the last policy meeting of the year, the probability of another 25 bps rate reduction stands at around 70%, against a 30% chance of a no change in the policy rate. The PCE Price Index figures are unlikely to alter these odds in a noticeable way. 

How will the Personal Consumption Expenditures Price Index affect EUR/USD?

Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief technical outlook for EUR/USD:

“The Relative Strength Index (RSI) indicator on the daily chart remains below 50 even though EUR/USD closed the previous three days modestly higher, highlighting a lack of bullish momentum.”

“On the upside, the 200-day Simple Moving Average (SMA) aligns as a pivot level at 1.0870. In case EUR/USD rises above this level and starts using it as support, technical buyers could take action. In this scenario, 1.0940 (100-day SMA) could be seen as next resistance before 1.1000-1.1010 (round level, 50-day SMA). On the downside, 1.0800 (round level) aligns as first support ahead of 1.0670 (static level from June).”

• Annual core HICP inflation in the Eurozone held steady at 2.7% in October.
• EUR/USD trades marginally higher on the day above 1.0850.

The Harmonized Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred gauge of inflation, rose 2% on a yearly basis in October's flash estimate, Eurostat reported on Thursday. This reading followed the 1.7% increase recorded in September and came in above the market expectation of 1.9%. On a monthly basis, the HICP rose 0.3% after falling 0.1% in September.

The core HICP, which excludes prices of volatile items such as food and energy, rose 2.7% annually, matching the September print.

Market reaction

EUR/USD edges slightly higher following this report and was last seen trading at around 1.0870.

The BoJ's statement didn't present many changes with the fireworks mainly happening during Governor Ueda's press conference, TDS’ FX and Macro Strategist Alex Loo notes.

No Big Changes to the Statement

“Gov Ueda reverts to a policy hawk by offering more hawkish remarks today. He tried to present an open-minded BoJ Board by noting that there is no "preconception on timing of rate hike" but the punchline was his capitulation of his previous comment that the BoJ "has time to mull" on policy options.”

“We maintain our view that the BoJ could hike in Dec'24 given firmer inflation prints and the possibility of a strong wage talk discussion result (i.e., Rengo is suggesting a 5% wage raise next year).”

“While JPY can see some near-term weakness as markets digest the domestic political situation and US elections outcome, we still maintain a medium-term bullish view on the JPY. Note that JPY's massive undervaluation (>20% on LFFV) dovetails with waning government support, and it is in the new government's interest to stem further JPY weakness.”

European Central Bank (ECB) Governing Council Member Fabio Panetta argued on Thursday that monetary conditions in the Eurozone remain restrictive, adding that rates need to come down, per Reuters.

"With the decline in inflation, we need to pay attention to the weakness of the real economy," Panetta said and noted that the ECB must avoid the risk of pushing inflation well below the target.

Market reaction

These comments failed to trigger a noticeable market reaction. At the time of press, EUR/USD was trading at 1.0865, rising 0.1% on a daily basis.

Yesterday, when the British Chancellor of the Exchequer, Rachel Reeves, delivered her budget speech, there was visibly a lot of volatility in the gilt market, the market for British government bonds, and in the foreign exchange market in GBP rates. No wonder. Everyone still remembers that in 2022, the then Tory government under Liz Truss triggered a rather spectacular collapse in the gilt market with its budget plan, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

Every budget is a balancing act

“The events of that time may be a cautionary reminder that even governments can only manage their finances under the restriction of a budget constraint. In other words, for finance ministers, too, there is no free lunch. No matter how many supporters of ‘modern monetary theory’ may claim the opposite. But it's just not that easy with the government budget constraint.”

“Because a rapidly growing economy generates more tax revenue for the treasury, a budget policy that chokes off growth by saving too much is not always the best way to achieve fiscal stability. In theory, a finance minister can even save her way into national bankruptcy. Therefore, every budget is a balancing act.”

“The fact that the British government is relying on tax increases in its budget rather than excessively cutting spending is probably the right decision from the point of view of fiscal stability. But this will only become clear later. Until then, it depends on the gilt traders' opinions. But because every trader knows that it is not their opinion that matters, but the average opinion of all the others, it sometimes takes a little back and forth in prices until an equilibrium is found and every trader believes that all the other traders will be satisfied. In the GBP and Gilt markets alike. That is market mechanics and not a warning from the market to Chancellor Reeves.”

The expanded BRICS – composition now also including Egypt, Ethiopia, Iran and the UAE – met in October in Kazan, Russia, Danske Bank macro analysts report.

13 countries for possible expansion have been agreed on

“The meeting was hosted by President Vladimir Putin who was able to attract heads of states from nearly 20 countries, including Turkey, to Russia. According to Putin, more than 30 countries have expressed a desire to join the forum, and a list of 13 countries for possible expansion has been agreed on. Saudi Arabia has been invited but is yet to formally join.”

“Anti-western attitudes are on the rise in many places across the global south, so it is no surprise many governments sympathise the BRICS whose central aim is to counterbalance the US-led world order. One of the themes in the BRICS+ group is to build an alternative global financial infrastructure to reduce dependence on Western-dominated systems such as SWIFT. We doubt the group can pose a credible challenger any time soon, also, due to internal conflicts.”

“For example, Ethiopia and Egypt have a long-standing dispute related to Ethiopia’s dam project which Egypt says is jeopardizing their water security. There is even a real risk of a proxy war between the two as tensions grow in Somalia’s breakaway region, Somaliland. Egypt signed a defence agreement with Somalia in July, while Ethiopia struck a deal with Somaliland in January to use its Red Sea shores for naval operations.”

• The Pound Sterling rises against its major peers after the UK budget announcement.
• Traders pare back BoE interest-rate cut bets due to upwardly revised inflation forecasts.
• In the US, investors expect the NFP report to show lower labor demand in October.

The Pound Sterling (GBP) outperforms its majority of peers on Thursday as traders have pared back bets that the Bank of England (BoE) will cut interest rates aggressively after the United Kingdom (UK) Labour government announced its first Autumn Forecast Statement on Wednesday. 

The budget presentation from UK Chancellor of the Exchequer Rachel Reeves was filled with the biggest tax increase in almost three decades to repair the hole in public services, which she referred to as “inheritance from Conservatives”.

The major highlight of the UK budget was the collection of taxes worth 40 billion pounds through an increase in employers’ contribution to National Insurance (NI), higher duty on alcohol and tobacco, and a sharp increase in Capital Gains Tax. Reeves allocated higher spending to various areas such as the National Health Service (NHS), affordable housing, funding duty freeze on fuel, and setting up green hydrogen projects.

Meanwhile, the UK’s Office for Business Responsibility (OCR) has upwardly revised inflation forecasts for 2024 to 2.5% from 2.2% projected in March, a revision that also led traders to expect less interest rate cuts by the BoE. The agency also revised inflation forecasts for 2025 significantly higher, to 2.6% from 1.5% previously anticipated.

Going forward, investors will shift focus to the BoE monetary policy meeting, which will be announced on November 7. The BoE is expected to cut interest rates by 25 basis points (bps) 4.75%, according to an October 22-28 Reuters poll.

Meta Title: Daily digest market movers: Pound Sterling gains slightly against US Dollar

• The Pound Sterling edges higher to near 1.3000 against the US Dollar (USD) in Thursday’s London session. The GBP/USD pair gains as the US Dollar drops ahead of a slew of United States (US) economic data to be announced on Thursday and Friday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, tests the 104.00 region.
• The US Dollar falls slightly as lower-than-expected US GDP growth in the third quarter offset a surprisingly upbeat ADP Employment data for October. ADP data showed that private payrolls came in significantly higher at 233K against 159K in September. 
• For more cues on the current status of the job market, investors will pay close attention to the US Nonfarm Payrolls (NFP) data for October, which will be published on Friday. The NFP report is expected to show that the economy added 115K workers, lower than 254K jobs created in September. The Unemployment Rate is expected to remain steady at 4.1%.
• Signs of slower job growth would prompt Federal Reserve (Fed) dovish bets, while robust figures would weaken them. According to the CME FedWatch tool, the central bank is expected to cut interest rates by 25 basis points (bps) in both of the policy meetings to be held in November and December.
• In Thursday’s session, investors will focus on the US Personal Consumption Expenditure Price Index (PCE) data for September, which will be published at 12:30 GMT. The core PCE inflation, which is the Fed’s preferred inflation gauge, is estimated to have grown by 2.6%, down from 2.7% in August.

Technical Analysis: Pound Sterling struggles near 1.3000

The Pound Sterling struggles to break above 1.3000 decisively against the US Dollar. The near-term trend of the GBP/USD pair remains uncertain as it stays below the 50-day Exponential Moving Average (EMA), which trades around 1.3060.

The GBP/USD pair continues to put efforts to hold the lower boundary of a Rising Channel chart formation around 1.2900 on the daily time frame. 

The 14-day Relative Strength Index (RSI) strives to hold above 40.00. A fresh bullish momentum would trigger if it manages to do so.

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 50-day EMA around 1.3060.

Silver prices (XAG/USD) fell on Thursday, according to FXStreet data. Silver trades at $33.59 per troy ounce, down 0.55% from the $33.77 it cost on Wednesday.

Silver prices have increased by 41.14% 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 82.70 on Thursday, up from 82.54 on Wednesday.

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After the excitement of yesterday’s GDP data, today investors are granted another peek into the hedonistic lifestyle of the US consumer. Personal income and consumption data are due, and both should be relatively buoyant. Job security and rising real incomes are powerful forces for supporting economic activity through consumer spending, UBS macro analyst Paul Donovan notes.

Upcoming US and European data may have significance

“The US personal consumer expenditure deflator is also due. This is less dependent on fantasy than the US consumer price measure, although there is still a fantasy element. Market determined prices (very definitely a subset of the overall index) showed a less than 2% y/y increase last month, which does not suggest a meaningly imbalance in economic supply and demand.”

“European October consumer price inflation will be published (the flash estimate) with Italy completing the data from the major economies. Germany’s data was higher yesterday, which may be an idiosyncrasy. Markets are unlikely to be deterred from expecting regular rate cuts.”

“US initial and continuing jobless claims data may be of more interest as these are reliable snapshots of a subset of the US labor market.”

As expected, the Bank of Japan left its key interest rate unchanged at 0.25% at the end of its meeting this morning. It's a way of acknowledging the current political risks, given the uncertain outcome of the parliamentary elections at home and the upcoming US elections, Commerzbank’s FX analyst Volkmar Baur notes.

JPY may start to weaken again

“The Bank of Japan also left its economic forecasts pretty much the same as they were three months ago. Next year's growth was revised up a little, while inflation expectations for the coming year were revised down a little in the wake of lower energy prices. The Bank of Japan still thinks rates should go up if the economy keeps growing as expected.”

“We're still waiting to hear why. They're expecting growth of around 1% and inflation of 1.9%. Other central banks would probably be happy – job done – and would simply wait and see how the economy develops, in order to be able to react to any unforeseen events by tightening or loosening. It's not clear why they're pushing to raise interest rates when the forecasts show that price stability will be achieved.”

“I can see this desire to raise interest rates again leading to a further interest rate hike in December. This would also make the yen stronger in the meantime. I don't think there'll be any more interest rate hikes next year though, which should mean the JPY will start to weaken again.”

• Silver price tests immediate support around the nine-day EMA at the $33.60 level.
• The 14-day RSI remains above the 50 mark, suggesting the bullish outlook prevails.
• Silver price may explore the region around the upper boundary of the ascending channel at $35.10.

Silver price (XAG/USD) continues to decline, trading at around $33.60 during the European session on Thursday. Analysis of the daily chart indicates a bullish bias, as Silver price consolidates within an ascending channel.

Furthermore, the 14-day Relative Strength Index (RSI) remains above the 50 mark, supporting the prevailing bullish outlook. However, a decline below 50 could signal a shift toward bearish sentiment.

However, the Moving Average Convergence Divergence (MACD) line is positioned above the signal line, indicating a potential bearish signal. A bearish crossover could suggest a shift in momentum from bullish to bearish, signaling a possible sell opportunity. Nonetheless, since both lines remain above the centerline (zero line), this suggests that the overall trend remains bullish.

On the upside, the Silver price may target the psychological level of $35.00, followed by the upper boundary of the ascending channel at $35.10. A breakout above this level could propel the price of the grey metal toward the psychological level of $36.00.

Regarding support, Silver price is testing the nine-day Exponential Moving Average (EMA) at $33.60, with the 14-day EMA at $33.27 serving as the next support level. A drop below this latter level could increase selling pressure, potentially pushing XAG/USD down to the lower boundary of the ascending channel around the psychological level of $33.00.

XAG/USD: Daily Chart

Yesterday's GDP data for the third quarter disappointed, especially in Hungary, confirming a return to technical recession, but the data in the Czech Republic was also slightly weaker, below central bank expectations, ING’s FX analyst Frantisek Taborsky notes.

CEE currencies remain under pressure

“Inflation numbers in Poland for October will be published today, the first in the Central and Eastern Europe (CEE) region. Our economists expect a slight pick-up from 4.9% to 5.1% YoY, one-tenth above market expectations. However, core inflation in particular surprised to the upside in September and may get more attention this time.”

“CEE currencies remain under pressure and we maintain a bearish view going forward. EUR/HUF moved to new highs and traded above 408 for a while yesterday. Valuations show significant cheapness of HUF assets, on the other hand, the market is risk-off ahead of the US elections and not much willingness to take too much risk ahead of the risk event. Thus, we do not see much reason for improvement and approaching 410 EUR/HUF seems to be the next test, which could be an uncomfortable level for the central bank.”

“In Poland, it was only at the end of yesterday's trading that the POLGBs market reflected the surprisingly high deficit increase announced a day earlier and today we could see further reverberations of market fears of higher bond supply, exposing PLN as well. In the Czech Republic, the CNB blackout period starts later today and so far we haven't heard much. That means today is the last chance to see any headlines, but the 25bp November cut seems like a done deal.”

Today, Eurostat will release the eurozone inflation figures for October, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

EUR can recover without high eurozone inflation

“After the German figures surprised on the upside yesterday (and were responsible for the euro being the strongest G10 currency yesterday), the market is likely to be waiting for a similar surprise for the currency area as a whole today. If that were to happen, the market's view of the ECB would be put to the test.”

“Whatever one may think of the ECB, if inflationary pressure remains high, it simply has no room to cut interest rates. Even most critics of the ECB would probably agree on that.”

“A high inflation figure today would complete the trend of the EUR recovery that we have been observing since the publication of the PMI indices. These had not even been surprisingly good. They just hadn't fallen any further. Should the market reaction today follow a similar pattern, it would not take a particularly high eurozone inflation rate for the euro to continue its recovery.”

• USD/CAD regains positive traction and remains close to a multi-month top set on Wednesday.
• A fresh leg down in Oil prices undermines the Loonie and offers some support to the major.
• A modest USD downtick might cap gains ahead of the US PCE Price Index and Canadian GDP.

The USD/CAD pair attracts fresh buying on Thursday and for now, seems to have stalled its corrective pullback from the 1.3940 area, or the highest level since August 5 touched the previous day. Spot prices trade above the 1.3900 mark through the first half of the European session as traders keenly await important macro data from the US and Canada. 

The US Personal Consumption Expenditure (PCE) Price Index should provide cues about the Federal Reserve's (Fed) interest rate outlook, which, in turn, will play a key role in influencing the US Dollar (USD) price dynamics. Apart from this, the monthly Canadian GDP print should provide some meaningful impetus to the USD/CAD pair. Heading into the key data risk, renewed selling around Crude Oil prices is seen undermining the commodity-linked Loonie and acting as a tailwind for the currency pair. 

The USD, on the other hand, languishes near the weekly low amid the hawkish Bank of Japan (BoJ)-inspired buying around the Japanese Yen (JPY). That said, elevated US Treasury bond yields, bolstered by firming expectations for a less aggressive policy easing by the Fed and deficit-spending concerns after the US election, continue to offer some support to the Greenback. Apart from this, the risk-off impulse benefits the USD's relative safe-haven status and contributes to the USD/CAD pair's move up. 

The incoming US economic data suggests that the economy remains on strong footing and supports prospects for smaller interest rate cuts by the Fed. Furthermore, investors remain concerned that the spending plans of Vice President Kamala Harris and the Republican nominee Donald Trump will further increase the US fiscal deficit. This, in turn, continues to push the US bond yields higher and favors the USD bulls, suggesting that the path of least resistance for the USD/CAD pair remains to the upside.

• The Mexican Peso rebounds slightly, but struggles to recover recent losses despite higher-than-expected economic growth in Q3. 
• Technical trend-following and the threat of a Trump victory is probably a factor weighing on the Peso as polls show a close race. 
• USD/MXN continues unfolding a bullish ‘abc’ pattern. 

The Mexican Peso (MXN) trades mixed in its key pairs – USD/MXN, EUR/MXN and GBP/MXN – on Thursday after weakening for four days running. The continuation lower comes despite a slight improvement in Mexican fundamentals as technical traders ride the Peso’s downtrend. 

Mexican Peso struggles as US presidential election draws to a close

The Mexican Peso’s broad weakness could be attributed to the continuing high odds of former President Donald Trump winning the US presidential election on November 5 given his promise to place high tariffs on Mexican imports. In addition, Trump’s preference for lowering taxes despite a rising US debt pile could also potentially lead to higher US Treasury yields and boost the US Dollar (USD), directly impacting USD/MXN. 

The election model on polling website FiveThirtyEight gives Trump a 52% chance of winning versus Vice President Kamala Harris’ 48%. Betting website OddsChecker offers fractional odds of 11/18 (or 62.1%) for a Trump win against 28/17 (or 37.8%) for a Kamala Harris victory. The latest opinion polls, however, still place Harris marginally in the lead with 48.1% for the Democrat nominee versus 46.7% for the Republican. 

The direct negative impact of a Trump victory on Mexico might be ameliorated, however, by the reality of modern trade between the countries. US, Mexican and Canadian supply chains and economic ecosystems are now intertwined due to three decades of free trade agreements, Mexican imported goods are actually often composed of an amalgam of the three country’s components so tariffs would harm the US as much as Mexico.

Mexican Growth in Q3 beats estimates

The latest macroeconomic figures, meanwhile, offered some relief to the Peso but not enough to push back the tide. Mexican Gross Domestic Product (GDP) growth came out at 1.5% YoY in Q3,  beating estimates of 1.2% but below the 2.1% registered in Q2, according to The Instituto Nacional de Estadistica Geografia e Informatica (INEGI). This follows 1.5% growth In Q1.

The Q3 result was exactly in line with the estimates of the International Monetary Fund (IMF), which downgraded its forecasts for Mexican economic growth by 1.5% for 2024. 

On a quarterly basis, Mexican GDP rose by 1.0% QoQ, beating estimates of a 0.8% expansion and the previous quarter’s 0.2% increase. 

The growth was broad-based and a positive development, however, it would not “preclude another rate cut in November” from the Bank of Mexico (Banxico), according to Kimberley Sperrfechter, Emerging Markets Economist at London-based advisory service Capital Economics. A cut to Mexico’s relatively attractive 10.50% base interest rate would attract less foreign capital inflows, pressuring the Peso lower.

“We still think the conditions are currently in place for Banxico to press ahead with another interest rate cut at its November meeting. But a lot will depend on the outcome of the US election. A Trump victory – and higher US Treasury yields and a stronger Dollar – would probably prompt Banxico to halt,” said Sperrfechter in a note. 

Technical Analysis: USD/MXN extends C wave of bullish pattern

USD/MXN continues unfolding a leg higher, probably the “c wave” of a bullish “abc” pattern, which began at the October 14 swing low. 

Wave c will probably reach the Fibonacci 61.8% of the length of wave “a”, giving an upside target of 20.29. 

USD/MXN Daily Chart 

USD/MXN is 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.

The original break above 19.83 (October 1 high) already confirmed a move up, with a target in the vicinity of the September 10 high at 20.13, which has now been met.

Labour's large tax-and-spend budget – described by some as an ‘old Labour’ policy – is still reverberating across UK asset markets, ING’s FX analyst Chris Turner notes.

New Gilt supply coming dangerously close to £300bn

“The Pound Sterling (GBP) briefly got a lift yesterday on the view that the budget was stimulative and that the Bank of England easing cycle would need to be repriced higher. We suspect the BoE is unlikely to be swayed by the government's budget plans and we see the risk that yesterday's spike in short-dated sterling interest rates gets reversed.”

“At the same time, it looks as though Labour is sailing very close to the wind with its borrowing plans – with new Gilt supply coming dangerously close to £300bn for FY24/25 and FY25/26. EUR/GBP should be trading a little lower based on short-dated rate spreads and the reason it is not is probably because a modest fiscal risk premium is going back into sterling. Should eurozone CPI surprise on the upside today, EUR/GBP could move closer to 0.8400.”

“Over the medium term, we are slightly bullish on EUR/GBP because of the market under-pricing the forthcoming easing BoE cycle. And it now seems the UK budget may add to that trend if indeed a modest fiscal risk premium gets priced into the pound. “

China’s official PMIs improved in October, probably as a first sign that policy stimulus is having an impact on the economy. Recent measures may take time to filter through to the economy. Also, more details will likely be released during the upcoming meeting of top Chinese policymakers on November 4-8, Commerzbank’s Senior Economist Tommy Wu notes.

All eyes are on the upcoming government meeting

“The official manufacturing PMI rose to 50.1 in October, up from 49.8 in September and after it stayed below the 50-neutral mark for five consecutive months. Among the components, production was firmer inside the expansion territory. New orders rose to 50 after indicating a contraction for five months. This reflects an improvement in domestic demand, likely bolstered by the recent policy stimulus. There are also signs that producer prices may start to stabilize, in month-on-month terms. The subindex on factory gate prices rose to 49.9, just below the 50-neutral mark, while prices of raw material inputs rose above 50 to 53.4.”

“Meanwhile, the non-manufacturing PMI rose to 50.2 in October from 50 in September. This was supported by an improvement in services, in which the subindex rose to 50.1, up from 49.9 below the 50-neutral mark previously. This may be in part due to the seasonal effect of the one-week National Day holiday in early October. The government’s trade-in program that supports the sales of cars and big-ticket items may also have a role to play.”

“All eyes are on the upcoming government meeting on November 4-8, in which the Standing Committee of National People’s Congress will discuss and approve economic and financial policies. The meeting is expected to fill in the details of policy measures previously announced. These include stimulus and measures that support consumption, the property sector, and local government financing.”

In contrast to the ADP figure, the publication of the US GDP data (for Q3) did not come as any major surprise. The figure (+2.8% annualized) was close to the median of analyst estimates (2.9%), so it was not a big surprise, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

Further US growth impulses are needed for new USD strength

“Of course, with growth rates like these, the US continues to have a significant growth advantage over other major developed economies, which are virtually stagnating after the immediate post-corona recovery has ended: the eurozone, the UK, and Japan. And that justifies USD strength. But we have to be careful. This growth advantage is not new. After all, the dollar is already strong. See figure below. US growth strength is already priced into Fed expectations, asset prices and USD exchange rates, it seems to me.”

“Further US growth impulses would be needed for new USD strength. One or the other currency trader may expect a second Trump presidency to provide such impulses. That may well be. I would just like to remind you that other conditions are also needed for this. Among other things, a Fed monetary policy that continues to be guided by reason.”

“Be that as it may, I think it's plausible that some market participants want to wait until the election and do not want to enter active positions based on current real economic data.”

Yesterday was a day for the ECB hawks, ING’s FX analyst Chris Turner notes.

Pivotal US elections next Tuesday

“German and eurozone data surprised on the upside as did German October CPI. And the influential Isabel Schnabel said the ECB should not rush further rate cuts. This prompted around a 12bp repricing higher in the terminal rate for the ECB's easing cycle and finally saw the two-year EUR:USD swap rate differential narrow, supporting EUR/USD.”

“The same dynamic could be present in the European morning should the eurozone October flash CPI surprise on the upside and again pare back expectations for the ECB rate cut in December. These still stand at 34bp.”

“EUR/USD could retest yesterday's 1.0870 high on today's European data – but a move up to 1.09030 might be a bridge too far given the pivotal US elections next Tuesday.”

The published ADP data on employment changes really doesn't have much to do with the data from the Bureau of Labor Statistics (BLS), which is always published two days later. Therefore, it cannot be concluded from yesterday's data release that tomorrow's nonfarm payrolls figure will be particularly high, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

ADP data don't provide any information about the nonfarm payrolls

“Nevertheless, the currency market reacts, when the ADP figure (as yesterday) is miles above analysts' estimates, with USD strength. Not much and not permanently, but visibly.

“In this respect, currency traders remind me a bit of my grandmother. She would have vehemently denied being superstitious, but she would never have hung out the laundry during the “Rough Nights” ("Twelvetide" in English, the period between Christmas and Epiphany). Because then, according to old Germanic mythology, the riders of the Wild Hunt would come. And they would be angry if they got tangled up in the laundry.”

“Apparently, currency traders are a lot like that: you know that the ADP data don't actually provide any information about the nonfarm payrolls, but a small USD long position can't hurt. Isn't it interesting how stubbornly such superstitions persist in the age of data analytics, trading machines and AI?”

• NZD/USD may test the upper boundary of the descending channel pattern.
• A drop in the 14-day RSI below 30 mark would indicate an oversold condition, potentially suggesting an upcoming upward correction.
• The pair may aim for the lower boundary of the descending channel near the 0.5920 level.

The NZD/USD pair extends gains for the second consecutive session, trading near 0.5980 during Thursday's European session. Daily chart analysis shows a bearish bias, with the pair moving within a descending channel. A breakout above this descending channel could signal a potential shift in momentum.

Further supporting this outlook, the nine-day Exponential Moving Average (EMA) remains below the 14-day EMA, reinforcing the bearish sentiment for NZD/USD. Short-term momentum appears weak, indicating continued downward pressure.

The 14-day Relative Strength Index (RSI), a key momentum indicator, hovers just above 30. A dip below this threshold would signal an oversold condition, potentially hinting at an impending upward correction for the NZD/USD pair.

On the downside, NZD/USD may approach the lower boundary of the descending channel near 0.5920. A decisive break below this support could drive the pair toward the next "pullback support" around the 0.5850 level.

On the resistance side, the initial hurdle for NZD/USD lies at the upper boundary of the descending channel, aligning with the nine-day Exponential Moving Average (EMA) near 0.6001, followed by the 14-day EMA at 0.6026. A sustained move above these EMAs could shift the pair to a short-term bullish stance, potentially targeting the psychological level of 0.6100.

NZD/USD: Daily Chart

The Dollar Index (DXY) has softened a little this week – largely in response to overseas events. Here the third-quarter eurozone growth data and October German price data were stronger than expected and have prompted the market to scale back expectations of a 50bp ECB rate cut this December, ING’s FX analyst Chris Turner notes.

DXY is currently on support at 104.00

“And this morning we have just seen USD/JPY drop nearly 1% on Bank of Japan Governor Kazuo Ueda's press conference outlining a plan to continue with rate hikes should the BoJ's forecasts be realised. Most recently the market had felt the BoJ would be less likely to hike on the back of uncertain political developments and potentially a more dovish make-up of the Japanese government.”

“That brings us to the USD. Dollar strength this month has all been about a market positioning for a Donald Trump win and US rate spreads widening in favour of the dollar as the Rest of the World turns more dovish. Well, it seems that the ECB and BoJ may not be quite as dovish as some had feared – news that could potentially cap the dollar's rally for the time being.”

“Given that background, a sticky core PCE deflator today – the Fed's preferred price gauge – at 0.3% month-on-month may not need to send the dollar that much higher. DXY is currently on support at 104.00 and after one-way bullish traffic for over a month, may be due a modest correction to the 103.65 area.”

• EUR/GBP loses ground despite a less-dovish sentiment surrounding the ECB following the robust Eurozone GDP data.
• Traders await Eurozone Harmonized Index of Consumer Prices (HICP) data on Thursday.
• UK budget includes £40 billion in tax increases aimed at reducing public finance deficits and enhancing funding for public services.

EUR/GBP trades slightly lower during early European hours on Thursday near 0.8360, following strong gains in the previous session. This downside may be limited, as the Euro could find support from investors scaling back expectations of a large rate cut by the European Central Bank (ECB) in December.

This sentiment shift regarding the ECB’s policy outlook comes after stronger-than-expected economic data from the Eurozone and Germany released on Wednesday. Investors will keep an eye on the Eurozone Harmonized Index of Consumer Prices (HICP) on Thursday.

According to preliminary estimates from Eurostat, the seasonally adjusted Eurozone Gross Domestic Product (GDP) expanded by 0.4% quarter-over-quarter in Q3, surpassing the expected 0.2% increase. Year-over-year, the Eurozone's GDP grew by 0.9%, above the forecasted 0.8% growth.

In Germany, GDP rose by 0.2% QoQ in Q3, recovering from a 0.3% decline in Q2 and exceeding expectations of a 0.1% contraction, based on preliminary data. Additionally, Germany’s Consumer Price Index (CPI) showed an annual inflation rate of 2.0% in October, a three-month high, up from 1.6% in September and above the projected 1.8%, according to preliminary estimates.

The EUR/GBP cross also gained support as the Pound Sterling (GBP) weakened following the UK Labour government’s first budget announcement on Wednesday. This budget includes £40 billion in tax hikes aimed at reducing public finance gaps and bolstering public services, as reported by CNBC. A major revenue source in the budget is a rise in National Insurance (NI) contributions, a tax on earnings paid by employers.

Furthermore, traders are likely watching an upcoming keynote address by Bank of England (BoE) Deputy Governor Sarah Breeden at a conference hosted by the Hong Kong Monetary Authority and Bank for International Settlements on the “Opportunities and Challenges of Emerging Technologies in the Financial Ecosystem.”

• EUR/USD clings to gains near 1.0850 on upbeat Eurozone GDP growth and hot German inflation.
• ECB Lagarde sees more interest-rate cuts and said she is hopeful about inflation returning to the bank’s target of 2%.
• The US Dollar will be influenced by the US presidential election, NFP, and the ISM Manufacturing PMI data.

EUR/USD holds up near 1.0850 in Thursday’s European session following Wednesday’s sharp recovery. The major currency pair strengthened as traders have pared back bets of a large interest-rate cut from the European Central Bank (ECB) in the December monetary policy meeting after a faster-than-expected Eurozone Gross Domestic Product (GDP) growth and hotter-than-forecasted German inflation.

Eurostat reported on Wednesday that the Eurozone expanded at a faster pace of 0.9% in the third quarter of the year compared with the same period a year earlier. A major contribution to higher growth in the Eurozone came from its largest nation, Germany, which managed to dodge a technical recession. The German economy surprisingly rose by 0.2% compared with the previous quarter, beating expectations of a 0.1% contraction. Meanwhile, the growth rate in Spain was higher than expected, as forecasted in France, and slower than anticipated in Italy.

The German flash Harmonized Index of Consumer Prices (HICP) for October accelerated at a faster pace of 2.4% on year, higher than estimates of 2.1% and the prior release of 1.8%, suggesting that the battle against inflation is yet not over. 

"The just-released flash estimate of German inflation in October could make some members of the ECB regret the latest rate cut and the European Central Bank's new openness to more aggressive cuts," said analysts at ING.

For more cues on the current status of inflation, investors will focus on the Eurozone flash HICP data for October, which will be published at 10:00 GMT.

Meanwhile, ECB President Christine Lagarde has shown confidence about taming price pressures in an interview with the French newspaper Le Monde published on Thursday. “The objective is in sight, but I am not going to tell you that inflation is under control,” Lagarde said. She reaffirmed her commitment to interest rate reduction, but refrained from committing to a specific rate cut path.

Daily digest market movers: EUR/USD holds up while US Dollar consolidates

• EUR/USD clings to gains near 1.0850 on upbeat Eurozone GDP data. Even though higher Eurozone GDP growth has improved the Euro’s (EUR) appeal, its outlook is still in danger amid uncertainty ahead of the United States (US) presidential election. 
• Traders seem to have priced in a victory from former President Donald Trump against current Vice President Kamala Harris, a scenario that would have significant repercussions on the Eurozone economy as Trump is expected to raise tariffs by 10% on all imports, hitting the Eurozone’s powerful export sector. Trump said this week that the European Union (EU) would have to "pay a big price" for not buying enough American exports if he won the November 5 election, Reuters reported.
• Meanwhile, the US Dollar (USD) trades in a tight range, with investors focusing on the US Nonfarm Payrolls (NFP) and the ISM Manufacturing PMI data for October, which will be published on Friday. The economic data will influence market speculation for the Federal Reserve (Fed) interest rate cut path. Later on Thursday, the Personal Consumption Expenditure (PCE) Price Index data for September will also be published, although its impact on markets is expected to be limited because the US GDP report on Wednesday already unveiled the overall figures for Q3.
• Job market conditions appear to be improving, according to the ADP gauge of private employment released on Wednesday. The report showed a robust labor demand, with 233K new workers hired in October against 159K in September.

Technical Analysis: EUR/USD strives to sustain above 1.0800

EUR/USD trades close to a fresh more than a week high around 1.0850 in European trading hours. The major currency pair holds onto its recent recovery after breaking above the round-level resistance of 1.0800. However, its broader outlook is still bearish as it trades below the 200-day Exponential Moving Average (EMA) at around 1.0900.

The 14-day Relative Strength Index (RSI) climbs to near 42.00 after staying in the 20.00-40.00 range for almost a month, suggesting that the bearish momentum has terminated.

Looking up, the shared currency pair could rise to near the 200-day EMA around 1.0900 and the September 11 low around 1.1000. On the downside, the upward-sloping trendline near 1.0750, which is plotted from the April 16  low at around 1.0600, will be the key support area for the Euro bulls.

• USD/CHF trades in negative territory for the second consecutive day near 0.8655 in Thursday’s early European session. 
• Global political uncertainty and geopolitical risks boost the Swiss Franc, a traditional safe-haven asset. 
• Investors await the US PCE inflation data for more cues on the Fed's policy path.

The USD/CHF pair drifts lower to around 0.8655 during the early European session on Thursday. Persistent safe-haven flows amid the uncertainty surrounding the US presidential election on November 5 and Middle East tensions continue to support the Swiss Franc (CHF). 

The US economic data continues to suggest that the US economy remains strong and supports prospects for less aggressive policy easing by the Federal Reserve (Fed). This, in turn, might cap the downside for the Greenback in the near term. Markets are pricing in about 96% odds of a 25 basis points (bps) rate cut by the Fed, according to CME's FedWatch Tool.

Traders will keep an eye on the US Personal Consumption Expenditure (PCE) Price Index, which is due later on Thursday. On Friday, the US employment data will take center stage, including the Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings. 

The race between Republican Donald Trump and Democrat Kamala Harris remains close ahead of the November 5 US presidential election. The ongoing geopolitical tensions in the Middle East and the uncertainty related to the outcome of the US election could lift the CHF and act as a headwind for USD/CHF for the time being.

Here is what you need to know on Thursday, October 31:

The Harmonized Index of Consumer Price (HICP) inflation data from the Euro area and the Personal Consumption Expenditures (PCE) Price Index readings from the US will be watched closely on the last day of October. The US economic docket will also feature weekly Initial Jobless Claims data.

The US Dollar (USD) came under modest bearish pressure in the second half of the day on Wednesday following mixed data releases. The Automatic Data Processing reported that employment in the private sector rose by 233,000 in October. This reading followed the 159,000 increase in September and surpassed the market expectation of 115,000 by a wide margin. On a negative note, the US Bureau of Labor Statistics' first estimate showed that the US' Gross Domestic Product (GDP) expanded at an annual rate of 2.8%, falling short of analysts' estimate of 3%. The USD Index edged lower and closed in negative territory. Early Thursday, the index holds steady slightly above 104.00.

The Bank of Japan (BoJ) announced early Thursday that it decided to keep its short-term interest rates target unchanged at 0.25% following the conclusion of its two-day monetary policy review. Speaking on the policy outlook in the post-meeting press conference, BoJ Governor Kazuo Ueda said that the impact of foreign exchange rates on prices has become larger than in the part, adding that firms are now more eager to hike wages and prices. "We will keep adjusting degree of easing if our economic, price outlook is to be realised," Ueda reiterated. After moving sideways on Tuesday and Wednesday, USD/JPY turned south following the BoJ event and was last seen trading deep in the red near 152.00.

During the Asian trading hours, the data from Australia showed that Retail Sales rose by 0.5% on a quarterly basis in the third quarter. Meanwhile, the NBS Manufacturing PMI in China came in at 50.1 in October, up from 49.8 in September. AUD/USD continues to move sideways below 0.6600 after ignoring these figures.

EUR/USD gained more than 0.3% on Wednesday, supported by the better-than-expected GDP and strong inflation readings from Germany. The pair stays relatively quiet in the European morning on Thursday and fluctuates in a narrow band at around 1.0850.

GBP/USD lost its traction and closed in the red on Wednesday as markets assessed the details of the Autumn Budget. The pair holds steady early Thursday and clings to small recovery gains above 1.2950.

Gold seems to have entered a consolidation phase after setting a new record-high of $2,790. At the time of press, XAU/USD was down 0.3% on the day at $2,780.

The Bank of Japan (BoJ) Governor Kazuo Ueda said on Thursday that the central bank will keep adjusting the degree of easing if the economic and price outlook is to be realized. Ueda further stated that he will monitor financial and foreign exchange markets, and their impact on the economy and prices.  

Key quotes 

Market reaction to the BoJ’s Ueda speech

At the time of writing, USD/JPY is trading 0.35% lower on the day to trade at 152.88. 

European Central Bank (ECB) President Christine Lagarde said that the rate cuts will continue, but it will be determined by underlying economic data in the coming months, per Le Monde. 

Key quotes

Market reaction 

At the time of writing, EUR/USD was down 0.04% on the day at 1.0851. 

• GBP/USD faces challenges as the US Dollar appreciates amid market caution ahead of the US presidential elections.
• The latest Reuters/Ipsos poll indicates that Harris holds a narrow lead at 46% compared to Trump's 43%.
• UK's budget features £40 billion in tax increases designed to address public finance shortfalls and support funding for public services.

GBP/USD extends its losses for the second successive day, trading around 1.2950 during the Asian session on Thursday. This downside of the pair could be linked to the solid US Dollar (USD) as a market caution persists amid uncertainty surrounding the upcoming US presidential election.

Former President Donald Trump has made gains among Hispanic men as the November 5 US presidential election approaches. Meanwhile, Harris has seen increased support among white women. The race between the two candidates is extremely close, with Harris holding a slight lead of 46% to 43% in the latest poll conducted from October 16 to 21.

Traders are now focusing on upcoming key US data releases including PCE inflation data on Thursday and Nonfarm Payrolls (NFP) on Friday. On Wednesday, the Greenback encountered headwinds as the US Gross Domestic Product (GDP) annualized expanded by 2.8% in Q3, below 3.0% in Q2 and forecasts of 3.0%. However, the ADP Employment Change reported 233,000 newly added workers in October, marking the largest increase since July 2023.

The Pound Sterling (GBP) dipped following the release of the UK's new Labour government's first budget on Wednesday, which includes £40 billion in tax increases aimed at addressing public finance shortfalls and funding public services, according to CNBC. A significant revenue-generating measure in the budget is an increase in National Insurance (NI) contributions, which are taxes on earnings paid by employers.

Traders are also expected to pay close attention to a keynote speech by Bank of England (BoE) Deputy Governor Sarah Breeden at the Hong Kong Monetary Authority and Bank for International Settlements joint conference on the “Opportunities and Challenges of Emerging Technologies in the Financial Ecosystem.”

• EUR/USD attracts fresh sellers on Thursday amid a modest USD strength.
• Bets for smaller Fed rate cuts and elevated US bond yields benefit the USD.
• Diminishing odds for aggressive ECB easing could limit losses for the pair.

The EUR/USD pair meets with some supply during the Asian session on Thursday and erodes a part of the previous day's gains to the 1.0870 area, or a one-and-half-week top. The downtick is sponsored by the emergence of some US Dollar (USD) dip-buying and drags spot prices below mid-1.0800s in the last hour.

The incoming US macro data continues to suggest that the economy remains on a strong footing and supports prospects for a less aggressive policy easing by the Federal Reserve (Fed), which, in turn, helps revive the USD demand. In fact, the ADP reported on Wednesday that private-sector employers added 233K new jobs in October. The growth in employment is expected to boost consumer spending and contribute to overall growth, validating the view that the Fed will proceed with smaller rate cuts.

Separately, the US Bureau of Economic Analysis' initial estimate indicated that the world's largest economy grew by a 2.8% annualized pace during the April-June period, slower than the 3% in the previous quarter. This, however, did little to influence expectations about the Fed's rate-cut path. Adding to this, concerns about increasing US fiscal deficit push the US Treasury bond yields higher, assisting the USD to stall its corrective slide from a three-month top and exerting pressure on the EUR/USD pair. 

Meanwhile, the Eurozone data released on Wednesday showed inflationary pressure in Germany remains sticky. Furthermore, the German economy – the Eurozone's powerhouse – unexpectedly grew by 0.2 % quarter-on-quarter in the third quarter. This forced investors to pare their bets for a jumbo rate cut by the European Central Bank (ECB), which could offer some support to the shared currency and the EUR/USD pair ahead of Thursday's release of the flash Eurozone consumer inflation figures. 

Later during the early North American session, the US Personal Consumption Expenditure (PCE) Price Index could provide fresh cues about the Fed's interest rate outlook and drive the US bond yields. Apart from this, the broader risk sentiment will drive demand for the safe-haven Greenback and contribute to producing short-term trading opportunities around the EUR/USD pair.

• Silver price may regain ground due to increased safe-haven demand amid uncertainties surrounding the US elections and geopolitical risks.
• The latest Reuters/Ipsos poll indicates that Harris holds a narrow lead at 46% compared to Trump's 43%.
• Silver prices may appreciate due to safe-haven demand amid uncertainties surrounding the geopolitical tensions in the Middle East.

Silver prices (XAG/USD) extends its losses for the second consecutive day, trading around $33.60 during the Asian hours on Thursday. However, the downside of the Silver price could be restrained amid increased demand for safe-haven assets amid uncertainties surrounding the US elections and geopolitical risks.

Former President Donald Trump has made gains among Hispanic men as the November 5 US presidential election approaches, where he will face Democratic candidate Kamala Harris. According to an analysis of Reuters/Ipsos polling, Trump is now trailing Harris by only 2%, with support at 44% compared to her 46%.

Meanwhile, Harris has seen increased support among white women. In late 2020, white women favored Trump over Biden by 12%, but now they lean Republican by a margin of 3%. The race between the two candidates is extremely close, with Harris holding a slight lead of 46% to 43% in the latest poll conducted from October 16 to 21.

Silver prices are likely to rise due to safe-haven demand as traders keep a close eye on escalating geopolitical tensions in the Middle East. This comes in the wake of Israel's military chief warning of a "very hard" strike on Iran if missile attacks continue. Lebanese Prime Minister Najib Mikati mentioned on Wednesday that US envoy Amos Hochstein indicated a possible ceasefire in the Israel-Hezbollah conflict could be achieved before the U.S. elections on November 5.

Additionally, investors are looking forward to China's parliamentary meeting scheduled for November 4-8, where announcements regarding potential stimulus measures from Beijing are anticipated. Reports indicate that China is considering a stimulus package exceeding 10 trillion Yuan to boost its economy.

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

The price for Gold stood at 7,526.42 Indian Rupees (INR) per gram, down compared with the INR 7,535.26 it cost on Wednesday.

The price for Gold decreased to INR 87,786.72 per tola from INR 87,889.82 per tola a day earlier.

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

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

• GBP/JPY attracts sellers for the second successive day amid the post-BoJ JPY strength.
• The BoJ rate-hike uncertainty and reduced bets for more BoE rate cuts to limit losses.
• Traders now look to the post-meeting conference for some meaningful opportunities.

The GBP/JPY cross drifts lower for the second straight day on Thursday and retreats further from over a three-month peak, around the 199.80 region touched the previous day. Spot prices slide below the 198.00 mark after the Bank of Japan (BoJ) announced its decision during the Asian session, albeit remain confined in a familiar range held since the beginning of this week. 

As was widely anticipated, the BoJ decided to leave monetary policy settings unchanged on the back of the political uncertainty after Sunday's snap elections in Japan. In the accompanying statement, the BoJ reiterated that it will continue to raise policy rates if the economy and prices move in line with the forecast. This, along with fears of possible government intervention and nervousness ahead of the November 5 US presidential election, drive haven flows towards the Japanese Yen (JPY) and exerts some pressure on the GBP/JPY cross. 

The British Pound (GBP), on the other hand, is weighed down by the emergence of some US Dollar (USD) dip-buying, which turns out to be another factor dragging spot prices lower. That said, doubts over the BoJ's ability to hike interest rates further, along with diminishing odds for more aggressive interest rate cuts by the Bank of England (BoE), could offer some support to the GBP/JPY cross. This, in turn, warrants some caution for bearish traders and before confirming that spot prices have topped out in the near term.

Investors now look forward to the post-meeting presser where comments by BoJ Governor Kazuo Ueda should influence the JPY and provide some impetus to the GBP/JPY cross in the absence of any relevant macro releases from the UK on Thursday.

• EUR/JPY drops to around 165.85 in Thursday’s Asian session. 
• The BoJ decided to leave policy settings unchanged at its October meeting on Thursday.
• The Eurozone economy grew 0.4% QoQ in Q3, stronger than expected

The EUR/JPY cross attracts some sellers to near 165.85 during the Asian session on Thursday. The Bank of Japan (BoJ) decided to keep its policy rate unchanged, as widely expected.

The Bank of Japan (BOJ) decided to keep the short-term interest rates target unchanged at 0.25% on Thursday and reiterated its forecast that inflation will persist near the 2% target. The upside for the Japanese Yen might be limited amid the uncertainty about Japan's fiscal and monetary policy outlook. "Any strengthening of the yen at present would likely result from a general weakening of the U.S. dollar if interest rates begin to align," noted Sean Teo, a sales trader at Saxo.

Market players will shift their attention to the press conference by BoJ Governor Kazuo Ueda, which might offer some hints about the interest rate path in Japan. Meanwhile, the cautious mood ahead of the US presidential election next week could boost the safe-haven flows, benefiting the JPY. 

On the Euro (EUR) front, the encouraging Eurozone flash Gross Domestic Product (GDP) for the third quarter (Q3) might help limit the EUR’s losses. Data released by Eurostat on Thursday showed that the Eurozone economy grew 0.4% QoQ in Q3, stronger than the 0.2% expected. On an annual basis, the Eurozone GDP expands by 0.9% in Q3, above the market consensus of 0.8%. 

• AUD/JPY experienced a decline following the Bank of Japan's decision to keep its short-term interest rate unchanged at 0.25%.
• BoJ Outlook Report for Q3 indicated to keep raising policy rates, provided the economy and prices align with its forecasts.
• Australia’s Retail Sales increased by 0.1% MoM in September, against the expected 0.3% and previous 0.7% growth.

AUD/JPY retraces its recent gains from the previous session, trading around 100.50 during Thursday's Asian hours. The decline in the AUD/JPY cross comes as the Japanese Yen (JPY) strengthens following the Bank of Japan's (BoJ) policy announcement. The BoJ opted to maintain its short-term interest rate target at 0.25% after concluding its two-day monetary policy review, a decision that aligned with market expectations for stability.

According to the BoJ Outlook Report for Q3, the central bank plans to continue raising policy rates as long as the economy and prices align with its forecasts, particularly given that real interest rates are currently very low. The Bank of Japan aims to conduct monetary policy with a focus on sustainably and stably achieving its 2% inflation target.

However, there are expectations that Japan's political landscape could necessitate expansionary fiscal policies, complicating the BoJ's ability to raise interest rates further. Concerns about potential government intervention, coupled with cautious market sentiment, are providing some support to the safe-haven Japanese Yen. Investors are now awaiting the post-meeting press conference, where comments from BoJ Governor Kazuo Ueda are anticipated.

On the AUD’s front, the seasonally adjusted Australian Retail Sales rose by 0.1% month-over-month in September, falling short of the expected 0.3% and significantly down from the 0.7% growth seen in the previous month. On a quarterly basis, Retail Sales increased by 0.5% in Q3, rebounding from a 0.3% decline in the prior quarter.

In addition, China's NBS Non-Manufacturing PMI increased to 50.2 in October, up from 50.0 in the previous month, although it fell short of market expectations of 50.4. Meanwhile, the NBS Manufacturing PMI rose to 50.1, surpassing the previous reading of 49.8 and slightly exceeding the forecast of 50.0. Given the close trade relationship between China and Australia, any shifts in the Chinese economy could significantly impact the Australian market.

• Gold price continues to attract haven flows amid US political jitters and Middle East woes.
• A further rise in the US bond yields revives the USD demand and caps the precious metal.
• Traders now look to the release of the US PCE Price Index for some meaningful impetus.

Gold price (XAU/USD) is seen oscillating in a narrow range during the Asian session on Thursday and consolidating its recent strong gains to a record high. The US Dollar (USD) attracts some dip-buying and for now, seems to have stalled its corrective slide from a three-month top amid bets for a slower path of rate cuts by the Federal Reserve (Fed), bolstered by robust economic data. This, along with concerns about the increasing US fiscal deficit, continues to push the US Treasury bond yields higher and caps the upside for the non-yielding yellow metal on the back of slightly overbought conditions on the daily chart. 

Traders also seem reluctant to place fresh bullish bets around the Gold price and opt to wait for the release of the US Personal Consumption Expenditure (PCE) Price Index. Apart from this, the closely watched US Nonfarm Payrolls (NFP) report on Friday will be looked upon for cues about the Fed's interest rate outlook, which, in turn, will drive demand for the precious metal. In the meantime, any meaningful corrective pullback for the XAU/USD seems elusive in the wake of persistent safe-haven demand stemming from the US political uncertainty ahead of the November 5 presidential election and Middle East tensions. 

Daily Digest Market Movers: Gold price remains supported by the US political uncertainty and geopolitical risks

• The Automatic Data Processing (ADP) reported on Wednesday that private sector employers added 233K new jobs in October as compared to the previous month's upwardly revised reading of 159K and better-than-expected consensus estimates. 
• The data points to a resilient labor market, which, along with a series of upbeat US data released recently, suggested that the economy remains on strong footing and supports prospects for a less aggressive easing by the Federal Reserve. 
• Separately, the US Bureau of Economic Analysis' initial estimate suggested that the world's largest economy expanded by a 2.8% annualized pace during the third quarter, slower than the 3% growth recorded during the April-June period.
• The markets are still pricing in a regular 25 basis points interest rate cut by the Fed in November, which, along with deficit-spending concerns after the US election, continues to push the US Treasury bond yields higher on Thursday. 
• The yield on the benchmark 10-year US government bond hovers just below 4.3%, near its highest level since July, which helps revive the US Dollar demand and acts as a headwind for the Gold price amid slightly overbought conditions.
• Thursday's release of the US Personal Consumption Expenditure (PCE) Price Index might influence the Fed's rate-cut path and drive the USD demand, which, in turn, should provide some meaningful impetus to the commodity. 
• The uncertainty ahead of next week's US presidential election and escalating geopolitical tensions in the Middle East suggest that the path of least resistance for the safe-haven precious metal remains to the upside. 

Technical Outlook: Gold price bulls could pause for a breather near ascending channel resistance, around $2,800

From a technical perspective, the recent move up along an upward-sloping channel from the August monthly swing low points to a well-established short-term bullish trend. That said, the Relative Strength Index (RSI) on the daily chart is already flashing overbought conditions. Hence, any subsequent move up is more likely to remain capped near the $2,800 mark. The said handle represents the top boundary of the channel, which if broken decisively will be seen as a fresh trigger for bulls and set the stage for an extension of the appreciating move. 

On the flip side, any meaningful corrective decline now seems to find decent support near the $2,750-2,748 region or a trading range resistance breakpoint. Some follow-through selling could make the Gold price vulnerable to extend the fall further towards the $2,732-2,730 intermediate support en route to the $2,715 area. This is followed by the $2,700 mark, which if broken should pave the way for a decline towards the next relevant support near the $2,675 zone en route to the $2,657-2,655 region.

• USD/CAD maintains its position around a three-month high at 1.3940, marked on Wednesday.
• US GDP annualized expanded by 2.8% in Q3, below 3.0% in Q2 and forecasts of 3.0%.
• Traders will closely observe US PCE - Price Index and Canada’s Gross Domestic Product data on Thursday.

USD/CAD appreciates to near its three-month high of 1.3940, recorded in the previous session, trading around 1.3920 during Thursday's European session. This upside of the pair could be linked to the solid US Dollar (USD) as market caution lingers amid uncertainty surrounding the upcoming US presidential election.

Traders are now focusing on upcoming key US data releases including PCE inflation data on Thursday and Nonfarm Payrolls (NFP) on Friday. On Wednesday, the Greenback encountered headwinds as the US Gross Domestic Product (GDP) annualized expanded by 2.8% in Q3, below 3.0% in Q2 and forecasts of 3.0%.

However, the ADP Employment Change report showed that private businesses in the United States added 233,000 workers in October, marking the largest increase since July 2023. This followed an upward revision to 159,000 in September and significantly exceeded forecasts of 115,000.

The commodity-linked Canadian Dollar (CAD) might have received support from stronger Oil prices, as Canada remains the largest crude supplier to the United States (US). crude prices found support amid optimism surrounding US fuel demand after an unexpected decline in crude inventories. West Texas Intermediate (WTI) Oil price trades around $68.70 at the time of writing.

The US Energy Information Administration (EIA) reported that crude Oil stockpiles fell by 0.515 million barrels in the week ending October 25, contrary to market expectations of a 2.3 million-barrel increase.

Bank of Canada Governor Tiff Macklem addressed the House of Commons Finance Committee on Wednesday to discuss the bank's monetary policy. Macklem stated that if the economy aligns broadly with their forecast, they expect to cut the policy rate further to support demand and maintain inflation on target.

• WTI prices could rise amid optimism regarding US Oil demand following an unexpected decrease in crude inventories.
• EIA Crude Oil Stocks Change fell by 0.515 million barrels in the previous week, against the expected 2.3 million-barrel increase.
• Crude Oil prices may appreciate due to increased expectations of OPEC+ delaying a planned production increase.

West Texas Intermediate (WTI) Oil price dips slightly to around $68.70 during Thursday's Asian trading hours. However, crude prices found support amid optimism surrounding US fuel demand after an unexpected decline in crude inventories.

The US Energy Information Administration (EIA) reported that crude Oil stockpiles fell by 0.515 million barrels in the week ending October 25, contrary to market expectations of a 2.3 million-barrel increase.

Additionally, crude Oil prices may gain further support amid expectations that OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies like Russia, might delay a planned production increase.

Reuters reported that OPEC+ could postpone its December output hike by at least a month due to concerns about weak Oil demand and rising supply. The group had scheduled an increase of 180,000 barrels per day (bpd) for December but previously postponed this from October due to declining prices.

Meanwhile, markets are closely monitoring ongoing geopolitical tensions in the Middle East, particularly following a warning from Israel's military chief of a 'very hard' strike on Iran if further missile attacks occur.

Lebanese Prime Minister Najib Mikati told Lebanese broadcaster Al-Jadeed on Wednesday that US envoy Amos Hochstein suggested a potential ceasefire in the Israel-Hezbollah conflict could be reached before the US elections on November 5. Hochstein traveled to Israel to discuss ceasefire terms with Hezbollah, as confirmed by US State Department spokesperson Matthew Miller.

• The Australian Dollar depreciates after the release of mixed economic data from Australia and China’s NBS PMI on Thursday.
• Australian Retail Sales rose by 0.1% MoM in September, against the expected 0.3% and the previous 0.7% growth.
• Traders await the upcoming US PCE inflation data on Thursday and Nonfarm Payrolls on Friday.

The Australian Dollar (AUD) edges lower following the release of mixed economic data from Australia and China’s NBS Purchasing Managers Index (PMI) on Thursday. However, hawkish expectations for the Reserve Bank of Australia's (RBA) policy outlook continued to support the Aussie Dollar and limit the downside of the AUD/USD pair.

In September, seasonally adjusted Australian Retail Sales rose by 0.1% month-over-month, falling short of the expected 0.3% and significantly down from the 0.7% growth seen in the previous month. On a quarterly basis, Retail Sales increased by 0.5% in Q3, rebounding from a 0.3% decline in the prior quarter.

The US Dollar (USD) gains some traction as market caution lingers amid uncertainty surrounding the upcoming US presidential election. The Greenback, however, encountered headwinds as the US Gross Domestic Product (GDP) annualized expanded by 2.8% in Q3, below 3.0% in Q2 and forecasts of 3.0%.

Traders are now focusing on upcoming key US data releases: PCE inflation data on Thursday and Nonfarm Payrolls (NFP) on Friday.

Daily Digest Market Movers: Australian Dollar depreciates after mixed economic data

• The Australian Dollar faced downward pressure after Australia's lower-than-expected third-quarter Consumer Price Index (CPI) data was released on Wednesday. However, mixed economic data from the United States (US) balanced out this effect.
• China's NBS Non-Manufacturing PMI rose to 50.2 in October, up from 50.0 in the previous month but slightly below market expectations of 50.4. Meanwhile, the NBS Manufacturing PMI edged up to 50.1 from the prior reading of 49.8, modestly surpassing the forecast of 50.0.
• The ADP Employment Change report showed that private businesses in the United States added 233,000 workers in October, marking the largest increase since July 2023. This followed an upward revision to 159,000 in September and significantly exceeded forecasts of 115,000.
• The Australian Bureau of Statistics reported that the Consumer Price Index (CPI) rose just 0.2% quarter-over-quarter in the third quarter, down from 1.0% in the previous quarter and slightly below the anticipated 0.3%. The monthly CPI rose by 2.1% year-over-year in September, coming in below market expectations of 2.3% and down from August's reading of 2.7%.
• On Tuesday, the US Bureau of Labor Statistics (BLS) reported that JOLTS Job Openings reached 7.443 million in September, down from 7.861 million in August and falling short of the market expectation of 7.99 million.
• The Reserve Bank of Australia signaled that the current cash rate of 4.35% is sufficiently restrictive to guide inflation back to the target range of 2%-3% while continuing to support employment. As a result, a rate cut in November appears unlikely.
• ANZ-Roy Morgan Australia Consumer Confidence dropped to 86.4 this week, down from 87.5 the previous week.

Technical Analysis: Australian Dollar steadies above 0.6550 close to descending channel’s upper boundary

AUD/USD hovers near 0.6570 on Thursday. The daily chart shows a short-term bearish trend as the pair trades within a descending channel. The 14-day Relative Strength Index (RSI) is trending lower and sits just above the 30 level, reinforcing the bearish sentiment.

On the support side, the AUD/USD may test the lower boundary of the descending channel around 0.6510, followed by the key psychological level of 0.6500.

For resistance, the AUD/USD pair challenges the upper boundary of the descending channel near 0.6580, with another psychological barrier at 0.6600. A breakout above this could open the path toward the nine-day Exponential Moving Average (EMA) at 0.6608.

AUD/USD: Daily Chart

• The Japanese Yen remains confined in a familiar range as traders keenly await the BoJ decision.
• The BoJ is expected to keep policy settings unchanged in the wake of domestic political uncertainty.
• The attention will then turn to the release of the US PCE Price Index later during the US session.

The Japanese Yen (JPY) extends its consolidative price move against its American counterpart on Thursday and remains close to a three-month low touched earlier this week. Traders opt to wait on the sidelines and refrain from placing aggressive directional bets ahead of the Bank of Japan (BoJ) policy decision later today. In the meantime, expectations that Japan's political landscape could force expansionary fiscal policy, and make it difficult for the Bank of Japan (BoJ) to hike interest rates further, continue to act as a headwind for the JPY. 

That said, fears of possible government intervention and the cautious market mood offer some support to the safe-haven JPY. Apart from this, a subdued US Dollar (USD) price action keeps a lid on the USD/JPY pair through the Asian session. Meanwhile, bets for smaller interest rate cuts by the Federal Reserve (Fed) and deficit-spending concerns after the US election continue to push the US Treasury bond yields higher. This, in turn, favors the USD bulls and should contribute to capping the upside for the lower-yielding JPY.

Daily Digest Market Movers: Japanese Yen struggles to lure buyers amid diminishing odds of further BoJ rate hikes

• Government data showed this Thursday that Japan's Industrial Production bounced after declining by 3.3% in August and rose 1.4% in September. The report also revealed that companies expect production to increase by 8.3% in October.
• A separate government report showed that Retail Sales increased by 0.5% from a year earlier in September, marking a sharp deceleration from the 3.1% rise in the previous month and pointing to a loss of momentum in consumption.
• This comes on top of a rare political turmoil after Sunday’s snap election in Japan that snatched the Liberal Democratic Party’s majority for the first time in 15 years and cast doubts over the Bank of Japan's ability to hike rates further.
• Hence, the market focus will remain glued to the highly-anticipated BoJ monetary policy decision. The Japanese central bank is widely expected to leave policy settings unchanged and retain a cautious stance amid the political uncertainty.
• The US Dollar attracts some dip-buying and reverses a part of the previous day's modest decline led by mixed economic data, which, in turn, keeps the USD/JPY pair close to its highest level since July 31 touched earlier this week. 
• The Automatic Data Processing (ADP) reported on Wednesday that private sector employers added 233K new jobs in October, better than the previous month's upwardly revised reading of 159K and surpassing optimistic estimates. 
• The growth in employment is expected to boost consumer spending and contribute to overall growth, validating the view that the economy remains on strong footing and that the Federal Reserve will proceed with smaller rate cuts.
• Separately, the US Bureau of Economic Analysis' initial estimate suggested that the world's largest economy expanded by a 2.8% annualized pace during the third quarter, slower than the 3% growth recorded in the previous quarter. 
• The markets are pricing in the possibility that the Fed will lower borrowing costs by 25 basis points in November, which, along with deficit-spending concerns after the US election, remains supportive of elevated US bond yields.
• Later during the early North American session, the release of the Personal Consumption Expenditure (PCE) Price Index could provide fresh cues about the Fed's interest rate outlook and influence the USD price dynamics. 

Technical Outlook: USD/JPY needs to decisively break through the 154.00 mark for bulls to retain near-term control

From a technical perspective, the recent repeated failures to find acceptance beyond the 61.8% Fibonacci retracement level of the July-September downfall warrant some caution for bulls. Moreover, the Relative Strength Index (RSI) on the daily chart is on the verge of breaking into the overbought zone. This further makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for additional gains. 

In the meantime, weakness below the 153.00 mark might continue to find some support near the 152.75-152.65 region ahead of the 152.40 area or the weekly low. Some follow-through selling could drag the USD/JPY pair to the 152.00 mark en route to the 151.45 support and the 151.00 mark. The downward trajectory could extend further towards challenging the 150.65 confluence resistance breakpoint, which should now act as a key pivotal point and a strong base for spot prices.

On the flip side, the 153.85-153.90 region now seems to have emerged as an immediate strong barrier. A sustained strength beyond, leading to a breakout through the 154.00 round-figure mark, has the potential to lift the USD/JPY pair towards the 154.35-154.40 supply zone en route to the 155.00 psychological mark. Spot prices could extend the momentum and eventually climb to test the late-July swing high, around the 155.20 region.

• NZD/USD gains ground to around 0.5980 in Thursday’s Asian session. 
• ANZ Business Confidence rose to 65.7 in October vs. 60.9 prior. 
• Investors await the US PCE inflation data on Thursday. 

The NZD/USD pair recovers some lost ground to near 0.5980 on Thursday during the Asian trading hours. The upbeat New Zealand business confidence and Chinese Manufacturing Purchasing Managers' Index (PMI) data underpin the China-proxy New Zealand Dollar (NZD). 

New Zealand business confidence jumped further in October, rising to 65.7 from 60.9 in September, according to a survey by the ANZ bank. Despite the improvement in confidence, the markets expect the Reserve Bank of New Zealand (RBNZ) to cut its Official Cash Rate (OCR) by 75 basis points (bps) at a policy meeting next month. This, in turn, might drag the Kiwi lower against the Greenback. 

The latest data released by the National Bureau of Statistics (NBS) showed on Thursday that China’s Manufacturing PMI jumped to 50.1 in October, up from 49.8 in September. This figure came in better than the expectation of 50.0. Meanwhile, the NBS Non-Manufacturing PMI improved to 50.2 in October versus 50.0 prior, below the consensus of 50.4. 

On the USD’s front, the economic readings have pointed to a resilient jobs market and economy, prompting traders to pare back their bets on the Federal Reserve (Fed) rate cuts. The anticipation that the Federal Reserve (Fed) will proceed with smaller interest rate cuts might lift the Greenback and cap the pair’s upside.

Investors will closely monitor the release of US Personal Consumption Expenditures (PCE) - Price Index data on Thursday. On Friday, the employment data will be in the spotlight. "With the focus more on employment data, a strong non-farm payroll print would provide Fed ammunition for a December pause," said Uto Shinohara, senior investment strategist at Mesirow Currency Management in Chicago.

China’s official Manufacturing Purchasing Managers' Index (PMI) rose to 50.1 in October, compared to 49.8 in the previous reading. The reading beated the market consensus of 50.0 in the reported month. 

The NBS Non-Manufacturing PMI improved to 50.2 in October versus September’s 50.0 figure and the estimates of 50.4.

Market reaction

At the time of writing, the AUD/USD pair is trading around 0.6573, up 0.02% on the day. 

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1250, as compared to the previous day's fix of 7.1390 and 7.1242 Reuters estimates.

Australia’s Retail Sales, a measure of the country’s consumer spending, increased 0.1% MoM in September, compared to a rise of 0.7% in August, the official data published by the Australian Bureau of Statistics (ABS) showed on Thursday.

The reading came in below the market expectations of a 0.3% growth. 

Market reaction to Australia’s Retail Sales data

At the time of writing, the AUD/USD pair is down 0.08% on the day at 0.6566.

• GBP/USD softens to near 1.2955 in Thursday’s early Asian session. 
• The UK's Labour government raised taxes by £40 billion in the new budget plan. 
• Flash US GDP expanded at an annualised rate of 2.8% in Q3. 

The GBP/USD pair extends the decline to around 1.2955 during the early Asian session on Thursday. The Pound Sterling (GBP) edges lower after the UK budget announcement. The attention will shift to the US Personal Consumption Expenditures (PCE) - Price Index data later on Thursday.

The UK's new Labour government released its first budget on Wednesday, which includes £40 billion in tax rises to plug a hole in the public finances and allow for investment in public services, per CNBC. One of the measures that is projected to be one of the most revenue-generating for the UK Treasury is a hike in the amount employers pay out in National Insurance (NI), a tax on earnings. 

The US Gross Domestic Product (GDP) for the third quarter fell below expectations. The ADP Employment Change report for October revealed that private companies hired more people than expected. According to the CME FedWatch tool, traders have priced in a nearly 95.2% chance of a 25 bps rate cut by the Fed in the November meeting. 

The release of the US PCE inflation data on Thursday could offer some hints about the size and pace of the US Federal Reserve's (Fed) rate reduction path. The headline PCE is expected to see an increase of 0.2% MoM in September, while the core PCE is estimated to see a rise of 0.3% MoM in the same reported period. The softer-than-expected outcome could trigger the hope of deeper rate cuts and might exert some selling pressure on the USD.