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• The NZD/USD is seeing a recovery fueled mostly by broad-market US Dollar selling.
• NZ economic data has broadly missed the mark, hampering upside potential.
• Markets set to keep an eye out for Friday's US NFP.

The NZD/USD is churning near 0.5870, looking for further upside as the US Dollar (USD) recedes across the broader market, giving the Kiwi (NZD) a leg up the charts heading into the Thursday market session.

Forex Today: Fed holds, Dollar slides and stocks rise

New Zealand economic data has missed the mark lately, with NZ Employment figures and the NZ Unemployment rate both coming in below expectations earlier in the week.

Jerome Powell explains decision to leave interest rate unchanged

The US Federal Reserve (Fed) held pat on interest rates on Wednesday, and Fed Chairman Jerome Powell struck a notably less hawkish tone than many market participants were expecting, sending the Greenback lower and giving equities and riskier assets a leg up for the mid-week trading session.

NZD/USD Technical Outlook

Despite Wednesday's bullish bounce, the Kiwi remains deeply in red territory, trading into the 21-day Exponential Moving Average (EMA) after dipping to twelve month lows at 0.5772.

The 50-day Simple Moving Average (SMA) is capping off bullish potential from just north of 0.5900, and the target to beat for bulls will be reclaiming the 0.6000 handle without getting rejected from the last swing high near 0.6050.

NZD/USD Daily Chart

NZD/USD Technical Levels

Brian Martin, Head of G3 Economics at ANZ Research, notes that the Euro Area (EA) is at risk of steepening declines as inflation recedes at a rapid pace.

EA inflation improvement increasingly sustainable

The Bank of Canada (BoC) Governor Tim Macklem said on late Thursday that there are some reasons to believe that the neutral interest rate is more likely higher than lower.

Market reaction

The comments above has little to no impact on the Canadian Dollar. The USD/CAD pair is trading lower on the day at 1.3847, as of writing.

• AUD/USD climbs above 0.6400 after the Federal Open Market Committee (FOMC) policy meeting.
• FOMC decided to hold the rate steady, as widely expected; ADP Private Payrolls rose 113K in October vs. 89K prior, below consensus.
• International Monetary Fund (IMF) highlighted that further policy tightening is required from the RBA.
• Investors await Australian Trade data and US weekly. Jobless Claims on Thursday. 

The AUD/USD pair gains momentum above the 0.6400 mark during the early Asian trading hours on Thursday. The pair attracts some buyers following the FOMC pause and mixed US economic data. The pair currently trade around 0.6409, gaining 0.25% on the day. Meanwhile, the US Dollar Index (DXY) faces some selling pressure near 106.67 after retreating from the weekly highs of 107.11. US Treasury bond yields edge lower, with the 10-year standing at 4.73%.

As widely expected, the Federal Open Market Committee (FOMC) policy meeting decided to maintain the interest rate steady and hold the tightening bias. The FOMC noted that tighter conditions are expected to impact economic activity and the labor market while mentioning that the recent rises in long-term bond rates lowered the need for more tightening. The probability of a December increase being discounted by the market is around 22%, according to the CME FedWatch Tool.

About the data, ADP Private Sector Payrolls rose 113K in October from 89K in September, below consensus expectations of a 150k rise. Additionally, the JOLTS jobs opening data unexpectedly rose to 9.553M. The ISM Manufacturing PMI fell to 46.7 in October, lower than the market consensus of 49. The figure registered the lowest reading since July.

On the Aussie front, the Reserve Bank of Australia (RBA) will announce its policy decision at its November meeting next week. The market anticipates the central bank to raise the rate by 25 basis points (bps) at the forthcoming meeting, due to higher inflation.

Furthermore, the International Monetary Fund (IMF) highlighted in its annual assessment of the Australian economy that the economy is resilient while inflation remains sticky, arguing that further policy tightening is required from the RBA.

Looking ahead, the Australian Trade Balance for September and US employment data, including the weekly jobless claims will be due on Thursday. Friday's Nonfarm Payrolls (NFP) will be the closely watched event by market participants on Friday.

• AUD/JPY climbs to a five-week high following the Federal Reserve's decision to hold rates steady.
• Wall Street rally and upbeat market sentiment benefit risk-perceived currencies like the Aussie Dollar.
• From a technical perspective, AUD/JPY is neutral to upward biased, with potential resistance at 96.92 and 97.00 marks.

The AUD/JPY climbs amid an upbeat sentiment, reached a five-week high of 96.54 late on Wednesday session after the US Federal Reserve (Fed) held the Federal Fund Rates (FFR) at around 5.25%-5.50%, unchanged compared to the last two meetings. The pair is trading at 96.50, with buyers eyeing the September 29 high at 96.92.

Wall Street rallied on Wednesday, portraying an upbeat market sentiment. Risk-perceived currencies like the Aussie Dollar (AUD) benefit in that scenario, seen as the main driver of Wednesday’s price action.

From a technical perspective, the AUD/JPY is neutral to upward biased, with buyers eyeing a break of the latest pivot high at 96.92, the September 29 high. Once that level gives way, up next would be the 97.00 mark, along with the year-to-date (YTD) high at 97.67, ahead of the 98.00 figure.

On the other hand, for sellers, the AUD/JPY must drop below the Tenkan-Sen at 95.45 so they can remain hopeful of seeing lower prices. If that level is breached, the next support level emerging would be the Senkou Span A at 95.20, followed by the 95.00 figure.

AUD/JPY Price Action – Daily chart

AUD/JPY Technical Levels

Analysts from Commerzbank Research are out with a note highlighting that the Federal Reserve's (Fed) rate hold on Wednesday sees the Fed unsure if their policy measures will be enough to control inflation moving forward.

Fed keeps key rates unchanged

• The AUD/NZD is trading into the top side heading into Thursday.
• The Kiwi has been lagging as economic data continues to miss the mark.
• The Aussie is stepping even deeper into overbought territory.

The AUD/NZD has rebounded back over the 1.0900 handle, and heads into the Thursday market session trading around 1.0930, testing into four-month highs. The trick for AUD bulls will be to keep the Aussie propped up, though the pair is getting plenty of support after a slew of economic data misses for the Kiwi this week.

Congestion within technical indicators is beginning to pile up for the AUD/NZD chart, with November's P0 neutral pivot point printing in between the 200-day and 50-day Simple Moving Averages (SMA) just north of the 1.0800 handle.

Intraday action has the pair struggling to develop the necessary momentum to claim the R1 weekly pivot, and the Aussie is increasingly at risk of running out of gas. A bearish reversal will see the pair falling back to P0 and the 200-hour SMA, with an extended decline coming up against S1 for the week at 1.0850.

AUD/NZD Hourly Chart

AUD/NZD Daily Chart

AUD/NZD Technical Levels

• NZD/JPY cleared most of its daily losses and closed at 88.220 after bottoming at a low of 87.556.
• The cross finished the session above the 20 and 100-day SMA.
• Indicators on the daily chart are now favouring the bulls.

In Wednesday's session, the NZD/JPY cleared daily gains and jumped from a low around the 100-day Simple Moving Avearge (SMA) to 88.220 above the 20-day SMA. 

On the daily chart, indicators are showing that the bears are losing momentum, with the Relative Strength Index (RSI) standing flat above 50.00 middle points while the Moving Average Convergence Divergence (MACD) prints lower red bars. On the four-hour chart, the bullish momentum is more present, with the RSI pointing north and the MACD printing green bars.

Furthermore, on a broader scale, the bulls need to defend the 20 and 100-day SMAs to continue climbing higher. It is worth noticing that both averages seem to be converging towards 88.000 to perform a bullish cross, which, in case it happens would provide further traction to the buyers, action as a strong support.

Support levels: 88.160 (20-day SMA), 88.000, 87.700.

Resistance levels: 88.800, 0.8900, 0.8930.

NZD/JPY Daily chart

• The EUR/GBP is trading back up from the day's bottom, but struggling to maintain momentum.
• Euro weakening after data softened further on Tuesday, EU GDP missed market calls.
• The BoE is slated for Thursday, expected to hold despite sticky inflation.

The EUR/GBP is trading close to the 0.8700 handle after seeing a halting rebound from the day's lows near 0.8685.

The Euro got knocked back in Tuesday trading after European Gross Domestic Product (GDP) figures missed the mark, alongside pan-EU inflation figures also flubbed forecasts.

European GDP came in at -0.1% for the 3rd quarter compared to the 2nd quarter's 0.1% increase, and declined past the broader market's expected flat reading of 0.0%.

EU Harmonized Index of Consumer Prices (HICP) also missed the mark, printing at 2.9% for the year into October compared to the forecast 3.1%, well below the previous period's 4.3%. The data misses are highlighting investor concerns of a steepening economic downturn across the European continent.

Market to punish GBP on impression that BoE is not doing enough to fight price risks – Commerzbank

European markets are now turning to the Bank of England's (BoE) upcoming rate call for Thursday. The BoE is broadly expected to hold rates steady once more, and investors are becoming leery of the UK central bank's "wait-and-see" approach as inflation continues to prove much stickier than most expected.

EUR/GBP Technical Outlook

The Euro's recent gains against the Pound Sterling from August's lows near 0.8500 have run into significant friction near the 200-day Simple Moving Average (SMA). Price action continues to get hung up in intraday play near the 0.8700 key level, and technical support is seeing consolidation as the 50-day SMA rises into 0.8640.

Further downside will be capped be the last meaningful swing low into 0.8620, while a topside break will see EUR/GBP prices challenging six-month highs beyond 0.8750.

EUR/GBP Daily Chart

EUR/GBP Technical Levels

Markets will continue to digest the FOMC meeting. During the Asian session, Australia is scheduled to release trade data and home loan figures. Later in the day, Switzerland will report consumer inflation data. More US employment data is due with the weekly jobless claims, leading up to Friday's NFP.

Here is what you need to know on Thursday, November 2:

The Federal Reserve (Fed) decided to keep the fed fund target range unchanged at 5.25% to 5.50%, which was in line with market expectations. The statement issued by the Fed was similar to the one released in September, and Chair Jerome Powell's remarks did not contain any surprises.

The US Dollar Index erased its gains following Fed Chairman Powell's press conference. After trading above 107.00 and reaching weekly highs, the DXY closed below 106.70. The US Dollar faced downward pressure due to increased risk appetite and higher demand for Treasuries. In the stock market, the Dow Jones gained 0.67%, while the Nasdaq rose by 1.64%.

Regarding US data releases on Wednesday, the results were mixed. The ADP employment report showed a modest increase in private payrolls by 113,000, falling below the market expectation of 150,000 but surpassing September's figure of 89,000. The JOLTS jobs opening data exceeded market consensus at 9.55 million. However, the ISM Manufacturing PMI unexpectedly dropped to 46.7 in October, lower than the anticipated reading of 49. These figures had minimal impact on the markets.

Upcoming data from the US includes the weekly jobless claims and Q3 Unit Labor Costs. On Friday, the focus will be on the release of Nonfarm Payrolls.

EUR/USD trim losses after the Fed. It traded under the critical support level of 1.0520 for a few minutes, and then rebounded to 1.0580, supported by the weaker US Dollar.

GBP/USD remained flat around 1.2145 after briefly trading below 1.2100. The pair continues to move sideways with a downside bias. The Bank of England is expected to keep the key rate unchanged at 5.25%, with a potentially divided vote. Governor Andrew Bailey will hold a press conference following the decision.

Japanese authorities expressed concerns about "one-sided moves," but USD/JPY remained firm above 150.00, trading near multi-decade highs. It declined below 151.00 after the FOMC, affected by lower Treasury yields.

USD/CHF lost ground and traded below 0.9100, moving away from monthly highs. Switzerland will report its October Consumer Price Index, with the headline figure expected to remain at 1.7% YoY.

AUD/USD had its best day in weeks, consolidating gains after the Fed decision and approaching the 0.6400 area. If it surpasses that level, further gains are likely. Positive market sentiment is crucial for the pair. Australia will release trade data on Thursday.

USD/CAD reached fresh one-year highs at 1.3898 but then retraced to 1.3860. The pair faces strong resistance near 1.3900.

Gold experienced its third consecutive day of losses, however it closed at $1,978 after bottoming at $1,969.90. Silver also trimmed losses during the American hours and ended around $22.70.

• The EUR/USD is back into the day's highs after the Fed left policy rates untouched.
• The Euro is seeing a rebound as the USD takes a step back following steady Fed showing.
• Market risk appetite is tentatively back on the rise after Fed's Powell holds for second month in a row.

The EUR/USD is recovering into Wednesday's peaks after a steady Federal Reserve (Fed) rate call pushes the US Dollar (USD) back down to the day's low bids.

The Fed held rates steady at 5.25-5.5% as markets broadly expected, and few changes were made to the Fed's rate statement compared to the previous month.

Fed Statement comparison: November vs September

Markets blinked after investors were expecting a much more hawkish showing from Fed Chairman Jerome Powell, with Chairman Powell noting that high rates and corresponding yield increases are weighing down on economic growth and inflation, though the Fed didn't entirely close the door on future rate hikes in price growth threatens to spiral out of control.

Jerome Powell explains decision to leave interest rate unchanged

With the Fed's showing out of the way, markets are free to focus on Friday's upcoming US Non-Farm Payrolls (NFP) for October.

Markets are expecting NFP job gains to cool slightly, with October's NFP forecast to print at 180K compared to September's showing of 336K.

EUR/USD Technical Outlook

The Euro opened on Wednesday near 1.0580, dropping into a low 1.0517 against the US Dollar heading into the Fed rate call.

The markets have reacted risk-on following the Fed showing, and the EUR/USD is trading back into the day's opening bids.

Intraday chart action is getting hampered by the 50- and 200-hour Simple Moving Averages (SMA) cycling in the midrange as momentum drains out of the pair in the medium term.

On the daily candlesticks, upside momentum continues to get hampered by the 50-day SMA, with bids continuing to cycle tightly with the 21-day Exponential Moving Average (EMA).

EUR/USD Hourly Chart

EUR/USD Daily Chart

EUR/USD Technical Levels

• XAG/USD found support at a low of around $22.55 and recovered to $22.90 clearing more than 1% of losses.
• The Fed decided to hold rates at the 5.25-5.50% range.
• Powell signalled that the end of the rate hike cycle is near.
• Falling US Treasury yields allowed the metal to find demand.

In Wednesday's session, the XAG/USD faced selling pressure, but Chair Powell's dovish words made the grey metal reverse its course towards $22.90, and at the time of writing, it is up by 0.20% on the day.

After the Federal Reserve (Fed) announced it would hold rates at the 5.25-5.50% range, Chair Powell sounded somewhat hawkish at the beginning of his presser that he would take into account the tighter financial conditions and the cumulative effects of the monetary policy for the next December decision. In addition, he welcomed the decelerating inflation and job creation figures, but he pointed out he still needs more data points to feel confident that the bank's job is done. That being said, he then commented that the Fed had come very far with this rate-hike cycle and that is close to its end, which triggered a wave of risk-on flows benefiting the Silver's price.

 In addition, US Treasury yields are sharply falling, with the 2-year rate falling below 5%, down by more than 2%, while the 5 and 10-year rates declined to 4.67% and 4.75%.

Focus now shifts to Friday's Nonfarm Payrolls report and next week's inflation readings from October for investors to continue placing their bets on the next decisions.

XAG/USD Levels to watch 

Analyzing the daily chart, it is apparent that the XAG/USD has a neutral to bearish technical stance, with the metal trading below the 200 and 100-day Simple Moving Averages (SMA). In addition, the Relative Strength Index (RSI) and the Moving Average Convergence (MACD) turned flat after the momentum gained during the American session and despite bullish momentum being limited, the metal holds above the 20-day average which could act as a support for the next sessions.

 Support levels: $22.55,$22.30,$22.15.

 Resistance levels: $23.00,$23.20-30 (200 and 100-day convergence),$23.50

XAG/USD Daily Chart
 

• GBP/JPY achieves losses of 0.54%, clinging to the top of the Ichimoku Cloud at 183.20s.
• Upbeat market sentiment and fears of Japanese authorities intervening could cap the potential rally.
• If GBP/JPY dives inside the Kumo, the first support is at 183.00, followed by Tenkan-Sen at 182.52.

The Pound Sterling (GBP) losses some ground against the Japanese Yen (JPY) on Wednesday but clings to the top of the Ichimoku Cloud (Kumo) at around 183.20s, though it achieves losses of 0.54%.

An upbeat market sentiment has capped the GBP/JPY fall inside the Kumo, which could open the door for further losses. If the cross stands above that level, that could open the door to reclaiming 184.00, but fears of Japanese authorities intervening in the Forex markets could cap the rally and trigger another leg down.

On the flip side, if GBP/JPY dives inside the Kumo, the first support would be 183.00. Additional losses lie below that level, firstly the Tenkan-Sen at 182.52, followed by the 182.00 mark. Once cleared, the next support would emerge at the bottom of the Kumo at 181.55/60, ahead of reaching the Kijun-Sen at 181.16.

GBP/JPY Price Action – Daily chart

GBP/JPY Technical Levels

Federal Reserve Chairman Jerome Powell holds a news conference to explain why they have decided to leave the policy rate, federal funds rate, unchanged at the range of 5.25-5.5% meeting and responds to questions.

Key quotes

"We've come far enough on policy that risks are now more two-sided."

"Letting higher inflation expectations get embedded is a prescription for misery."

"It's clear that inflation expectations are in a good place."

"The public believes that inflation will come down, that's critical in winning the battle."

"Wage increases have really come down significantly over the course of the last 18 months."

"Wages are not principle driver of inflation so far."

"In the future, it may be that labor market becomes more important for inflation."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."

Federal Reserve Chairman Jerome Powell holds a news conference to explain why they have decided to leave the policy rate, federal funds rate, unchanged at the range of 5.25-5.5% meeting and responds to questions.

Key quotes

"'Dot plot is a picture in time of appropriate policy in light of policymakers' personal views."

"Efficacy of dot plot decays during inter-meeting period."

"We try to be transparent in our thinking."

"As we approach the next meeting, we'll be talking about how we're parsing the data."

"We are seeing elevated potential growth."

"We are going to look at full range of economic data including financial conditions."

"We have come very far with this rate-hike cycle."

"We are close to the end of the cycle."

"We are not considering changing the pace of balance sheet runoff."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."

• The AUD/USD is churning chart paper around 0.6375 as markets digest the Fed's rate hold.
• Fed holds rates steady at 5.25%, Powell says no decisions on future meetings.
• Next Up: Australian September Trade Balance, US NFP Friday.

The AUD/USD is frothing in the middle range for Wednesday after the US Federal Reserve (Fed) held their policy rates at 5.25-5.5%, and markets will be turning towards Friday's US Non-Farm Payrolls (NFP) print.

The Aussie (AUD) rebounded against the US Dollar (USD) for the first day of November's trading, lifting from an early low of 0.6318 to tap an intraday high of 0.6394 and is now trading in the middle near 0.6360.

Powell speech: We have not made any decisions on future meetings

The US Fed held rates steady as many market participants expected, but a notable lack of change in the Fed's rate statement is knocking back the market's early bets of one last rate hike for 2023 in December.

Fed Statement comparison: November vs September

Up next for the Antipodeans will be Australia's Trade Balance figures due early Thursday; investors are anticipating a slight reduction in the Aussie Trade Balance from 9.64B to 9.4B.

After that the broader market will be turning eyes towards Friday's US NFP release, which will be taking on additional weight now that the Fed has directed their forward guidance to being limited to near-term data.

Jobs growth is expected to decline but still remain positive for the US, and Friday's NFP is forecast to print at 180K for October compared to September's print of 336K.

AUD/USD Technical Outlook

The Aussie continues to run into technical resistance near the 0.6400 handle as the 50-day Simple Moving Average (SMA) acts as a ceiling on price action near 0.6390, and the pair is cycling tightly in the midrange around the 21-day Exponential Moving Average (EMA).

AUD/USD bids remain firmly trapped in bear country in the medium-term, and a downside continuation through the 0.6300 handle will see the pair etching in twelve-month lows below 0.6270.

AUD/USD Daily Chart

AUD/USD Technical levels

Federal Reserve Chairman Jerome Powell holds a news conference to explain why they have decided to leave the policy rate, federal funds rate, unchanged at the range of 5.25-5.5% meeting and responds to questions.

Key quotes

"High inflation is painful for people."

"The best thing we can do for the US is to fully restore price stability, with the least damage we can."

"We have been very gratified that we've made significant progress without a spike in unemployment."

"I still believe, and colleagues also, that it is likely we will need to see slower growth, softening in labor market conditions."

"Supply side gains have really been helping, but those things will run their course."

"Still very hard to say the length of lags of policy."

"We have to make policy under great uncertainty."

"This is one reason we have slowed the process down this year."

"Slowing down is giving us a better sense of how much more need to do, if we need to do more."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."

Federal Reserve Chairman Jerome Powell holds a news conference to explain why they have decided to leave the policy rate, federal funds rate, unchanged at the range of 5.25-5.5% meeting and responds to questions.

Key quotes

"We are going to be looking at broad picture in assessing rate hikes."

"We look at labor market, economic growth, financial conditions."

"If we reach a judgment we need to tighten, we will."

"We are not thinking or talking about rate cuts."

"We are focused on if we are sufficiently restrictive."

"The next question will be how long to keep policy restrictive."

"The question we are asking is, should we hike more."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."

• USD/CHF retreats from 0.9107 and remains within the 0.9090/0.9107 range after the Fed's rate decision.
• Fed Chair Jerome Powell acknowledges economic resilience and potential upward pressure on inflation.
• Traders bet on the end of Fed rate hikes, with first-rate cuts anticipated in June 2024.

The USD/CHF retreats some from daily highs reached at 0.9107, though it remains trading within the 0.9090/0.9107 area after the US Federal Reserve (Fed) decided to keep rates unchanged at the 5.25%-5.50% range while continuing to reduce its security holdings (balance sheet).

Fed’s Powell initial comments

The US Federal Reserve Chair Jerome Powell is taking the stand and so far said the Fed is attentive to recent data showing the resilience of economic data and demand for labor. he added that those situations could put upward pressure on inflation. He added “We are not confident policy is sufficiently restrictive,” triggering a jump in the US Dollar.

Summary of the Fed’s latest monetary policy statement

Federal Reserve officials voted unnecessarily on their latest decision. Policymakers acknowledged that economic activity expanded steadily in Q3, mentioning that job gains had moderated. However, they noted that inflation is too high and emphasized the committee is firmly committed to returning inflation to its 2% target.

According to Reuters, US short-term interest rate futures are added to earlier gains as traders bet Fed rate hikes have ended. Additionally, the first-rate cuts are eyed at June 2024.

USD/CHF Technical Levels

Federal Reserve Chairman Jerome Powell holds a news conference to explain why they have decided to leave the policy rate, federal funds rate, unchanged at the range of 5.25-5.5% meeting and responds to questions.

Key quotes

"We are attentive to increase in longer term yields, it can have implications on monetary policy."

"Tighter financial conditions from higher long term rates, stronger dollar, lower stocks could matter for future rate conditions."

"Longer term higher rates can't be a reflection of higher policy rates from us."

"It does not appear that an expectation of higher Fed policy rates is causing higher longer-term rates."

"We aren't confident financial conditions are restrictive enough."

"We have not made any decisions on future meetings."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."

Federal Reserve Chairman Jerome Powell holds a news conference to explain why they have decided to leave the policy rate, federal funds rate, unchanged at the range of 5.25-5.5% meeting and responds to questions.

Key quotes

"Nominal wage growth has shown some signs of easing."

"Labor demand still exceeds supply."

"Jobs to workers gap has narrowed, but jobs still exceeds supply."

"Inflation remains well above target."

"Inflation has moderated since the middle of last year."

"We still have a long way to go to get inflation down to 2%."

"Our restrictive stance is putting downward pressure on economic activity and inflation."

"Committed to achieving a sufficiently restrictive stance."

"Attentive to recent data showing resilience of economy and demand for labor."

"These could put further progress on inflation at risk, could warrant further interest rate hikes."

"Financial conditions have tightened significantly."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."

Federal Reserve Chairman Jerome Powell holds a news conference to explain why they have decided to leave the policy rate, federal funds rate, unchanged at the range of 5.25-5.5% meeting and responds to questions.

Key quotes

"We remain squarely focused on dual mandate."

"Stance of policy is restrictive."

"Full effects of tightening yet to be felt."

"Given how far we have come and amid uncertainty, we are moving carefully."

"We will make decisions on totality of data, balance of risks."

"Economy has expanded well above expectations."

"Labor market remains tight."

"Supply and demand conditions for labor continue to come into better balance."

"Job gains at a strong pace but less than earlier in the year."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."

• The USD/JPY is treading water near 151.00 as Fed holds rates, as expected.
• Only minor changes in Fed statement leaves investors strung along the middle.
• Markets set to turn towards Friday's US NFP.

The USD/JPY is holding steady near the 151.00 handle as the Federal Reserve (Fed) holds rates at 5.25-5.5%, as markets broadly expected, but a lack of significant changes in the Fed's rate statement leaves investors unsure of an additional rate hike in December to close out the year.

Fed leaves interest rate unchanged at 5.25%-5.5% as forecast

The Fed's statement noted a firmer pace of economic expansion, but a moderation in jobs gains for the US.

Inflation remains elevated, and the unemployment rate remains low, but the Fed dropped few flags indicating one last rate hike for the year and the US Dollar (USD) is trading into the midpoint of Wednesday's chart moves.

Fed Statement comparison: November vs September

USD/JPY Technical Outlook

The Dollar-Yen pairing is ever-so-slightly down from yesterday's twelve-month high of 151.72 after catching a bounce from a rising trendline etched in from July's low closes near 138.00.

The USD/JPY continues to catch bids from the 21-day Exponential Moving Average (EMA) currently lifting into 150.00, and medium-term support is baking in from the 50-day Simple Moving Average (SMA) near 148.50.

USD/JPY Daily Chart

USD/JPY Technical Levels

• XAU/USD declined to $1,980 after the decision and is down by 0.25% on the day.
• The Fed decided to hold rates steady at the 5.25%-5.50% range.
• US Treausry yields are declining, which may limit the metal's losses.
• The bank remains data-dependant and left the door open for another hike.

In Wednesday’s session, the Gold Spot price declined towards $1,980, seeing 0.25% gains after the Federal Reserve (Fed) decision to hold rates at the 5.25%-5.50% range. The bank pointed out that it is still data-dependent and that it will take into account tighter financial conditions and the cumulative effects of the monetary policy for its next decisions.

Following the decision, the US Treasury bond yields, often seen as the opportunity cost of holding gold, declined after the decision, which could limit the downward movements of the metal for the rest of the session. The 2-year yield fell below 5.00% while the 5 and 10-year declined rates to 4.70% and 4.90%, respectively. On the other hand, the US Dollar, measured by the DXY index, is still up on the day, trading at 107.00, up by 0.20%.

Focus now shifts to Chair Powell’s presser for investors to look for further clues on the following decisions.
  

XAU/USD Levels to watch 

The daily chart suggests a neutral to a bearish outlook for the short term for the yellow metal’s price as buyers show signs of exhaustion after hitting overbought condition last week. That being said, the 20-day Simple Moving Average (SMA) is about to perform a bullish cross with the 200-day average, which would limit potential losses by acting as a strong support.

 Support levels: $1,960, $1,950, $1,930 (20-day and 200-day SMA convergence)

 Resistance levels: $2000, $2015, $2030.

XAU/USD Daily Chart

• GBP/USD oscillates around 1.2120 following the Federal Reserve's decision to keep rates unchanged.
• Fed acknowledges steady economic activity but emphasizes commitment to returning inflation to 2% target.
• Traders bet on the end of Fed rate hikes, with first-rate cuts eyed at June 2024.

The GBP/USD oscillates at around 1.2108 after the US Federal Reserve (Fed) decided to keep rates unchanged at the 5.25% - 5.50% range and said it is prepared to adjust its policy stance “as appropriate.”

Federal Open Market Committee (FOMC) monetary policy statement

The Fed’s decision was unanimously approved. In its monetary policy statement, Fed officials acknowledged that economic activity expanded steadily in Q3, mentioning that job gains had moderated. However, they noted that inflation is too high, and emphasized the committee is firmly committed to returning inflation to its 2% target.

According to Reuters, US short-term interest rate futures are added to earlier gains as traders bet Fed rate hikes have ended. Additionally, the first-rate cuts are eyed at June 2024.

GBP/USD Reaction to the Fed’s decision

So far, the GBP/USD failed to gain traction, as it seems traders are awaiting Jerome Powell’s press conference, at around 18:30 GMT. However, initial support is seen at the November 1 low at 1.2095 before extending towards the October 26 low of 1.2069. Key resistance is at 1.2164 before advancing towards the October 31 swing high at 1.2200.

• Federal Reserve keeps rates unchanged as expected. 
• US Dollar slid modestly after the FOMC statement, limited market reaction. 
• EUR/USD holds onto daily losses, near the 1.0520 support area. 

The EUR/USD rose modestly to 1.0552 after the FOMC statement and then lost momentum. The US Dollar fell modestly on a limited market reaction. 

Fed delivers as expected 

The Federal Reserve (Fed) has decided to maintain its target range for the federal funds rate at 5.25% to 5.50%, in line with market expectations. During this meeting, the Fed did not provide macroeconomic projections. The statement was practically similar to the September meeting. Market attention is focused on the upcoming press conference by Chair Jerome Powell.

Fed holds steady for the second consecutive meeting – Live coverage

Earlier on Wednesday, the ADP employment report indicated an increase in private payrolls by 113,000 in October, surpassing September's figure of 89,000 but falling short of market estimates of 150,000. Another report revealed that the ISM Manufacturing PMI unexpectedly worsened in October to 46.7, down from 49 in September. The JOLTS Jobs Opening data exceeded expectations, rising to 9.55 million in September compared to the anticipated 9.25 million. Additional employment data is scheduled for release on Thursday with Jobless Claims and on Friday with Nonfarm Payrolls.

Levels to watch 

The EUR/USD is trading near the crucial support level of 1.0520. A breakdown below this level could potentially lead to further losses, with the next target being the 1.0500 area. On the upside, for an improved intraday outlook, the Euro must surpass the 20-hour Simple Moving Average (SMA). The pair is headed toward its daily close in two weeks. However, while above 1.0520, losses seem limited. 

Technical levels 
 

• WTI barrels are retreating into recent lows as global economic data misses the mark.
• US Dollar is seeing lift in the mid-week, further depressing Crude Oil bids.
• Crude Oil is shrugging off a smaller-than-expected increase in EIA Crude stocks.

West Texas Intermediary (WTI) Crude Oil bids are on the backfoot for Wednesday as the US Dollar (USD) finds firm bids across the board, suppressing energy prices. Meanwhile, global economic data continues to miss the mark, pushing back market hopes for increasing Crude Oil demand.

European and Chinese growth continues to lag against market expectations, and stumped demand growth is bleeding across into Crude Oil prices as investors fear a steepening contraction in Crude usage failing to eat up production supply.

Energy Information Administration (EIA) Crude Oil Stocks into the week ending October 27th showed Crude Oil reserves increased at a smaller pace than expected, with EIA stocks increasing but 0.774M barrels against the forecast 1.261M (last 1.371M).

Despite the smaller-than-expected buildup, US Crude reserves are regardless increasing as Crude Oil usage continues to undershoot demand, washing away energy markets' narrative of a drastic undersupply in Crude pipelines.

WTI Technical Outlook

With WTI trading back towards $80.00, bidders will be looking to cut off a retreat below the 200-day Simple Moving Average (SMA) near $78.00.

The top side is capped off by the last swing high just shy of the $90.00 handle, and a lower high pattern is forming up on the daily candlesticks.

WTI Daily Chart

WTI Technical Levels

FOMC meeting statement comparison

September 20November 1, 2023

Recent indicators suggest that economic activity has been expandingexpanded at a solidstrong pace. in the third quarter. Job gains have slowed in recent monthsmoderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated.

The U.S. banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Adriana D. Kugler; Lorie K. Logan; and Christopher J. Waller.

Follow Fed meeting – Live coverage

• USD/JPY at risk of sliding to 150.00 handle, with losses of 0.39% as US Treasury bond yields drop.
• Market participants expect Fed to hold rates unchanged, with focus on Jerome Powell's press conference.
• Bank of Japan's latest decision keeps the Japanese Yen pressured against most G8 currencies.

USD/JPY retreats from daily highs reached at 151.68, as US Treasury bond yields dropped on mixed US economic data ahead of the US Federal Reserve monetary policy decision. The major trades at 151.05, at the brisk of sliding to the 150.00 handle, with losses of 0.39%.

Mixed US economic data and anticipation of the Federal Reserve's monetary policy decision impact USD/JPY

With the Fed’s decision right around the corner, the USD/JPY remains offered due to the latest economic releases. Before delving into that data, market participants expect the Fed to hold rates unchanged at the 5.25% -5.50% range, followed by Jerome Powell's press conference at 18:30 GMT.

The US economic docket witnessed the release of the Institute of Supply Management (ISM) October report, which showed that Manufacturing PMI dropped to 46.7, below estimates, and September’s 49.0 level, suggesting that activity is slowing down.

Moving to the US jobs data, Automatic Data Processing (ADP) indicated an increase in private hiring compared to September, although it fell significantly short of estimates. Subsequently, the US Bureau of Labor Statistics (BLS) reported that job openings exceeded both forecasts and the previous reading, with September's Job Openings and Labor Turnover Survey (JOLTS) reaching 9.553 million.

Meanwhile, on the Japan front, the latest decision of the Bank of Japan (BoJ) keeps the Japanese Yen (JPY) pressured against most G8 currencies. Even though the bank tweaked the Yield Curve Control (YCC), the USD/JPY printed a new year-to-date (YTD) high of 151.72, though authorities and the BoJ remain on hold of intervening in the Forex markets. That said, further Yen weakness is expected, though caution is warranted.

USD/JPY Technical Levels

• AUD/USD peaked at a daily high around 0.6395 and then settled at 0.6360,  still up on the day.
• The market's attention is on the Fed decision later in the session and on Jerome Powell's comments.
• The USD is holding its ground despite the report of weak data.
• Australia will report key Trade Balance data in Thursday's session.

In Wednesday's session, the AUD/USD gained momentum and rose to a high of 0.6395 and then consolidated towards 0.6360, still holding around 0.30% gains. The short-term trajectory will be dictated by the Federal Reserve (Fed) decision later in the session, where investors will place their bets on the December meeting, potentially increasing the demand for US Dollars.

Earlier in the session, the US reported that Automatic Data Processing Inc. (ADP) reported that Employment Change came in lower than expected in October. The private sector added 113,000 jobs vs the 150,000 expected but higher compared to its last reading of 89,000. In addition, the Institute for Supply Management (ISM) reported that its Manufacturing PMI came in at 46.7 in October, below the 49 expected, and declined from its previous reading of 49. Despite the reports of weak data, the US Dollar is holding its ground, mainly driven by a cautious market mood ahead of the Fed's decision.

On the Aussie's side,  Australia will report Trade Balance data from September, which is expected to have decelerated. Earlier in the session,  Australian housing and industrial came in lower than expected but did not trigger any selling pressure on the Aussie as attention is set on what the Fed decides.  

 AUD/USD Levels to watch 

Observing the daily chart, the outlook is starting to tilt in favour of the bears, but they still have some work to do, which contributes to a neutral to bearish bias. The Relative Strength Index (RSI) has a positive slope below its midline, while the Moving Average Convergence (MACD) prints flat green bars. On the broader scale, the pair is above the 20-day Simple Moving Average (SMA), but below the 100 and 200-day SMAs, suggesting that despite the recent bearish sentiment, the bulls are still resilient, holding some momentum.

 Support levels: 0.6350, 0.6330, 0.6270.

 Resistance levels: 0.6400, 0.6430, 0.6470.

 AUD/USD Daily Chart

• US economic slowdown and high inflation pressures keep the Federal Reserve focused on price stability.
• Mixed US employment data and a rally in US bonds contribute to a weaker US Dollar.
• Lack of new Eurozone data leaves traders relying on Tuesday's figures, justifying ECB's pause on tightening.

The Euro (EUR) extended its losses versus the US Dollar (USD) in the early trading session on Wednesday, even though economic data from the United States (US) portrays the economy is slowing down, but high inflation pressures keep the US Federal Reserve (Fed) under pressure to deliver price stability. The EUR/USD is trading at 1.0540, down 0.32%.

EUR/USD down 0.32% as mixed US data and ECB's pause on the tightening cycle weigh on the Euro

Economic data in the US deteriorated the outlook to the already battered US Dollar. Employment data revealed by Automatic Data Processing (ADP) showed that private hiring advanced more than September’s but missed estimates by a substantial quantity. Later, the US Bureau of Labor Statistics (BLS) announced that job openings rose above estimates and the prior reading figures, with September JOLTs hitting 9.553M, vs. 9.25M foreseen and 9.47M previous data.

Further data showed the US Treasury Department is expected to auction 112 billion, less than the 114 billion estimates by analysts, on its quarterly refunding, triggering a rally in US bonds to the detriment of US yields.

In addition to that, business activity in the manufacturing front is losing steam as the ISM Manufacturing PMI for October dropped below the 50 contraction/expansion threshold for twelve straight months, sponsored by the fall in New Orders, while Manufacturing Prices rose.

On the Eurozone (EU) front, Wednesday's lack of economic data left traders adrift to Tuesday’s EU figures and inflation data, which justified the European Central Bank (ECB) pause on its tightening cycle as inflation dipped below the 3% threshold.

EUR/USD Price Analysis: Technical outlook

The EUR/USD downtrend remains intact, and it could accelerate if the pair achieves a daily close below the bottom trendline of the bearish flag. Once cleared, the next support would be the October 13 swing low of 1.0495, ahead of extending its fall to October’s low of 1.0448. Conversely, if the major remains above the bottom trendline, a test of the 1.0550 mark is on the cards, ahead of 1.0600.

• The EUR/JPY is seeing a relief pullback, dipping back towards 159.00.
• The Euro hit its highest bids against the Yen since 2008, peaking at 160.85.
• Dovish BoJ sapping Yen strength, EU data missing the mark.

The EUR/JPY tipped into a fifteen-year high of 160.85 on October 31st with the Yen (JPY) continuing to collapse across the broader market as the Bank of Japan (BoJ) continues to waffle on lifting interest rates.

With the BoJ interest rate differential with all other major central banks continuing to widen, there's little else for the Yen to do but continue to weaken.

European economic data continues to miss the mark, softening up the Euro (EUR) after EU Gross Domestic Product (GDP) figures came in below expectations early Wednesday. EU GDP for the 3rd quarter came in at -0.1%, declining from the previous quarter's 0.1% and missing the forecast of a flat 0%.

Pan-EU Harmonized Index of Consumer Prices (HICP) for the year into October also missed market expectations, printing at 2.9% versus the forecast 3.1%, and declining even further than expected from the previous 4.3%.

The BoJ broadly flubbed market expectations of defensive posturing to protect the Yen, holding steady on policy rates, mechanisms, and only introducing a minor change in their yield control curve policy tool as the Japanese central bank continues to fear long-term inflation failing to meet the BoJ's minimum target of 2%.

The BoJ's own inflation expectations don't see inflation declining below 2% until well into 2025, even as Japanese consumers continue to suffer under the weight of a collapsing Yen.

EUR/JPY Technical Levels

The EUR/JPY is falling back towards the 159.00 handle as the pair drifts back towards the near-term median at the 200-hour Simple Moving Average (SMA) just below 159.00, paring back yesterday's gains.

The pair is threatening to tip back into familiar swing highs near 158.80, and the last meaningful swing low rests at October 30th's low of 157.70.

Today's pullback sees the EUR/JPY consolidating between the 200-hour SMA and the 50-hour SMA near 159.60.

EUR/JPY Hourly Chart

EUR/JPY Technical Levels

• The Canadian Dollar is trapped near familiar low bids as Fed rounds corner.
• Bank of Canada Governor Tiff Macklem wrapping up government testimony today.
• Markets are expecting a hawkish pause from Fed Chair Powell.

The Canadian Dollar (CAD) is stuck to the floorboards, trading into twelve-month lows as the markets turn to face the latest rate call from the Federal Reserve.

Bank of Canada (BoC) Governor Tiff Macklem will be making an appearance later in the day to wrap up day two of his financial conditions testimony to the Canadian government’s Standing Senate Committee on Banking, Commerce and the Economy. 

Daily Digest Market Movers: Canadian Dollar held down as markets await Fed’s Powell

• The CAD is stuck at twelve-month lows as the markets head into another Fed rate call.
• Fed press conference scheduled for 30 minutes after rate release. 
• “Hawkish hold” from Fed Chair Powell expected, investors bracing for one last rate hike in December.
• Crude Oil prices have receded, sapping knock-on support for the Loonie.
• BoC Governor Tiff Macklem will be wrapping up his government testimony on financial conditions later in the day.
• Macklem to be followed by Senior Deputy Governor Carolyn Rogers.
• Post-Fed markets will be turning immediately toward Friday’s US Non-Farm Payrolls.
• Canada Unemployment Rate, Employment Change for October also slated for Friday.

Technical Analysis: Canadian Dollar finding little momentum as investors prioritize Fed

The Canadian Dollar (CAD) is cycling just below the 1.3900 handle against the US Dollar (USD) as markets await the Fed’s rate call, and the pair has struggled to etch in any meaningful chart movement since first tapping into 1.3880 last Friday.

The USD/CAD has been rising since bouncing from the 200-hour Simple Moving Average (SMA) last week near 1.3680, gaining 1.5% as the Loonie recedes against the Greenback. The pair has been finding consistent technical support from the 50-hour SMA as median bids trend upward, with the moving average buoying prices for Wednesday from 1.3860.

On the daily candlesticks, the USD/CAD is firmly pinned into bull territory, trading into year-long highs and catching bullish bounces from the 21-day Exponential Moving Average (EMA).

The floor on bearish corrections will be at the 200-day SMA near 1.3500, with technical support from the 50-day SMA currently pushing upward to 1.3650.

USD/CAD Hourly Chart

USD/CAD Daily Chart

• Softer-than-expected US economic data weakens USD, propelling NZD/USD to trade at 0.5838.
• Mixed US labor market signals and recessionary manufacturing activity create an upbeat sentiment for NZD.
• NZD/USD's future hinges on the upcoming US Federal Reserve monetary policy meeting outcome.

NZD/USD makes a U-turn and registers decent gains of 0.22% after softer-than-estimated economic data from the United States (US) weakened the American Dollar (USD). At the time of writing, the pair is trading at 0.5838 after bouncing from daily lows of 0.5788.

NZD/USD registers gains amidst mixed US labor market signals and recessionary manufacturing activity

An upbeat sentiment favors risk-perceived currencies like the Kiwi Dollar (NZD) ahead of the US Federal Reserve (Fed) monetary policy meeting. A tranche of US data witnessed the US labor market displaying mixed signals, as the ADP Employment Change in October, showed the creation of more jobs than the previous month but missed estimates. On the other hand, the US Department of Labor reported the JOLTs report, which revealed that job openings in September continued to rise, above estimates and August’s figures.

In the meantime, manufacturing activity in the US continues to remain in recessionary territory. The ISM Manufacturing PMI in October, remained below the 50 contraction/expansion threshold for twelve straight months, blamed on New Orders falling while Manufacturing Prices rose.

In other data, the US Treasury Department announced its quarterly refunding, with auctions increasing less than expected, sparking a rally in US bonds.

During the Asian session, employment data from New Zealand was a headwind for the NZD/USD, with the economy slashing jobs; consequently, the Unemployment Rate rose. That would refrain the Reserve Bank of New Zealand (RBNZ) from hiking rates.

That alongside with China’s economic recovery being a bumpy one, could undermine the Kiwi. The Caixin Manufacturing PMI in October, deteriorated further, in alignment with the National Bureau of Statistics (NBS) data announced a day before.

All that said, the NZD/USD remains positive but at the mercy of the Fed’s monetary policy decision. A hawkish tilt could undermine the NZD/USD pair, pushing prices below the 0.5800 mark.

NZD/USD Technical Levels

• The DXY index retreated to 106.80 after peaking at a high of around 107.00.
• The ISM Manufacturing PMI from October came in lower than expected, as well as the ADP employment change.
• Markets await the Fed decision later in the session.

The US Dollar (USD) moved higher on Wednesday, with the DXY Index rising to a nearly one-month high above 107.00 before settling at 106.80. The Dollar price dynamics were set by soft economic data from the US and falling US bond yields, which declined after the US Treasury announced a lower-than-expected refund. Still, a cautious market mood ahead of the Federal Reserve (Fed) later in the session keeps the Greenback afloat.

The focus is on the United States' economic situation as markets await data to continue modeling their expectations on the next Federal Reserve (Fed) decisions. However, the probability of a 25 basis points increase in December, as per the CME FedWatch tool, remains slim, dampening the USD's potential for significant gains. At Wednesday's meeting, a pause is priced in. The Fed is expected to announce a hawkish hold as in September, pointing out that they will remain data-dependent but leaving the door open for further tightening if needed. 

Daily Digest Market Movers: US Dollar retreats from one-month high after weak labor and economic activity figures

• The US DXY index traded in the 106.80 - 107.10 range on Wednesday.
• The US labour market is displaying signs of weakness ahead of Friday’s Nonfarm Payrolls from October.
• The Automatic Data Processing Inc. (ADP) reported that Employment Change fell short of expectations in October. The private sector added 113,000 jobs vs the 150,000 expected but accelerated compared to its last reading of 89,000.
• On the economic activity front, The Institute for Supply Management (ISM) reported that its Manufacturing PMI printed at 46.7 in October,below the 49 expected, and declined from its previous reading of 49.
• Meanwhile, US government bond yields are falling sharply, with the 2, 5 and 10-year yields declining to 5.01%, 4.72% and 4.79%, respectively, contributing to the USD loss of momentum.
• According to the CME FedWatch Tool, the odds of a 25 basis points hike in December are still low, around 20%. Chair Powell’s presser and the policy statement will likely impact those expectations.

Technical Analysis: The US Dollar Index still holds the 20-day SMA with a limited bullish momentum

Observing the daily chart, signs of bullish exhaustion are apparent for the DXY Index. The Relative Strength Index (RSI) exhibits a flat slope above its midline, while the Moving Average Convergence (MACD) histogram displays red bars. As for now, the pair is above the 20,100 and 200-day Simple Moving Average (SMA), indicating a favorable position for the bulls in the bigger picture, but if the bears manage to breach the 20-day average, more downside will be on the horizon.

Supports: 106.30 (20-day SMA), 106.00, 105.70.
Resistances: 106.90, 107.00, 107.30.

• Mexican Peso buyers are in charge after the USD/MXN slump below the 18.00 figure.
• Mexico's Business Confidence improved in October, rising to 54 from September's 53.8.
• Weak US economic data, including lower-than-expected ADP Employment Change and a drop in ISM Manufacturing PMI, put pressure on the USD.
• Traders brace for US Federal Reserve monetary policy decision around 18:00 GMT.

The Mexican Peso (MXN) gathered traction against the US Dollar (USD) on Wednesday as market sentiment shifted positively due to a tranche of weaker-than-expected economic data from the United States, which weighed on the Greenback (USD). Across the border, Mexico’s Business Confidence improved, though it wasn’t the reason behind the Peso's strength. Therefore, the USD/MXN is falling 0.74%, trading at 17.90, well below the psychological 18.00 figure.

The US economic docket was packed on Wednesday. First, the ADP Employment Change revealed by Automatic Data Processing (ADP) showed the economy adding 113K private jobs, above September’s 89K but missing estimates of 150K.

Recently, the Institute of Supply Management (ISM) announced that October’s Manufacturing PMI witnessed a drop below the 50 contraction/expansion midline, at 46.7 for the previous twelve months in a row, below the consensus and September’s 49.0 reading. The ISM report revealed that prices paid by producers are climbing, putting the US Federal Reserve (Fed) under pressure to continue tightening interest rates to curb stubbornly high inflation in exchange for harming the economy.

In other data, the US Treasury Department announced its quarterly refunding, with auctions increasing less than expected, sparking a rally in US bonds.

After the data, the US 10-year Treasury bond yield plunged 15 basis points, from 4.935% to 4.787%, while the US Dollar Index (DXY) – a gauge of the buck’s value against a basket of six currencies – dropped from the daily high of 107.09 to 106.66, losing 0.04%.

Additional data from the US Department of Labor revealed that job openings in September rose by 9.553 million, above estimates of 9.25 million and August’s 9.497 million vacancies reported a month ago.

Aside from this, Mexico’s Business Confidence in October rose to 54 from September’s 53.8, but the main headlines are around Acapulco’s tragedy after Hurricane Otis. Mexican President Lopez announced a recovery plan, including tax breaks, financial assistance and social welfare payments. The Mexican Finance Minister said that 61 billion pesos in investment would be required for Acapulco.

Daily digest movers: Mexican Peso rallies sharply as the USD/MXN falls off cliff below 17.95

• US ADP Employment Change in October climbed to 113K, better than the previous month, but missed forecasts of 150K.
• The ISM Manufacturing PMI dropped to recessionary territory at 46.7 in October, below forecasts and September’s 49 reading.
• September’s JOLTs job report showed openings rose by 9.553 million, above forecasts of 9.25 million, and August’s 9.497 million.
• Mexico’s Business Confidence in October improved to 54 from 53.8.
• Mexico’s Gross Domestic Product grew by 0.9% QoQ in the third quarter on its preliminary reading, above the previous quarter and estimates of 0.8%.
• On a yearly basis, Mexico’s GDP for Q3 expanded 3.3%, above forecasts of 3.2% but trailing the previous 3.6%.
• According to Enki Research, a firm specializing in natural disasters, the first estimates of Hurricane Otis's damages stand at around $10 to 15 billion dollars.
• Mexican authorities reported that around 270,000 houses in Acapulco were affected or destroyed, while 80% of hotels were severely damaged.
• The US agenda will feature the Fed’s decision and Chair Jerome Powell’s press conference.
• On October 24, Mexico's National Statistics Agency, INEGI, reported annual headline inflation hit 4.27%, down from 4.45% at the end of September, below forecasts of 4.38%.
• Mexico’s core inflation rate YoY was 5.54%, beneath forecasts of 5.60%.
• The Bank of Mexico (Banxico) held rates at 11.25% in September and revised its inflation projections from 3.50% to 3.87% for 2024, above the central bank’s 3.00% target (plus or minus 1%). The next decision will be announced on November 9.

Technical Analysis: Mexican Peso buyers target the 200-day Simple Moving Average

The USD/MXN uptrend is at the risk of being reversed as the exotic pair plunged below 18.00, leaving the 20-day Simple Moving Average (SMA) standing behind at 18.10. The risk is rising that the 200-day SMA at 17.72 is about to be tested.

A breach of the last and subsequent support would be the 50-day SMA at 17.58. On the flip side, USD/MXN buyers must reclaim the 18.00 psychological figure to have a chance of reclaiming the 20-day SMS at 18.10 before targeting the October 26 high at 18.42 before challenging last week’s high at 18.46, ahead of the 18.50 figure.

Analysts at Rabobank expect the EUR/GBP pair to edge down toward the 0.86 area in the weeks, considering that the latest data showed the Eurozone economy continued to sour. 

Key quotes: 

• ISM Manufacturing PMI worsened unexpectedly to 46.7 in October.
• US Dollar Index trims gains, retreats from 107.00.

The economic activity in the US manufacturing contracted in October, with the ISM Manufacturing PMI falling to 46.7 from 49 in September. This reading came in worse than the market expectation of 49.

Key takeaways from the report:

Market reaction

The US Dollar Index pulled back modestly after the ISM and the JOLTS report, retreating from 107.00 to 106.85. It was still up for the day. Now attention is set on the Federal Reserve’s decision. 
 

• USD/CAD finds offers near 1.3900 as oil price recovers strongly.
• The market mood remains risk-off ahead of Fed policy.
• In October, fresh US private payrolls were 113K, lower than expectations of 159K.

The USD/CAD pair faces selling pressure near the round-level resistance of 1.3900 in the early New York session. The Loonie asset remains subdued as a strong recovery in oil prices has strengthened the Canadian Dollar.

Oil prices recovered sharply as the Israeli defense forces (IDR) entered Gaza for a full-scale invasion, which is elevating fears of Iran’s intervention in the Israel-Palestine conflicts. If Iran intervenes, the oil supply chain will be disrupted significantly. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices support the Canadian Dollar.

The market sentiment is downbeat as investors await the Federal Reserve’s (Fed) monetary policy. As per the CME Fedwatch tool, the decision to keep interest rates unchanged in the range of 5.25-5.50% is certain. However, hawkish guidance is expected due to robust consumer spending and strong labor market conditions.

The US Dollar Index (DXY) climbs close to the crucial resistance of 107.00 despite weak US private payroll data for October. The US Automatic Data Processing (ADP) reported that employers hired 113K job seekers, which was lower than expectations of 159K but significantly higher than the former reading of 89K.

On the Canadian Dollar front, Bank of Canada (BoC) Governor Tiff Macklem said that the central continues to assess whether monetary policy is sufficiently restrictive and is ready to do whatever is required to restore price stability.

The US Department of the Treasury announced its plans for debt auctions from November 2023 to January 2024. It revealed that it will gradually increase the size of most of its auctions and stated that it will require one more additional quarter of increases beyond the current announcement. The sales of 10-year notes were increased by $2 billion, below the market's expectations of $3 billion.

Key takeaways from the statement: 

Market reaction

Wall Street futures moved to the upside and Treasury bonds rose. The 10-year yield dropped from 4.90% to 4.83%. Market participants are also digesting the ADP employment report while waiting for the Federal Reserve’s decision. 
 

• ADP: US private payrolls rose by 113,000 in October, up from 89,000 in September.
• US Yields drop after Treasury refunding announcement; 10-year slides to 4.83%.
• EUR/USD consolidates around 1.0550 amid a mixed US Dollar ahead of the FOMC decision.

The EUR/USD pair reached a bottom at 1.0540, the lowest level in three days, and bounced to 1.0557 following the release of the ADP employment report and the Treasury refunding announcement. Currently, the pair is hovering around 1.0550, holding onto daily losses as markets await the FOMC decision.

The ADP employment report showed an increase in private payrolls of 113,000 in October, below the market consensus of 150,000 but above the unrevised figure of 89,000 recorded in September. The report did not trigger significant market actions. More US data is due on Wednesday, with the ISM Manufacturing PMI at 14:00 GMT.

The US Treasury Department has released its plan for debt auctions, which includes gradually increasing the size of most auctions from November 2023 to January 2024. Treasury yields declined after the announcement, putting pressure on the US Dollar, particularly against commodity currencies.

The US Dollar Index is still up by 0.10%, primarily due to the decline in EUR/USD. The Euro is underperforming on Wednesday, also falling against the Pound, Swiss Franc, and Yen.

Later in the day, the Federal Reserve (Fed) will announce its decision on monetary policy. No change in interest rates is expected. Following the statement at 18:00 GMT, Fed Chair Jerome Powell will hold a press conference.

US Interest Rate Decision Preview: Federal Reserve expected to stand pat for second consecutive meeting

Levels to watch

Below the daily lows, the next support for EUR/USD emerges at 1.0520, last week's low, followed by 1.0493 (Oct 13 low). The short-term bias is currently tilted to the downside. Immediate resistance can be seen at 1.0565. For a reversal of the negative bias, the Euro would need to rise above the 1.0590 area, surpassing key Simple Moving Averages (SMA) on the 4-hour chart.

EUR/USD 4-hour 

Technical levels 

• The Federal Reserve is widely expected to leave its policy rate unchanged at 5.25%-5.5%.
• Fed Chairman Jerome Powell will speak on the policy outlook in the post-meeting press conference. 
• The US Dollar valuation could be impacted by the statement language and FOMC Chairman Powell’s comments.

The Federal Reserve (Fed) is expected to leave its policy rate unchanged at the range of 5.25%-5.5% for the second consecutive time in November. The decision will be announced at 18:00 GMT and FOMC Chairman Jerome Powell will speak on the policy outlook and respond to questions in the post-meeting press conference, starting at 18:30 GMT.

The market positioning suggests that a no change in the Fed’s policy rate is fully priced in. However, investors still see a nearly 20% probability that the Fed will opt for one more 25 basis points (bps) interest-rate hike before the end of the year, as per the CME Group FedWatch Tool.

Economists at ABN Amro said that the Fed has reached the end of its tightening cycle and explain:

“We think July was the last hike of the cycle, and that benign core inflation readings will give the FOMC the confidence to keep policy on hold over the coming months.”

“We continue to expect the Fed to start cutting rates from next March. Falling inflation will push real rates higher, and the recent jump in bond yields also represents a significant tightening in financial conditions.”

When will the Fed announce policy decisions and how could they affect EUR/USD?

The Federal Reserve is scheduled to announce its interest rate decision and publish the monetary policy statement at 18:00 GMT. This will be followed by the post-meeting FOMC press conference at 18:30 GMT. Investors expect the Fed to leave the policy rate unchanged, while seeing a small chance of one more rate hike in the last policy meeting of the year in December. 

Following the Fed’s decision to stand pat on rates in September, the benchmark 10-year US Treasury bond yield has climbed from 4.3% to 5%. Although the rise in yields was largely driven by the selling pressure surrounding the Treasury bonds on government shutdown fears, it caused a further tightening of financial conditions. In his most recent public appearance at the Economic Club of New York, Chairman Powell acknowledged that higher bond yields could have implications for the policy and added that they could take some pressure off of the Fed to raise rates.

Meanwhile, recent data releases from the US reaffirmed tight conditions in the labor market and the strength of the economy. Nonfarm Payrolls rose by 336,000 in September, the biggest one-month increase since January, and the US economy grew at an annualized rate of 4.9% in the third quarter.

FOMC speech tracker: Balanced approach ahead of November 1 meeting

Federal Reserve officials modeled their vocabulary towards a more balanced approach on their public appearances during late September and October, before the 10-day blackout period ahead of their November 1 FOMC meeting and interest rate decision. Balanced remarks, even by FOMC policymakers who had been leaning clearly hawkish recently such as Neal Kashkari or Loretta Mester, were more frequent this time around. At the same time, some board members who had been more balanced during the spring and summer, have leaned more dovish in the fall, like Christopher Waller or Patrick Harker.

That said, the general tone going into the meeting is quite balanced, well represented by Fed Chair Jerome Powell speech at the Economic Club of New York on October 19 and the last eight recorded appearances from Fed members having been had a generally balanced tone.

*Voting members in 2023.

FOMC speech counter

This content has been partially generated by an AI model trained on a diverse range of data.

In case the Fed shuts the door to a December rate hike, the market positioning suggests that the US Dollar (USD) could weaken further against its rivals with the initial reaction. On the other hand, a hawkish tone could revive expectations for one more increase and provide a boost to the USD. Powell might cite the above-mentioned data and argue that the economy is healthy enough to handle additional tightening.  

In case the Fed adopts a neutral stance and reiterates the data-dependent approach, investors could refrain from taking large positions ahead of Friday’s jobs report.

Analysts at TD Securities provide a brief preview of the potential market reaction to the Fed’s policy decisions:

“For the Fed, they will strike a hawkish tone, but we think the bar is higher for them to actually move the market. Markets are fully priced for US exceptionalism, and we note the decoupling of US macro trends and the US 10y yield.”

“We expect softer US data this week and another round of strong China data. With the USD running a new cyclical risk premium and long positioning quite elevated, the USD should struggle to hold onto recent gains this week.” 

Eren Sengezer, European Session Lead Analyst at FXStreet, shares his technical outlook for EUR/USD: “The Relative Strength Index (RSI) indicator on the daily chart declined below 50 and EUR/USD fell below the 20-day Simple Moving Average (SMA) early Wednesday, pointing to a bearish tilt in the short-term outlook.”

Eren also points out the key levels for the pair: “1.0500 (psychological level, static level) aligns as first support for the pair before 1.0450 (end-point of the July-October downtrend) and 1.0400 (psychological level, static level). On the upside, resistances are located at 1.0650 (20-day SMA, Fibonacci 23.6% retracement), 1.0750 (Fibonacci 38.2% retracement) and 1.0800 (100-day SMA, 200-day SMA).”

• USD/CHF delivers a lackluster performance ahead of Fed policy.
• Higher US bond yields and gradually easing price pressures warrant a steady policy decision from the Fed.
• USD/CHF aims to stabilize above the horizontal resistance plotted from 0.9090.

The USD/CHF pair trades back and forth in a narrow range near the round-level resistance of 0.9100 in the late European session. The Swiss Franc asset struggles for a direction as investors await the monetary policy decision by the Federal Reserve (Fed) and crucial US economic data.

The Fed is expected to deliver a neutral interest rate decision but will maintain a hawkish guidance due to upside risks to inflation remaining persistent. Higher US long-term bond yields and gradually easing price pressures are supporting a steady monetary policy decision from the Fed.

Meanwhile, investors await the speech from Swiss National Bank (SNB) Governor Thomas J. Jordan which would impact visibility for the Swiss Franc. SNB Jordan is expected to discuss about keeping interest rates higher for longer to keep inflation sustainably around or below 2%.

USD/CHF aims to stabilize above the horizontal resistance plotted from September 29 low at 0.9090, which is turning as a support. Upward-sloping 20-period Exponential Moving Average (EMA) indicates that the near-term outlook is bullish. The Relative Strength Index (RSI) (14) oscillates in the bullish range of 60.00-80.00, indicating strength in favor of US Dollar bulls.

A fresh upside would appear if the asset breaks above the round-number resistance of 0.9100, which will drive the asset toward May 31 high around 0.9147, followed by October 6 high at 0.9176.

On the contrary, a downside move below October 25 low at 0.8920 would expose the asset to October 24 low at 0.8888. Further breakdown below the latter would drag the asset toward September 5 low around 0.8830.

USD/CHF two-hour chart

• Private sector employment grew at a softer pace than expected in October.
• US Dollar Index stays in positive territory above 106.50.

Private sector employment in the US rose by 113,000 in October, the data published by Automatic Data Processing (ADP) showed on Wednesday. This reading followed the 89,000 increase recorded in September and came in below the market expectation of 150,000.

Assessing the findings of the survey, “no single industry dominated hiring this month, and big post-pandemic pay increases seem to be behind us,” said Nela Richardson, chief economist ADP, and added: “In all, October's numbers paint a well-rounded jobs picture. And while the labor market has slowed, it's still enough to support strong consumer spending.” 

The details of the report revealed that the annual pay was up 5.7% year-over-year in October.

Market reaction

The US Dollar showed no immediate reaction to these figures and the US Dollar Index was last seen gaining 0.15% on the day at 106.86.

• WTI attempts recovery from $80.50 in hopes that the Fed will keep interest rates unchanged.
• The US Dollar Index gathers strength to extend recovery ahead of Fed policy, US labor, and factory data.
• Oil prices managed to recover despite weak Caixin Manufacturing PMI data.

West Texas Intermediate (WTI), futures on NYMEX, find bets near $80.50 on expectations that the Federal Reserve (Fed) will keep interest rates unchanged in the range of 5.25-5.50%. The Fed is widely to keep policy steady due to a gradual decline in consumer inflation and higher US long-term bond yields, which are impacting business investment and overall spending.

Considering the strength in the US economy due to robust consumer spending, strong labor market conditions, and a potential recovery in factory activities, the Fed would keep doors open for further policy tightening.

The US Dollar Index (DXY) gathers strength to extend recovery toward the crucial resistance of 107.00 Apart from the Fed’s monetary policy, the US Dollar would face volatility after the release of the private payrolls data and the ISM Manufacturing PMI for October.

Meanwhile, deepening Middle East tensions have also improved the oil demand. The Israeli army is planning a ground attack in Gaza to dismantle Palestine's military troops. Israel seems not in the mood for a ceasefire against Hamas and the likelihood of Iran’s intervention is high.

The oil price managed to recover despite weak Caixin Manufacturing PMI data for October. S&P Global reported that China’s factory activities unexpectedly dropped in the contraction zone to 49.5 against expectations of 50.8 and the former reading of 50.6. This has elevated global slowdown fears.

• Gold price falls back sharply as the Fed is expected to deliver hawkish guidance on interest rates.
• The Fed may keep expectations of further policy tightening alive due to strong wage growth.
• Middle East tensions keep the broader appeal for Gold bullish.

Gold price (XAU/USD) extends its two-day losing spell as investors turn cautious ahead of the interest rate decision by the Federal Reserve (Fed). The precious metal falls sharply even though markets widely expect that the Fed will keep interest rates unchanged in the 5.25%-5.50% range. However, a hawkish interest rate outlook is highly anticipated as robust spending by households and strong labor market conditions keep upside inflation risks alive.

Fed Chair Jerome Powell and his colleagues may keep the likelihood of further policy tightening on the table as the progress in inflation easing toward the 2% target has slowed due to strong wage growth. US households having high purchasing power are spending heavily, keeping core Personal Consumption Expenditure (PCE) price index relatively stubborn.

Apart from the upcoming Fed decision, the broader appeal for Gold is still upbeat as Middle East tensions persist. The Israeli army is preparing for the ground incursion in Gaza as Israeli authorities rejected calls for a ceasefire. 

Daily Digest Market Movers: Gold price falls sharply ahead of Fed policy

• Gold price starts November on a cautious note as investors shift focus to the Federal Reserve’s monetary policy.
• The Fed is expected to keep interest rates unchanged in the range of 5.25%-5.50%. Investors hope that higher US long-term bond yields and gradually declining price pressures will back the Fed to keep interest rates steady..
• 10-year US Treasury yields have rebounded strongly to 4.91% on expectations that the Fed will keep interest rates higher for a significantly longer period. 
• Fed policymakers said that higher US bond yields are sufficient to tighten financial conditions, dampening overall spending and investment.
• Cleveland Fed Bank President Loretta Mester said ahead of the November monetary policy meeting that higher bond yields are equivalent to one interest rate hike of 25 basis points (bps). The Fed could use higher Treasury yields as a substitute for further policy tightening.
• The Fed is expected to deliver hawkish guidance on interest rates as the US economy is resilient on the grounds of consumer spending, labor demand and wage growth. 
• Fed Chair Jerome Powell and his colleagues could keep the possibility of further policy tightening high as inflation looks persistent in the near-term due to robust consumer spending and strong wage growth.
• Jerome Powell said in his latest remarks that the current Fed policy rate is "fairly close" to the sufficiently restrictive level needed to ensure price stability over the medium term, but that the process of getting inflation down to 2% has a "long way" to go.
• The US Dollar Index (DXY) consolidates near 106.80 ahead of the Fed’s policy meeting, ADP Employment Change and the ISM manufacturing PMI for September.
• Economists expect that US private employers recruited 150K job seekers in October against 89K jobs added in September.
• As for the ISM Manufacturing PMI, consensus points to a steady reading at 49.0. If consensus is right, the PMI will remain below the 50.0 threshold which separates expansion from contraction in factory activity. This would be the 12th straight contraction.
• An upbeat labor and factory data would strengthen the appeal for the US Dollar and Treasury yields. Robust economic data would also allow Fed policymakers to keep interest rates elevated for a longer period.
• On the geopolitical front, Hamas’ promise of releasing hostages in a few days has eased safe-haven bets marginally. Meanwhile, the Israeli Defence Forces (IDF) has expanded their ground attack against Hamas in the northern section of the Gaza strip.
• The broader outlook for Gold is still upbeat as a ceasefire between Israel and Palestine is less likely, while fears of Iran’s intervention in the Middle East conflict remain high.

Technical Analysis: Gold price drops to near $1,970

Gold price faced an extended sell-off while attempting to stabilize above the psychological resistance of $2,000. The precious metal drops sharply on expectations that the Fed will keep the door open for further policy tightening. The yellow metal has been trading in a range between $1,960 and $2,010 for the past week. Volatile action is widely anticipated after the Fed’s policy announcement. Momentum oscillators continue to trade in a bullish trajectory.

• USD/JPY could revisit the yearly high at 151.72 on a stronger US Dollar.
• Key support emerges at 151.00 major level following the 21-day EMA.
• Technical indicators suggest bullish momentum for the pair.

USD/JPY consolidates near 151.20 during the European session on Wednesday, pulling back from the recent yearly high of 151.72 reached on Tuesday. The pair surged after the Bank of Japan (BoJ) scrapped the 1% ceiling for the 10-year government bond yield.

The immediate support at 151.00 comes into play, with the 21-day Exponential Moving Average (EMA) at 149.76 serving as the next support level. A decisive break below the latter could open the door for USD/JPY bears to target the 23.6% Fibonacci retracement around 148.28.

The unexpected decrease in China's Caixin Manufacturing Purchasing Managers' Index (PMI) could contribute to the pressure on the Japanese Yen (JPY). The report printed a figure of 49.5 in October, falling below the expected 50.8 and September's expansion at 50.6.

The Moving Average Convergence Divergence (MACD) line's position above the centerline and the signal line suggests a potential bullish momentum. Furthermore, the 14-day Relative Strength Index (RSI) above the 50 level indicates a favorable market sentiment, supporting the notion of bullish momentum for the USD/JPY pair.

On the upside, the USD/JPY could face resistance near the highs marked in October 2022 at 151.94, which is lined up with a 152.00 psychological level.

USD/JPY: Daily Chart

• The US JOLTS report will be watched closely by investors ahead of the Fed’s policy announcements.
• Job openings are forecast to decline to 9.25 million on the last business day of September.
• US labor market conditions remain out of balance despite Fed rate hikes.

The Job Openings and Labor Turnover Survey (JOLTS) will be released on Wednesday by the US Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of job openings in September, alongside the number of layoffs and quits.

JOLTS data will be scrutinized by market participants and Federal Reserve (Fed) policymakers because it could provide valuable insights regarding the supply-demand dynamics in the labor market, a key factor driving up salaries and inflation. 

What to expect in the next JOLTS report?

The number of job openings on the last business day of September is forecast to decline to 9.25 million. "Over the month, the number of hires and total separations changed little at 5.9 million and 5.7 million, respectively," the BLS noted in the August report and added: "Within separations, quits (3.6 million) and layoffs and discharges (1.7 million) changed little."

After declining steadily from 10.3 million to 8.9 million in the April-July period, job openings rose sharply to 9.6 million in August. This unexpected increase, combined with the impressive 336,000 jump in Nonfarm Payrolls in September, highlighted that conditions in the US labor market remained relatively tight.

Although the revised Summary of Economic Projections showed in September that the majority of Fed policymakers saw it appropriate to raise the policy rate one more time before the end of the year. However, rising US Treasury bond yields since the September policy meeting revived expectations that the Fed could leave the policy rate unchanged in the 5.25%-5.5% range in 2023. According to the CME Group FedWatch Tool, markets are pricing in a 20% probability that the US central bank will hike the policy rate in December.

FXStreet Analyst Eren Sengezer shares his view on the JOLTS Job Openings data and the potential market reaction:

“JOLTS Job Openings data is usually published on Tuesdays. This time around, the data will be released on a Wednesday, after the ADP private sector employment report and just a few hours before the Fed’s monetary policy announcements. Moreover, the ISM will release the Manufacturing PMI report at the same time. Hence, the market reaction to job openings could remain short-lived and it might be risky to take a position based on this data alone.”

When will the JOLTS report be released and how could it affect EUR/USD?

Job openings data will be published at 14:00 GMT. Eren points out key technical levels to watch for EUR/USD ahead of JOLTS data:

“It will not be easy to navigate through all the data releases and investors are likely to wait for the Fed’s policy decisions before taking large positions. In any case, the 50-day Simple Moving Average (SMA) aligns as initial resistance at 1.0650 for EUR/USD before 1.0750 (Fibonacci 38.2% retracement level of the July-October downtrend) and 1.0800 (100-day SMA, 200-day SMA). On the downside, 1.0500 (psychological level) could be seen as first support ahead of 1.0450 (end-point of the downtrend) and 1.0400 (psychological level, static level).”

• EUR/GBP extends losses after downbeat Eurozone economic figures.
• Eurozone HICP (YoY) reduced to 2.9% and GDP (YoY) eased to 0.1%.
• Pound Sterling could face challenges as BoE is expected to keep interest rates at 5.25%.

EUR/GBP continues the losing streak post retreating from the five-month high, trading lower around 0.8690 during the early European session on Wednesday. The EUR/GBP cross faces downward pressure as the Eurostat released the weaker-than-expected consumer inflation data on Tuesday.

The Eurozone report showed that the preliminary Harmonized Index of Consumer Prices (YoY) for October, reduced to 2.9% from 4.3% prior, below the market anticipations of 3.1%. The seasonally adjusted Gross Domestic Products (YoY) came in at 0.1% in Q3 compared to the 0.2% expected.

The significant slowdown in consumer prices aligns with the market's anticipation that the European Central Bank (ECB) is unlikely to push for additional interest rate hikes. Moreover, the looming risks of a recession may continue to undermine the Euro (EUR), influencing the EUR/GBP cross.

However, European Central Bank (ECB) officials maintain the possibility of further tightening. Member of the ECB Governing Council Joachim Nagel said, "Our tight monetary policy is working, but we must not let up too soon." According to him, rates should remain at a sufficiently high level for an extended period.

On the other side, the Pound Sterling (GBP) could face challenges in the near term as investors lean towards the belief that the Bank of England (BoE) will maintain interest rates at 5.25% in Thursday's meeting, driven by concerns about a potential slowdown in the UK economy.

Investors are keen on receiving guidance regarding future interest rates and the inflation outlook. United Kingdom (UK) Prime Minister Rishi Sunak pledged in January to halve inflation to 5.4% by year-end, a commitment that appears challenging as annual price growth stood at 6.7% in September.

• GBP/JPY struggles to capitalize on the previous day’s post-BoJ rally to a seven-week high.
• Intervention fears prompt some profit-taking ahead of the BoE policy meeting on Thursday.
• The BoJ’s dovish stance might continue to undermine the JPY and help limit the downside.

The GBP/JPY cross comes under some selling pressure on Wednesday and erodes a part of the previous day's strong gains to the 184.30 area, or its highest level since September 13. Spot prices, however, manage to recover a few pips from the daily low and currently trade around the 183.80 region, down less than 0.30% for the day.

Traders opted to lighten their bearish bets around the Japanese Yen (JPY) in the wake of verbal intervention by authorities, which, in turn, is seen as a key factor weighing on the GBP/JPY cross. Japan's top currency diplomat Masato Kanda said that the government was ready to respond to "one-sided, sharp" moves in currency markets. Adding to this, Japanese Chief Cabinet Secretary Hirokazu Matsuno noted that they won't rule out any steps to respond to rapid, disorderly and undesirable FX moves.

That said, the Bank of Japan's (BoJ) dovish pledge to continue with its extremely accommodative policy to support the domestic economy caps gains for the JPY and helps limit the downside for the GBP/JPY cross. The Japanese central bank announced minor changes to its yield curve control (YCC) policy on Tuesday, disappointing investors hoping for a more aggressive move towards ending years of monetary stimulus. The BoJ also indicated that a shift away from the ultra-dovish stance will take longer than initially expected.

The British Pound (GBP), on the other hand, is undermined by a modest US Dollar (USD) strength and speculations that the Bank of England (BoE) will leave the benchmark interest rate on hold for the second successive time to support the ailing economy. This fails to assist the GBP/JPY cross to capitalize on its modest intraday bounce from the vicinity of mid-183.00s. Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the BoE monetary policy decision, scheduled to be announced on Thursday.

Technical levels to watch

• Silver continues losing ground for the second straight day and drops to a fresh weekly low.
• The technical setup favours bearish traders and supports prospects for a further downfall.
• A sustained move beyond the $23.60-70 multiple tops barrier will negate the bearish bias.

Silver (XAG/USD) remains under heavy selling pressure for the second successive day on Wednesday and hits a fresh weekly low during the early part of the European session. The white metal currently trades around the $22.60-$22.55 area, down 1.30% for the day, and seems vulnerable to extending its descending trend.

From a technical perspective, the recent repeated failures to find acceptance above the 200-day Simple Moving Average (SMA) and rejections near the $23.60-$23.70 supply zone constitute the formation of a bearish multiple tops pattern. This, along with the fact that oscillators on the daily chart have again started gaining negative traction, suggests that the path of least resistance for the XAG/USD is to the downside.

Some follow-through selling below last week's swing low, around the $22.45 region, will reaffirm the bearish bias and pave the way for deeper losses. The XAG/USD might then fall to the $22.00 mark before dropping to the $21.70 horizontal support zone and the $21.35-$21.30 region. The downward trajectory could drag the white metal further towards the $21.00 mark en route to the $20.70-$20.65 area, or a seven-month low touched in October.

On the flip side, the $22.75-$22.80 congestion zone now seems to act as an immediate hurdle ahead of the $23.00 round figure. The next relevant hurdle is pegged near the $23.25 region, or the 200-day SMA, above which the XAG/USD could make a fresh attempt to clear the $23.60-$23.70 strong barrier. A convincing breakout through will be seen as a fresh trigger for bullish traders and set the stage for additional gains.

Silver daily chart

Technical levels to watch

FX option expiries for Nov 1 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts

• 1.0500 753m
• 1.0540 450m
• 1.0575 389m
• 1.0595 422m
• 1.0600 614m
• 1.0685 453m
• 1.0675 971m

- USD/JPY: USD amounts                     

• 148.45 470m
• 149.25 500m
• 149.80 549m
• 150.00 1.2b
• 150.50 1.2b
• 150.60 1.2b
• 151.00 867m

- AUD/USD: AUD amounts

• 0.6325 359m
• 0.6400 470m
• 0.6430 348m

- USD/CAD: USD amounts       

• 1.3750 425m

- EUR/GBP: EUR amounts        

• 0.8675 500m

• Pound Sterling struggles for a decisive move ahead of the monetary policy decision by both the Fed and the BoE.
• The BoE is expected to keep interest rates steady as slowdown fears mount.
• Stubborn UK inflation puts at risk Prime Minister Rishi Sunak’s pledge to halve inflation to 5.4% by year-end.

The Pound Sterling (GBP) registered lackluster moves on Wednesday as investors await monetary policy decisions from both the US Federal Reserve (Fed) and the Bank of England (BoE). The GBP/USD pair remains on tenterhooks as investors expect that the BoE will keep interest rates unchanged. 

The near-term demand for the Pound Sterling looks vulnerable as investors seem to believe that the BoE will hold rates steady, prompted by fears of a slowdown in the UK economy, shrugging off still stubborn price pressures. Apart from the monetary policy decision, investors will look for guidance on interest rates going forward and the inflation outlook. UK Prime Minister Rishi Sunak vowed in January to halve inflation to 5.4% by year-end, a promise that looks challenging as annual price growth was at 6.7% in September, broadly unchanged since July. 

Daily Digest Market Movers: Pound Sterling juggles ahead of key monetary policy decisions

• Pound Sterling remains on the backfoot as the appeal for risk-perceived assets diminishes ahead of the monetary policy meeting by the Federal Reserve and ongoing Middle East tensions.
• Hamas announced that it will release hostages in the next few days, but a ceasefire is not expected as the Israeli Defense Forces (IDF) are looking to enter Gaza for a full-scale ground offensive. 
• Apart from geopolitical tensions, caution among market participants ahead of the BoE meeting is keeping the Pound Sterling on tenterhooks.
• The BoE is expected to keep interest rates unchanged at 5.25% on Thursday. This would be the second straight time in which policymakers leave interest rates unchanged after 14 consecutive rate hikes.
• Investors doubt whether UK Prime Minister Rishi Sunak will fulfill his promise of halving inflation to 5.4% by year-end.
• Consumer inflation in the UK economy is the highest among G7 economies due to robust wage growth. In spite of persistent inflation risks, the BoE is expected to maintain the status quo as the economy is slowing down due to deteriorating labor demand.
• The UK Office for National Statistics (ONS) reported that employment shrank for the third time in a row in August, warranting upside risks to the Unemployment Rate.
• Other economic data pointing to weak consumer spending and declining business investment are also supporting a steady interest rate decision from the BoE.
• While robust wage growth continues to prompt price pressures, food price inflation dropped significantly in October. High inflation and soft labor demand forced households to spend less and save more amid a volatile environment. 
• The British Retail Consortium (BRC) reported on Tuesday that food inflation declined for a sixth straight month. The food price index decelerated to 8.8% in October from 9.9% in September.
• Meanwhile, the US Dollar Index (DXY) turns sideways around 106.80 after a sharp recovery as investors await the Fed’s monetary policy decision, private payroll data, and the ISM Manufacturing PMI for October.
• The Fed is expected to keep interest rates in the range of 5.25%-5.50% but will deliver hawkish guidance as inflation in excess of 2% seems the most stubborn due to robust consumer spending, strong labor market conditions, and expectations of a revival in business activity.
• An upbeat private payrolls and factory activity report would strengthen the US Dollar as it would allow the Fed to keep interest rates elevated for a longer period.
• The survey of private factories done by S&P Global for October showed that the Manufacturing PMI came in at the 50.0 threshold, which separates expansion from contraction in factory activity. 

Technical Analysis: Pound Sterling trades sideways around 1.2150

Pound Sterling juggles around 1.2150 as investors await the monetary policy decision from both the Fed and the BoE. The near-term outlook remains bearish as the 20-day Exponential Moving Average (EMA) has been acting as a major barricade for the Pound Sterling bulls. Downward-sloping 50-day and 200-day EMAs indicate that the broader trend is extremely bearish. Momentum oscillators demonstrate a contraction in volatility.

• NZD/USD extends losses on weaker Kiwi and Chinese economic data.
• Kiwi Employment Change declined by 0.2% in the third quarter.
• China's Manufacturing PMI dropped to 49.5 in October.
• Traders seek Fed's remarks on interest rates trajectory.

NZD/USD trims most of its intraday losses but still trades in the negative trajectory, bidding around 0.5820 during the early European session. The pair faces losses in the second consecutive session as market sentiment leans toward the US Dollar (USD) ahead of monetary policy decision by the US Federal Reserve (Fed) on Wednesday.

Additionally, the moderate employment data from New Zealand undermines the Kiwi pair. Employment Change declined by 0.2% in the third quarter against the expected 0.4% readings. Unemployment Rate increased, as expected, to 3.9% from 3.6% prior. This indicates that the Reserve Bank of New Zealand (RBNZ) will likely maintain its policy rate in November, putting downward pressure on the NZD/USD pair.

Moreover, as revealed in the latest Wednesday data, the unanticipated drop in China's Caixin Manufacturing Purchasing Managers' Index (PMI) sparks worries about deteriorating conditions in the world's second-largest economy, which adds pressure on the Kiwi Dollar (NZD). The index showed a print of 49.5 in October compared to the 50.8 expected, lower than September's expansion at 50.6.

On Tuesday, the US Dollar Index (DXY) got a lift from higher US Treasury yields, holding steady around 106.70 as the 10-year US bond yield stood at 4.90% by the press time. The prevailing market sentiment suggests an anticipation that the US Federal Reserve will keep the current interest rate at 5.5% in the Wednesday meeting.

Investors will closely observe the Fed's remarks on the future path of interest rates, and any hint of a hawkish stance could potentially bolster the US Dollar (USD).

• EUR/JPY gains momentum around the 160.00 psychological figure on Wednesday.
• The verbal intervention from Japan's top currency diplomat Masato Kanda might cap the Japanese Yen’s downside.
• Eurozone HICP eased to 2.9% YoY in October vs 4.3% prior, the quarterly GDP for Q3 came in at -0.1%.

The EUR/JPY cross holds positive ground during the early European session on Wednesday. The cross hovers around the 160.00 psychological mark after retracing from the fresh 15-year highs of 160.85. That being said, the disappointed Bank of Japan’s (BoJ) decision to maintain the ultra-loose policy exerts pressure on the Japanese Yen (JPY). However, the verbal intervention from Japanese policymakers might cap the downside of the JPY.

On Tuesday, the BoJ committee decided to keep the interest rate and 10-year Japanese Government Bond (JGB) yield target at -0.1% and 0%, respectively, after its October meeting. Japanese central bank decided to make YCC more flexible and changed the language around the 1.0% 10-year JGB yield cap. Following the meeting, the JPY weakened across the board and this triggered the warning from the Japanese policymakers. Early Wednesday, Japan's top currency diplomat Masato Kanda came out with verbal intervention by saying that he is concerned about one-sided and sharp FX moves. Kanda added that he won't rule out any steps to respond to disorderly FX moves.

On the Euro front, the European Central Bank (ECB) decided to leave the interest rate steady last week and the market anticipates the first-rate cut in the first half of 2024. On Tuesday, the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) eased to 2.9% YoY in October versus 4.3% prior, below the market consensus. The Core HICP came in at 4.2% from the previous reading of 4.5%.

Meanwhile, the quarterly and annual Eurozone Gross Domestic Product (GDP) for the third quarter (Q3) came in at -0.1% and 0.1%, respectively. Both figures were below the market expectation.

Later this week, market participants will keep an eye on the German Unemployment rate, Spain, and Italy’s HCOB Manufacturing PMI on Thursday. Traders will also take more cues from ECB's Lane speech for fresh impetus. These events could give a clear direction to the EUR/JPY cross.

• USD/CAD continues to gain ground ahead of the FOMC policy decision.
• Crude oil prices dropped to two-month lows; weakening the Loonie Dollar.
• Canada’s GDP experienced no growth, remaining flat at 0.0% in August.

USD/CAD attempts to extend the gains for the second consecutive day on the back of improved risk appetite ahead of the US Federal Reserve (Fed) monetary policy decision. The spot price trades slightly higher near 1.3880 during the Asian session on Wednesday.

The US Dollar Index (DXY) received a boost from increased US Treasury yields on Tuesday, hovering around 106.70 with the 10-year US bond yield sitting at 4.90%, by the press time. Market sentiment leans towards the expectation that the US Fed will maintain the current interest rate at 5.5% in the Wednesday meeting. If there's a hawkish statement from the Federal Open Market Committee (FOMC) regarding the future trajectory of interest rates, it could potentially strengthen the US Dollar (USD).

The conflict between Israel and Hamas has raised concerns about potential disruptions in the oil supply from the Middle East. Despite these worries, Crude oil prices have fallen to two-month lows putting pressure on the Canadian Dollar. Western Texas Intermediate (WTI) trades below $81.00 per barrel at the time of writing.

Additionally, on Tuesday, the disappointing data of the monthly Canadian GDP might have undermined the commodity-linked Loonie Dollar (CAD) and acted as a tailwind for the USD/CAD pair.

The release of Canada’s Gross Domestic Product (GDP) data from Statistics Canada on Tuesday, revealed that the economy experienced no growth, remaining flat at 0.0% in August. This result contradicts market predictions, which anticipated a 0.1% growth during the same period. Furthermore, S&P Global Manufacturing PMI will be eyed for gaining more cues on Canada’s economic scenario.

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

The US Dollar (USD) stays relatively quiet early Wednesday after posting strong gains against its major rivals on Tuesday. ADP Employment Change and ISM Manufacturing PMI data for October will be featured in the US economic docket alongside JOLTS Job Openings for September. Later in the session, the Federal Reserve (Fed) will announce monetary policy decisions and Chairman Jerome Powell will speak on the outlook in a press conference.

ISM Manufacturing PMI Preview: Elevated investment set to boost index, US Dollar.

ADP Jobs Preview: A rebound that could not matter.

After opening lower, Wall Street's main indexes gained traction and posted modest gains on Tuesday. Despite the upbeat mood, the USD held its ground on rising US Treasury bond yields. Additionally, month-end flows on the last day of October provided an additional boost to the currency. The US Dollar Index rose more than 0.5% and erased Monday's losses before going into a consolidation phase above 106.50 on Wednesday. In the meantime, US stock index futures were last seen trading modestly lower on the day, while the 10-year yield was fluctuating in a narrow channel at around 4.9%.

The Fed is widely expected to leave its policy rate unchanged at 5.25%-5.5% for the second consecutive meeting. The statement language regarding the prospects for additional tightening and Chairman Powell's comments on the policy outlook could ramp up the volatility during the American trading hours. 

Federal Reserve Preview: Powell set to lift US Dollar by leaving door open to more hikes.

After rising to a weekly high above 1.0650, EUR/USD reversed its direction and closed in negative territory below 1.0600 on Tuesday. At the time of press, the pair was moving sideways slightly above 1.0550.

The data from New Zealand showed that Employment Change fell by 0.2% in the third quarter. This reading followed the 1% growth recorded in the second quarter and came in worse than the market expectation for an increase of 0.4%. Meanwhile, Caixin Manufacturing PMI in China dropped to 49.5 in October from 50.6 in September. NZD/USD came under bearish pressure and declined to the 0.5800 area following these disappointing data releases.

GBP/USD turned south and erased its daily gains after meeting resistance at 1.2200 on Tuesday. The pair holds steady at around 1.2150 early Wednesday.

USD/JPY gathered bullish momentum on the Bank of Japan's inaction on policy and reached its highest level in a year above 151.70 on Tuesday. During the Asian trading hours on Wednesday, Japan's top currency diplomat Masato Kanda said that they were concerned about one-sided sharp movements in the foreign exchange markets and reiterated that they will not rule out any steps to respond. The pair turned negative on the day below 151.50 following this verbal intervention.

Gold climbed above $2,000 on Tuesday but profit-taking seemingly triggered a sharp drop. XAU/USD was last seen moving up and down near $1,980.

• Most Asian equities trade on a flat note ahead of the Federal Open Market Committee (FOMC) meeting.
• The downbeat China's Caixin Manufacturing PMI added worries about sluggish economic conditions in China.
• Japan’s Nikkei leads gains after the Japanese top currency diplomat came out with verbal intervention.
• The FOMC rate decision will be closely watched event by market players.

Asian stock markets trade in a flat-to-low range on Wednesday as investors turn to a cautious mood ahead of the Federal Open Market Committee (FOMC) policy meeting on Wednesday. Japan’s Nikkei leads gains after Japanese authorities came out with verbal intervention on one-sided and sharp FX moves.

At press time, China’s Shanghai is up 0.24% to 3,026, the Shenzhen Component Index is down 0.15% to 9,850, Hong Kong’s Hang Sang is up 0.07% to 17,125, South Korea’s Kospi gains 0.79%, India’s NIFTY 50 drops 0.14%, and Japan’s Nikkei rises 2.19%.

On Wednesday, China's Caixin Manufacturing PMI fell to 49.5 in October from September’s expansion of 50.6, below the market consensus of a 50.8 rise. The weaker-than-expected Chinese data adds doubt to recent optimism for a recovery in the world's second-largest economy.

In Japan, the final Jibun Bank PMI shrank in the contraction zone for a fifth straight month in October by arriving at 48.7. Furthermore, the significant drop in the Japanese Yen (JPY) after the Bank of Japan's rate decision on Tuesday sparked a warning from Japanese authorities. Early Wednesday, Japan's top currency diplomat Masato Kanda said that he is concerned about one-sided and sharp FX moves. Kanda further stated that he won't rule out any steps to respond to disorderly FX moves.

Market participants will closely monitor the FOMC rate decision later on Wednesday. The hawkish message from FOMC Chair Jerome Powell might lift the US Dollar (USD) and trigger volatility in the riskier assets like stock markets.

• USD/CHF oscillates around the 0.9076-0.9105 region in a narrow trading band ahead of the key event.
• Federal Open Market Committee (FOMC) will announce its interest rate decision on Wednesday, with no surprise in rate expected.
• Swiss Real Retail Sales came in at -0.6% YoY in September vs. -2.2%, better than expected.
• FOMC policy meeting and Swiss National Bank (SNB) Chairman Jordan's speech will be in the spotlight on Wednesday.

The USD/CHF pair consolidates its recent gains after climbing to multi-week highs of 0.9107 during the Asian session on Wednesday. Investors await the highly anticipated Federal Open Market Committee (FOMC) policy meeting later on Wednesday, with no change in rate expected. The pair currently trades around 0.9097, down 0.07% on the day.

The US Chicago Purchasing Managers' Index for October eased to 44.0 from 44.1 in September. The CB Consumer Confidence Index from October surpassed expectations, coming in at 102.6. Additionally, the US S&P/Case-Shiller Home Price Indices improved to 2.2% in August YoY versus 0.2% prior, better than the market estimation of 1.6%. Finally, the House Price Index came in at 0.6% MoM versus 0.8% prior.

FOMC will announce its interest rate decision on Wednesday with no surprise in the rate expected. Market players will closely monitor the FOMC’s message during the press conference about how high the bar is to convince the FOMC to raise the interest rates again. The hawkish comments from Fed officials might lift the US Dollar (USD) and exert pressure on the CHF. According to CME Fedwatch tools, the market priced in a 97% rate hold in the November meeting, while the odds of a rate hike for the November meeting increased to 29.1%.

On Tuesday, the Swiss Real Retail Sales for September came in at a 0.6% drop YoY from the previous reading of a 2.2% fall, better than the market consensus of a 1.2% decline. The upbeat figure failed to boost the Swiss Franc (CHF). However, the escalating tension in the Middle East might boost the CHF, a traditional safe-haven currency, and cap the upside of the USD/CHF pair.

Moving on, the FOMC policy meeting and Swiss National Bank (SNB) Chairman Thomas Jordan's speech will be the highlights. Also, the US ADP employment report, JOLTS Job Openings, and the ISM Manufacturing PMI will be due later on Wednesday. Later this week, the Swiss Consumer Price Index (CPI) will be released on Thursday and US employment data, including Nonfarm Payrolls and Average Hourly Earnings, will be released on Friday.

• USD/MXN gains ground despite solid Mexico’s GDP figures.
• Mexico's economy expanded at 0.9% in the third quarter compared to the 0.8% expected.
• Positive market sentiment contributes support for the US Dollar ahead of the Fed decision.

USD/MXN aims to continue the gains for the second successive day ahead of the policy decision by the US Federal Reserve (Fed). The spot price hovers above 18.0000 during the Asian session on Wednesday. Despite the positive Gross Domestic Product (GDP) data, the pair continues to strengthen amid geopolitical tension in the Middle East. 

Mexico's economy expanded at 0.9% slightly above the market consensus of 0.8% in the third quarter between July and September, driven by domestic consumption and industrial activity. Moreover, during the previous week, Mexico’s Jobless Rate declined to 2.9% in September from August's 3.0%. Additionally, Mexico’s Trade Deficit widened in September from $1.377B in August to $1.481B.

The improved risk appetite supports the USD/MXN pair ahead of the Fed interest rate decision. The US Dollar Index (DXY) receives upward support from elevated US Treasury yields, bidding higher near 106.70 at the time of writing. The 10-year US bond yield stands at 4.91% by the press time.

The escalating Middle East conflict could reinforce the prices of Crude oil and Gold, which may provide minor support to the Mexican Peso (MXN).

Investors eagerly await the upcoming policy decision from the US Fed and indications suggest the central bank will likely maintain its current interest rate at 5.5% in the Wednesday meeting. Additionally, in the North American session, traders will closely monitor key indicators such as the US ADP Employment Change and ISM Manufacturing PMI for October.

• WTI remains depressed for the third straight day and languishes near a two-month low.
• Receding fears about supply disruptions from the Middle East war weigh on Oil prices.
• Worries that a slowdown in China will dent fuel demand contribute to the offered tone.

West Texas Intermediate (WTI) Crude Oil prices trade with a negative bias for the third successive day on Wednesday and languish near a two-month low touched the previous day. The commodity remains depressed below the $81.00/barrel mark through the Asian session and seems poised to weaken further in the wake of easing global supply concerns.

Market participants seem less worried about the potential for other Arab countries entering the Israel-Hamas war and a possible supply disruption from the Middle East. Furthermore, a Reuters survey showed that OPEC crude output rose by 180,000 barrels per day (bpd) in October. Adding to this, the Energy Information Administration (EIA) said on Tuesday that US field production of crude oil rose to a new monthly record in August, at 13.05 million barrels per day. This, along with weaker business activity data from China, raises concerns about slowing fuel demand from the world's top oil consumer and continues to weigh on the black liquid.

The official PMI released by the National Bureau of Statistics on Tuesday showed that China's Manufacturing PMI unexpectedly fell into contraction territory in October, while the non-manufacturing PMI pointed to a slowdown in the vast service sector and construction. A Caixin-sponsored survey also confirmed the official figures and showed that activity in China’s manufacturing sector contracted in October. This suggests that stimulus efforts from China only provided limited support to the fragile economic recovery. This comes amid worries about headwinds stemming from rising borrowing costs and validates the negative outlook for Crude Oil prices.

Traders, however, might refrain from placing aggressive directional bets and prefer to wait on the sidelines ahead of the crucial FOMC policy decision, scheduled to be announced later during the US session. Market participants will closely scrutinize the accompanying monetary policy statement and Fed Chair Jerome Powell's comments at the post-meeting press conference for cues about the future rate-hike path. This, in turn, will play a key role in influencing the near-term US Dollar price dynamics and provide some meaningful impetus to the USD-denominated commodities, including Crude Oil prices.

Technical levels to watch

• EUR/USD could revisit the previous week's low at 1.0521 due to facing pressure.
• Any dovish remarks post-Fed decision could uplift the pair toward a 23.6% Fibonacci retracement level at 1.0648.
• RSI indicates a bias towards a weaker market sentiment.

EUR/USD consolidates ahead of the Federal Open Market Committee (FOMC) policy decision with the expectation of maintaining the current interest rate at 5.5% in November’s meeting. The pair trades lower near 1.0570 during the Asian session on Wednesday.

The Eurozone Harmonised Index of Consumer Prices (HICP) exhibited a significant slowdown in a report released on Tuesday, dropping from an annual pace of 4.3% to 2.9% in October. This notable deceleration in consumer prices aligns with market expectations that the European Central Bank (ECB) is unlikely to pursue further interest rate hikes. Additionally, the looming risks of a recession may persist in undermining the EUR/USD pair.

The EUR/USD pair could find support around the psychological level of 1.0550, followed by the previous week's low at 1.0521. If the pair convincingly breaches the latter, it could pave the way for further downside movement towards the critical level around 1.0500.

The Moving Average Convergence Divergence (MACD) line positions below the centerline but above the signal line implying a potential shift in momentum. This nuanced market sentiment suggests a mix of factors indicating a potential change in the prevailing trend.

Investors will closely watch the Federal Open Market Committee's (FOMC) post-meeting communication to gauge the potential path of interest rates. Any dovish remarks could turn the pair to the upside toward the key barrier around the 23.6% Fibonacci retracement level at 1.0648. The further obstacles are presented by the 50-day Exponential Moving Average (EMA) at 1.0650.

A successful breach above the mentioned resistance levels could potentially invigorate the EUR/USD pair to revisit October's high at the 1.0694 level.

However, the EUR/USD pair seems to be facing restrained momentum as the 14-day Relative Strength Index (RSI) lies below the 50 level, suggesting bearish momentum and reflecting a bias towards a weaker market sentiment.

EUR/USD: Daily Chart

• Gold price drifts lower for the third successive day and refreshes weekly low on Wednesday.
• Receding safe-haven demand and hawkish Fed expectations weigh on the XAU/USD.
• China’s economic woes could lend support to the safe-haven metal ahead of the Fed decision.

Gold price (XAU/USD) extends the previous day's retracement slide from the vicinity of a five-and-half-month top touched last week and continues drifting lower during the Asian session on Wednesday. This marks the third successive day of a negative move and drags the commodity to a fresh weekly low, around the $1,978 region in the last hour. Easing concerns over the Israel-Hamas war, along with anticipation of a hawkish Federal Reserve (Fed), turn out to be key factors weighing on the non-yielding yellow metal.

The downside for the Gold price, however, is likely to remain limited as the market focus remains glued to the outcome of the highly-anticipated two-day FOMC monetary policy meeting, scheduled to be announced later during the US session. Apart from this, concerns about China's fragile economic recovery at the start of the fourth quarter could lend support to the safe-haven metal and help limit deeper losses. This, in turn, warrants some caution before confirming that the XAU/USD has topped out in the near term.

Daily Digest Market Movers: Gold price retreats further from multi-month peak

• Gold price registered its biggest monthly rise since November 2022, albeit kicks off the new month on a weaker note in the wake of receding safe-haven demand.
• Traders are pricing in a lower risk premium from the Israel-Hamas war as no other Arab powers have joined in so far; Hamas said it will free foreign hostages in the next few days.
• The US Dollar sticks to a positive bias on the back of expectation for any hawkish surprises from the highly-anticipated FOMC monetary policy meeting.
• The Federal Reserve will announce its decision later during the US session and is expected to hold rates steady at a 22-year high for the second straight time.
• The US economic resilience and still sticky inflation should allow the central bank to maintain its hawkish stance and leave the door open for more rate hikes.
• The yield on the benchmark 10-year US government bond remains close to the 5% mark, or a 16-year top touched in October and underpins the US Dollar.
• A Caixin-sponsored survey showed that business activity in China’s manufacturing sector contracted in October for the first time in three months.
• This suggests that stimulus efforts from China only provided limited support to the fragile economic recovery and could lend support to the XAU/USD.

Technical Analysis: Gold price could attract some dip-buying at lower levels

From a technical perspective, the ongoing decline might still be categorized as a corrective pullback, especially after a steep rise of over 10% from the October swing low. Moreover, the Relative Strength Index (RSI) on the daily chart has eased from the overbought territory. Hence, any subsequent fall might still be seen as a buying opportunity and remain limited. The $1,970 area is likely to protect the immediate downside, below which the Gold price could drop to last week's swing low, around the $1,954-$1,953 region.

On the flip side, the Asian session peak, around the $1,986 area, now seems to act as an immediate hurdle ahead of the $2,000 psychological mark and the $2,007-2,009 region, or the multi-month top. A sustained strength beyond the latter should pave the way for an extension of over a three-week-old strong bullish trend and lift the Gold price to the next relevant barrier near the $2,022 zone.

• USD/JPY strengthened as the BoJ scrapped the 1% ceiling for the 10-year government bond yield.
• BoJ Governor Ueda expressed fear about inflation not reaching long-term targets.
• Japan's Chief Cabinet Secretary Matsuno engaged in some verbal intervention to bolster the yen.

USD/JPY trades around 151.20 during the Asian session on Wednesday, pulling back from the yearly high marked after the Bank of Japan (BoJ) removed the 1% ceiling for the 10-year government bond yield on Tuesday.

Following the adjustment to the yield curve control (YCC), BoJ Governor Kazuo Ueda adopted a notably dovish stance. He expressed apprehensions about inflation not definitively reaching the BoJ's long-term targets.

Japan's Chief Cabinet Secretary, Hirokazu Matsuno, engaged in some verbal intervention to bolster the yen. He stressed the importance of currencies moving in a stable manner that reflects fundamentals, expressing disapproval of rapid foreign exchange (FX) fluctuations. While refraining from commenting on specific Forex levels, Matsuno did not rule out the possibility of taking measures to address disorderly FX movements.

Moreover, the unexpected decline in China's Caixin Manufacturing Purchasing Managers' Index (PMI) to 49.5 in October, down from September's expansion at 50.6, as disclosed in the latest Wednesday data, has added pressure on the Japanese Yen (JPY).

The US Dollar Index (DXY) is on a two-day upward trajectory, buoyed by elevated US Treasury yields. The index trades higher near 106.70 at the time of writing. Additionally, the market anticipates the imminent policy decision from the US Federal Reserve (Fed), pointing toward the central bank maintaining its current monetary policy stance in the Wednesday meeting.

Investors will closely watch the Federal Open Market Committee's (FOMC) post-meeting communication, eager for insights that could help gauge the potential path of interest rates. The data-driven considerations for December add an extra layer of anticipation to the market dynamics.

Traders will also watch the pivotal indicators like the US ADP Employment Change and ISM Manufacturing PMI for October in the North American session.

• GBP/USD extends its downside around 1.2140 ahead of key events.  
• Federal Open Market Committee (FOMC) is expected to hold the rate unchanged at its November meeting while holding a hawkish stance. 
• Bank of England (BoE) is anticipated to keep rates steady amid the fear of potential recession in the UK. 
• The FOMC and BoE meetings will be in the spotlight ahead of the US Nonfarm Payrolls data. 

The GBP/USD pair remains on the defensive during the early Asian session on Wednesday. The major pair faces rejection near the 1.2200 mark. Market players await the highly anticipated Federal Open Market Committee (FOMC) policy meeting on Wednesday ahead of the Bank of England (BoE) on Thursday. These events might trigger the volatility in the market. GBP/USD currently trades near 1.2139, losing 0.11% on the day. 

The two-day FOMC policy meeting begins today and will end in late Wednesday. The markets anticipate the FOMC to hold the interest rate unchanged at its November meeting. Traders will keep an eye on the FOMC Chair Powell’s press conference for fresh impetus. If the FOMC delivers a hawkish message, the US Dollar (USD) might attract some buyers and weigh on the GBP/USD pair. 

On the other hand, the Bank of England (BoE) is expected to keep interest rates steady at 5.25% at its November meeting on Thursday amid growing worries about a recession in the UK economy. Following the meeting, BoE governor Andrew Bailey might offer some hints about the latest forecasts for the UK economy and the future of monetary policy. 

The weaker UK data and stubborn inflation exert pressure on the British Pound (GBP) and act as a headwind for the GBP/USD pair. Additionally, the elevated geopolitical risks in the Middle East might boost safe-haven flows and benefit the Greenback. 

Investors will take cues from the US ADP employment report, JOLTS Job Openings, and the ISM Manufacturing PMI ahead of the FOMC meeting on Wednesday. On Thursday, the BoE rate decision and BoE Governor Bailey's speech will be the highlights. The US employment data, including Nonfarm Payrolls and Average Hourly Earnings for October, will be released on Friday. 

 

• Indian Rupee edges lower on the stronger USD.
• The Reserve Bank of India (RBI) Governor highlighted the optimistic view for the Indian economy.
• Investors will closely monitor the Federal Open Market Committee (FOMC) policy meeting on Wednesday.

Indian Rupee ticks lower on Wednesday on the renewed US Dollar (USD) demand. That being said, the higher-for-longer US interest rate narrative has lifted US Treasury bond yields to multi-year highs, which acts as a tailwind for the pair. Elevated geopolitical risks in the Middle East might also lead to higher oil prices and impact Indian importers.

Nonetheless, the Reserve Bank of India (RBI) Governor Shaktikanta Das said Tuesday that India’s growth momentum remains robust and the Gross Domestic Product (GDP) in the second quarter of Fiscal Year 2024 is expected to surprise on the upside. Das further stated that geopolitical risks are the biggest challenge to growth. However, he is confident that India is in a better position compared to other countries to deal with potentially risky situations.

Market participants will closely monitor the Federal Open Market Committee (FOMC) policy meeting, with no change in rates expected. However, a hawkish stance during the press conference might trigger volatility in the Indian market. Later this week, the spotlight will shift to US Nonfarm Payrolls on Friday.

Daily Digest Market Movers: Indian Rupee maintains a bearish vibe amid multiple headwinds

• Reserve Bank of India (RBI) Governor Shaktikanta Das said GDP growth for the second quarter of FY24 will exceed expectations.
• RBI Governor Das said geopolitical risks are the biggest challenge, but India is better placed compared to other countries to deal with any potentially risky situation.
• Overseas investors sold $2.74 billion in Indian equities in October, marking the largest monthly sell-off since January.
• According to the RBI, India's foreign currency reserves fell by $2.36 billion to $583.53 billion in the week ending October 20.
• RBI will maintain watch over inflation to ensure that it remains within the 4% target.
• The International Monetary Fund (IMF) raised its projected growth rate for India to 6.3% in October.
• The US S&P/Case-Shiller Home Price Indices for August improved to 2.2% YoY versus 0.2% prior, better than the expectation of 1.6%.
• The US Core Personal Consumption Expenditure Index (PCE) for September arrived at 3.7% YoY from the previous reading of 3.8%, and the headline PCE arrived at 3.4% YoY versus the estimation of 3.4%.

Technical Analysis: Indian Rupee keeps a bearish stance in a familiar range

The Indian Rupee trades with mild losses on the day. The USD/INR pair trades within a familiar range of 83.00–83.35. However, the technical outlook suggests that the bullish bias stays intact as the pair holds above the 100- and 200-day Exponential Moving Averages (EMA) on the daily chart.

The key resistance level will emerge at the upper boundary of the trading range of 83.35. A decisive break above the latter will see a rally to year-to-date (YTD) highs of 83.45. The additional upside filter to watch is a psychological round figure at 84.00. On the other hand, the confluence of a low of October 20 and a round mark at 83.00 acts as a critical contention level. Any follow-through selling below 83.00 will pave the way to a low of September 12 at 82.82, followed by a low of August 4 at 82.65.

• NZD/USD drifts lower for the second straight day and is pressured by a combination of factors.
• The dismal New Zealand jobs data and China’s Caixin manufacturing PMI weigh on the Kiwi.
• Hawkish Fed expectations and elevated US bond yields continue to underpin the Greenback.
• The USD bulls now look to the US macro data for some impetus ahead of the FOMC decision.

The NZD/USD pair remains under some selling pressure for the second straight day on Wednesday and slips below the 0.5800 mark during the Asian session, hitting a fresh weekly low in reaction to the disappointing Chinese data.

A Caixin-sponsored survey showed that business activity in China’s manufacturing sector contracted in October for the first time in three months. In fact, the Caixin China PMI fell from 50.6 the previous month to 49.5 in October, confirming the official figures released on Tuesday and fueling concerns about the worsening conditions in the world's second-largest economy. This comes on top of dismal domestic employment figures and exerts additional downward pressure on the New Zealand Dollar (NZD).

Statistics New Zealand reported that the number of employed people unexpectedly fell by 0.2% during the third quarter and the jobless rate rose to 3.9% from 3.6%. This, in turn, suggests that the Reserve Bank of New Zealand (RBNZ) will keep its policy rate unchanged in November, which, along with a modest US Dollar (USD) strength, drags the NZD/USD pair lower. The USD bulls, however, seem reluctant to place aggressive bets and now look to the highly-anticipated FOMC monetary policy decision.

The Federal Reserve (Fed) is widely expected to maintain the status quo for the second time in a row. Investors, however, seem convinced that the US central bank will keep the door open for additional rate hikes to bring inflation back to the 2% target. Moreover, the US economic resilience should allow the Fed to stick to its hawkish stance. Hence, the accompanying policy statement and Fed Chair Jerome Powell's comments at the post-meeting presser will be scrutinized for cues about the future rate-hike path.

The outlook, in turn, will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the NZD/USD pair. Heading into the key event risk, traders will confront the release of US macro data – the ADP report on private-sector employment, the ISM Manufacturing PMI and JOLTS Job Openings data – later during the early North American session. In the meantime, elevated US Treasury bond yields might continue to underpin the buck and weigh on the major.

Technical levels to watch

Japanese Chief Cabinet Secretary Hirokazu Matsuno said on Wednesday that they “won't rule out any steps to respond to disorderly FX moves.

Additional quotes

Related reads

• Japan’s Top FX Diplomat Kanda: Concerned about one-sided sharp FX moves

In its annual assessment of the Australian economy, the International Monetary Fund (IMF) highlighted that the economy is resilient while inflation remains sticky, arguing that further policy tightening is required from the Reserve Bank of Australia (RBA).

Key takeaways

“After a strong post-pandemic recovery, Australia’s economy is slowing but remains resilient.” 

“Although inflation is gradually declining, it remains significantly above the RBA’s target and output remains above potential,”

“Staff therefore recommend further monetary policy tightening to ensure that inflation comes back to the target range by 2025 and minimize the risk of de-anchoring inflation expectations.”

“The Commonwealth government and state and territory governments should implement public investment projects at a more measured and coordinated pace, given supply constraints, to alleviate inflationary pressures and support the RBA’s disinflation efforts.”

Market reaction

AUD/USD is little impressed by the IMF findings, currently testing lows near 0.6320, down 0.19% on the day.

• USD/CAD continues to draw support from bearish Oil prices and a modest USD strength.
• Tuesday’s disappointing Canadian GDP also undermines the Loonie and acts as a tailwind.
• Traders now look to the US macro data for some impetus ahead of the key FOMC decision.

The USD/CAD pair attracts some dip-buying during the Asian session on Wednesday and inches back closer to its highest level since October 2022 touched the previous day. Spot prices currently trade around the 1.3885 region and continue to draw support from a combination of factors.

Crude Oil prices languish near a two-month low despite worries that the ongoing conflict between Israel and Hamas could lead to a disruption in supply from the Middle East. Adding to this, the disappointing release of the monthly Canadian GDP print on Tuesday continues to undermine the commodity-linked Loonie and act as a tailwind for the USD/CAD pair. In fact, data published by Statistics Canada showed that the economy was effectively flat in August and the July GDP was revised down to show a marginal contraction as compared to a zero growth reported initially. Furthermore, the flash estimate indicated that the economy was likely also unchanged in September, which translates into an annualized 0.1% decline in the third quarter and confirms a technical recession.

Apart from this, a modest US Dollar (USD) strength turns out to be another factor lending support to the USD/CAD pair. The prospects for further policy tightening by the Federal Reserve (Fed) remain supportive of elevated US Treasury bond yields and continue to benefit the Greenback. The USD bulls, however, seem reluctant to place aggressive bets and now look to the outcome of the highly-anticipated FOMC meeting before placing fresh bets. The US central bank will announce its decision later during the US session and is expected to maintain the status quo for the second time in a row. Investors, however, seem convinced that the Fed will stick to its hawkish stance in the wake of the US economic resilience and keep the door open for one more rate hike in 2023 to combat sticky inflation.

Hence, market participants will closely scrutinize the accompanying monetary policy statement and Fed Chair Jerome Powell's comments at the post-meeting press conference for cues about the future rate-hike path. This, in turn, will help determine the next leg of a directional move for the buck and provide some meaningful impetus to the USD/CAD pair. Heading into the key central bank event risk, traders will confront the release of important US macro data – the ADP report on private-sector employment, the ISM Manufacturing PMI and JOLTS Job Openings data – later during the early North American session. This, along with Oil price dynamics, should contribute to producing short-term trading opportunities around the major.

Technical levels to watch

China's Caixin Manufacturing Purchasing Managers' Index (PMI) unexpectedly dropped to 45.5 in October, compared with September’s expansion of 50.6, the latest data published on Wednesday.

The market had expected a 50.8 readout.

Key highlights (via Caixin)

"Manufacturing demand expanded slowly, and supply contracted. Total new orders increased for the third consecutive month, but the pace of growth slowed for two months in a row. External demand continued to decline, with new export orders falling for the fourth straight month,” said Wang Zhe, an economist at Caixin Insight Group.

"As a result, manufacturers reduced their supply, leading production to shrink for the first time in three months," Wang added.

On Tuesday, China’s National Bureau of Statistics (NBS) released the country’s official Manufacturing Purchasing Managers' Index (PMI), which dropped to 49.5 in October as against the 50.2 expansion expected.

AUD/USD reaction to China’s PMI data

The downbeat Chinese Manufacturing PMI adds to the weight on the Aussie Dollar, as AUD/USD is flirting with an intraday low near 0.6325, down 0.15% on the day.

• Australian Dollar extends losses after weaker economic data on Wednesday.
• Australia’s AiG Industry Index came in at -9.9, while Building Permits declined by 4.6%.
• Upbeat US Treasury yields support the advance of the US Dollar ahead of the Fed decision.

The Australian Dollar (AUD) extends its losses for the second session, hovering around a key level on Wednesday. The AUD/USD pair faces downward pressure due to the subdued economic data from Australia, coupled with a stronger US Dollar (USD) ahead of the Federal Open Market Committee (FOMC) policy decision.

Australia’s economic data released on Wednesday, featuring the AiG Industry Index and Building Permits (MoM) for September, indicated a downturn. Nevertheless, the Aussie Dollar found reinforcement on Monday, courtesy of robust Retail Sales.

Reserve Bank of Australia (RBA) is poised to unveil its policy decision on November 7. Anticipations lean towards a 25 basis points increase in interest rates during the upcoming meeting, driven by heightened inflation.

The US Dollar Index (DXY) continues to gain ground for the second day, propelled by higher US Treasury yields as the market braces for the upcoming policy decision by the US Federal Reserve (Fed). While expectations suggest the central bank will likely uphold its current monetary policy stance in the Wednesday meeting, the outlook for December's gathering hinges on data-driven considerations.

Investors are poised to closely monitor the Federal Open Market Committee's (FOMC) post-meeting message, seeking valuable cues for market participants gauging the potential trajectory of interest rates.

Daily Digest Market Movers: Australian Dollar trades lower on the weaker economic data ahead of the Fed policy decision

• Australia’s AiG Industry Index for September reduced to 9.9 against the previous reading of a 3.5 decline, while Building Permits (MoM) declined by 4.6% against the market consensus of a 1.3% rise, swinging from the previous growth of 7.0%.
• Australia's Retail Sales (Month-on-Month) soared to 0.9% in September, surpassing market expectations of 0.3% and the previous figure of 0.2%.
• Australian Consumer Price Index (CPI) for the third quarter of 2023 reached 1.2%, exceeding both the 0.8% uptick in the previous quarter and the market consensus of 1.1% for the same period.
• The Reserve Bank of Australia stated heightened concern about the inflation impact stemming from supply shocks. Governor of the Reserve Bank of Australia, Michele Bullock stated that if inflation persists above projections, the RBA will take responsive policy measures. There is an observable deceleration in demand, and per capita consumption is on the decline.
• The Chinese Purchasing Managers' Index (PMI) data released on Tuesday has sparked concerns about the sluggish economic state of the world's second-largest economy. With Australia being China's largest trading partner, there's a heightened possibility of this development influencing the Australian Dollar.
• China's NBS Manufacturing PMI took an unexpected turn in September, contracting to 49.5, down from the 50.2 expansion observed in July and falling short of the market consensus of 50.2.
• Chinese NBS Services PMI also experienced a decline, dropping to 50.6 in September compared to the anticipated figure of 51.8 and the previous reading of 51.7.
• According to reports, there's a tentative agreement between the US and China for a meeting between Presidents Joe Biden and Xi Jinping in November. This comes after months of strategic diplomatic efforts to mend relations.
• US Core Personal Consumption Expenditures Price Index (YoY) saw a slight decline to 3.7% from the previous reading of 3.8%. However, the monthly index showed an increase to 0.3%, in line with expectations and up from 0.1% previously.
• The University of Michigan Consumer Index surpassed expectations in October, reporting a figure of 63.8, which was expected to remain consistent at 63.0.
• Investors will focus on the key indicators such as the US ADP Employment Change, and ISM Manufacturing PMI for October ahead of the Fed policy decision, with expectations of the interest rates to be kept at 5.5% in the upcoming meeting on Wednesday.

Technical Analysis: Australian Dollar hovers below 0.6350 psychological level

The Australian Dollar consolidates beneath the crucial level of 0.6350, with the annual low at 0.6270 potentially serving as a significant support, closely aligned with the major level around 0.6250. On the upside, attention is drawn to the pivotal resistance situated around the 50-day Exponential Moving Average (EMA) at 0.6400. A breakthrough above this resistance has the potential to propel the currency towards the 23.6% Fibonacci retracement level at 0.6419.

AUD/USD: Daily Chart

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Wednesday at 7.1778 as compared to the previous day's fix of 7.1779 and 7.3327 Reuters estimate.

• EUR/USD finds support ahead of the mid-1.0500s, though struggles to attract any buyers
• The USD pauses after the previous day’s strong move up and lends some support to the pair.
• Expectations that the ECB is done raising rates undermine the Euro and act as a headwind.
• Investors now look to the US macro data for a fresh impetus ahead of the FOMC decision.

The EUR/USD pair oscillates in a narrow band during the Asian session on Wednesday and for now, seems to have stalled the previous day's sharp retracement slide from the 1.0675 region, or a one-week high. Spot prices manage to hold above mid-1.0500s, though the fundamental backdrop warrants some caution before positioning for any meaningful appreciating move.

The official data published by Eurostat on Tuesday showed that the Eurozone Harmonised Index of Consumer Prices (HICP) decelerated sharply from an annual pace of 4.3% to 2.9% in October. This represented the slowest growth in consumer prices since July 2021 and reaffirmed market expectations that the European Central Bank (ECB) will not raise interest rates further. Apart from this, looming recession risks might continue to undermine the shared currency and act as a headwind for the EUR/USD pair.

The US Dollar (USD), on the other hand, takes a breather following the previous day's strong move up as traders now look to the outcome of the highly-anticipated FOMC monetary policy meeting before placing fresh directional bets. The Federal Reserve (Fed) is widely expected to keep interest rates on hold for the second consecutive time, though might keep the door open for another rate increase by the end of this year. Hence, the market focus will remain glued to the accompanying monetary policy statement.

Apart from this, Fed Chair Jerome Powell's remarks at the post-meeting press conference will be scrutinized closely for cues about the future rate-hike path. This, in turn, will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the EUR/USD pair. In the meantime, hawkish Fed expectations remain supportive of elevated US Treasury bond yields and continue to underpin the buck. This might further contribute to capping the upside for the EUR/USD pair and warrants caution for bulls.

Heading into the key central bank event risk, traders will confront the release of the ADP report on private-sector employment, the ISM Manufacturing PMI and JOLTS Job Openings data from the US. This, along with the US bond yields and the broader risk sentiment, will drive demand for the safe-haven USD and produce short-term trading opportunities around the EUR/USD pair later during the early North American session. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.

Technical levels to watch

Speaking at a news conference following the release of the November Financial Stability Report, Reserve Bank of New Zealand (RBNZ) Deputy Governor Christian Hawkesby said that slow demand from China is hitting commodity prices.

Hawkesby also commented on the domestic jobs report released earlier this Wednesday and said that the country can handle higher rates of unemployment. In fact, Statistics New Zealand reported that the number of employed people unexpectedly declined by 0.2% during the third quarter and the jobless rate shot up to 3.9% from 3.4%.

The remarks, meanwhile, do little to provide any respite to the New Zealand Dollar (NZD) or ease the bearish pressure surrounding the NZD/USD pair, which remains well within the striking distance of the YTD low touched last week.

The European Central Bank (ECB) Governing Council and Bank of Estonia Governor, Madis Müller said on Tuesday that the Middle East geopolitical tensions are causing energy prices to rise again and the potential of this spreading is one of the main risks to eurozone inflation. 

Key quotes

Market reaction

The comments above have little to no impact on the Euro. The EUR/USD pair is trading higher on the day at 1.0577, as of writing.

• Gold price loses momentum for the third consecutive day on the higher US Treasury yields.
• The FOMC has signaled that it will not hike rates at its November meeting.
• The downbeat Chinese data raised concerns about the economic recovery in the world’s second largest economy.
• The FOMC meeting and press conference will be the closely watched events by traders.

Gold price (XAU/USD) loses traction during the early Asian trading hours on Wednesday. The yellow metal hovers around $1,984 after facing rejection to hold above the $2,000 mark. Investors await the Federal Open Market Committee (FOMC) policy meeting, with no change in rates expected.

Meanwhile, the US Dollar Index (DXY), the value of the USD relative to a basket of global currencies, consolidates its recent gains around 106.71 after bouncing off the low of 105.90. The US Treasury bond yield moves a little, with the 10-year Treasury bond yield hovering around 4.92%.

The FOMC has signaled that it will not hike rates at its November meeting, thus investors will keep an eye on the FOMC’s message during the press conference about how high the bar is to convince the FOMC to raise the interest rates again. Last week, the Federal Reserve (Fed) Chair Jerome Powell affirmed that another rate hike is possible if high economic growth and a labor shortage continue. That being said, rising interest rates raise the opportunity cost of investing in non-yielding assets, implying a negative outlook for precious metals.

The weaker-than-expected Chinese data on Tuesday raised concerns about the economic recovery in the world’s second-largest economy. China’s Manufacturing Purchasing Managers' Index (PMI) came in at 49.5 in October from 50.2 expansion in September, below the market consensus of 50.2. Meanwhile, the Services PMI fell to 50.6 in October from the previous reading of 51.7, worse than the 51.8 expected. This, in turn, exerts some selling pressure on the gold price as China is the world's largest gold producer and consumer.

Nonetheless, the elevated geopolitical risks in the Middle East might boost the safe-haven asset like gold. US Secretary of State Antony Blinken will travel to Israel on Friday for meetings with members of the Israeli government before making another stop in the region.

Gold traders will monitor the US ADP employment report, JOLTS, and the ISM Manufacturing PMI. The attention will shift to the FOMC decision and press conference on Wednesday. These events could give a clear direction to gold price.