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Federal Reserve Bank of Cleveland President Loretta Mester speaks on her economic outlook on Monday, per Reuters.

Key quotes

Market reaction

As of writing, the US Dollar Index was unchanged on the day at 107.03.

• USD/JPY is floating just shy of the 150.00 major level heading into Tuesday's Asia market session.
• The US Dollar is extending a broad-market bid that scooped up markets on Friday, driving the USD/JPY into year-long highs.
• Economic calendar lacks Japan data heading into another NFP week.

The USD/JPY is pushing into its highest prices in eleven months, driving towards the 150.00 major handle as the US Dollar (USD) catches a broad-market ride up the charts on souring investor appetite and risk-off flows piling into the safe haven USD. The Japanese Yen (JPY) has lost almost 3% since September's opening bids near 145.55.

The Bank of Japan (BoJ) continues to chase its hyper-easy monetary policy framework, announcing an unscheduled bond purchasing exercise on Monday attempting to clamp down on spiraling Japanese government bond yields.

BoJ announces unscheduled bond-buying operation to stem surge in yields

Despite the operation, the BoJ's bond buying saw little market absorption, with investors broadly focusing on how much USD they can scoop up, and the JPY continues to tumble towards the USD/JPY's highest bids in a year.

September's US Manufacturing Purchasing Manager Index (PMI) figures on Monday came in better than expected, printing at 49.0 against the forecast uptick into 47.7 from the previous reading of 47.6.

ISM Manufacturing PMI improves to 49.0 vs. 47.7 forecast

With little of note on the economic calendar for Japan, market focus will be squarely on the US data docket heading into another Non-Farm Payrolls (NFP) Friday, with the US NFP for September expected to slip from 187K to 163K.

Next up will be Tuesday's JOLTS job openings for August, forecast to tick upwards slightly from 8.827M to 8.83M.

Read More:

Forex Today: US Dollar shows its strength, RBA to keep rates unchanged

US Dollar Index climbs to 107.00, claims eleven-month high as market sentiment extends risk-off flows

USD/JPY technical outlook

The USD/JPY is pinning into eleven-month highs just beneath the 150.00 major psychological handle, and Tuesday markets are rolling out of bed with the pair bidding near 149.85.

Hourly candles see the USD/JPY trading well above the 200-hour Simple Moving Average (SMA) near 148.90 as the major moving average sees itself pinned in place to a rising near-term trendline from last week's swing low into 147.32.

On the daily candlesticks, the US Dollar has closed bullish against the Japanese Yen for six of the last eight straight trading months, and current price action is well-bid after rebounding from the 34-day Exponential Moving Average (EMA) just above 147.00, with the 200-day SMA far below current prices, turning bullish from 138.00.

USD/JPY hourly chart

USD/JPY daily chart

USD/JPY technical levels

The Biden administration has warned China that additional export restrictions on AI chips and chipmaking tools to China are due early this month, per Reuters. This would be an update around the one-year anniversary of the initial unveiling of the measures on October 7, 2022.

The restrictions announced last October aimed to prevent US technology from being used to strengthen the Chinese military by limiting China's access to advanced AI chips and imports of the US' most advanced chipmaking tools.

Market reaction

This headline had little to no impact on the Australian Dollar’s performance against its rivals. At the press time, AUD/USD is losing 0.07% on the day to trade at 0.6358.

• EUR/JPY retreats from last week’s high of 158.47, with fears of intervention looming.
• The daily chart depicts a neutral bias for the pair, with potential downside exposure to 156.00 and 155.49 if it breaches the Kumo at around 157.00.
• Bearish outlook in the hourly chart suggests a potential mean reversion move towards 157.30 before resuming its downtrend towards the 156.00 figure.

The EUR/JPY retreated from last week’s high of around 158.47 amid fears of an intervention by Japanese authorities, dropped 0.54% on Monday, and reached the top of the Ichimoku Cloud (Kumo) at around the current exchange rate. The cross is trading at 157.02 as the Asian session begins.

The daily chart portrays the pair as neutral biased, capped on the downside by the Kumo at around 157.00. A breach of the latter will expose 156.00, followed by the bottom of the Kumo at around 155.49. Conversely, if EUR/JPY reclaims the Tenkan-Sen at 157.59, that could pave the way to test the Senkou-Span A line at 157.88. Up next would be 158.00.

The EUR/JPY is bearish on the hourly chart, with the cross exchanging hands below the Kumo, while the Tenkan-Sen sits below the Kijun-Sen. However, as price action seems overextended, the pair is subject to a mean reversion move towards the Tenkan-Sen at 157.30 before resuming its downtrend towards the September 28 low of 156.70, followed by the 156.00 figure.

EUR/JPY Price Action – Hourly chart

EUR/JPY Key Technical Levels

• AUD/USD remains flat around 0.6362 as traders turn cautious ahead of Australia’s key event.
• US ISM Manufacturing PMI came in at 49.0 in September vs. 47.6 prior, better than expected.
• Market players expect another interest rate pause at 4.1% from the Reserve Bank of Australia (RBA) on Tuesday.

The AUD/USD pair consolidates its recent losses above the mid-0.6300s during the early Asian session on Tuesday. Traders prefer to wait on the sidelines ahead of the Reserve Bank of Australia (RBA) monetary policy meeting on Tuesday. RBA is likely to maintain a status quo on interest rates at its upcoming meeting. The pair currently trades near 0.6362, losing 0.02% for the day.

Data released on Monday revealed that the US ISM Manufacturing PMI came in at 49.0 in September from 47.6 in the previous reading, above the market consensus of 47.7. This figure showed that business activity in the US manufacturing sector continued to contract.

Further details of the report showed that the Prices Paid Index fell significantly from 48.4 to 43.8. The Employment Index rose from 48.4 to 51.2. Finally, the New Orders Index climbed from 46.8 to 49.2.

Federal Reserve (Fed) Governor Michelle Bowman said on Monday that it will likely be appropriate to raise the policy rate further and hold it at restrictive levels for some time. While Fed Vice Chair for Supervision Michael Barr stated that the central bank should approach monetary policy with caution. He said the most important question is not how much interest rates will rise, but how long they will remain at a sufficiently restrictive level. However, Barr believes that the Fed can control inflation without causing a significant deterioration in the jobs market.

On the Aussue front, market players expect another interest rate pause at 4.1% from the Reserve Bank of Australia (RBA) on Tuesday. This will be the first meeting with Michele Bullock as governor. Market players will take cues from the RBA statement. Any hints about a further rate hike might cap the downside of the Aussie against the US Dollar.

Looking ahead, traders will closely watch the RBA interest rate decision on Tuesday. Also, the US JOLTS Job Openings report will be due in the American session. The focus will shift to the US employment data, with the release of the ADP report on Wednesday and the Nonfarm Payrolls on Friday.

• US Dollar Index continues its climb, giving riskier assets little room to breathe.
• Risk-off market flows are thrusting the USD higher.
• This week sees US labor previews on Wednesday and Thursday, NFP Friday data drop.

The US Dollar Index (DXY) has climbed to a fresh eleven-month high above 107.00 on Monday, and the DXY is up nearly 7.5% from July's bottom just south of 99.70.

Forex Today: US Dollar shows its strength, RBA to keep rates unchanged

Climbing US Treasury yields on a hawkish Federal Reserve (Fed) rate outlook and US market jitters over political budget brinkmanship are rattling broad-market investor sentiment and sending risk-off flows piling into the USD.

10-year US Treasury yields peaked at 4.7% on Monday, the bond's highest yield since 2007. The Fed is set to see inflation higher than previously expected, and interest rate expectations looking forward are slowly rising, increasing the likelihood of the Fed being forced to increase the number of additional rate hikes heading into 2024.

The US government was able to avert an operational shutdown after the US Senate approved a last-minute, stopgap funding measure, but the temporary funding allotment will only keep the US government funded and operational through November 17th, at which point the US government is expected to again face partisan budget brinkmanship.

Republican Speaker of the House Kevin McCarthy faces a challenge to his position as head of the GOP on Capitol Hill, and investors are getting rattled by the ongoing political dramatization of operating the world's largest and most powerful economy.

ISM Manufacturing PMI improves to 49.0 vs. 47.7 forecast

US Purchasing Manager Index (PMI) figures on Monday provided additional support on Monday for the USD, with the US Manufacturing PMI jumping to 49.0 against the previous reading of 47.6.

Tuesday, Wednesday, and Thursday all bring a slew of employment data previews:

Tuesday's JOLTS Jobs Openings for August is seen ticking up from 8.827M to 8.83M;

Wednesday's ADP Employment Change for September is forecast to dip from 177K to 160K;

Thursday's Initial Jobless Claims are likewise expected to move from 204K to 210K.

Elsewhere on the economic calendar, Wednesday will also be bringing Services PMI figures, expected to decline from 54.5 to 53.6, and investors will no doubt be buckling down for Friday's Non-Farm Payrolls, where non-NFP payroll starts are expected to dip from 187K to 163K.

Read More:

DXY: Break above 106.80 to open up a return towards 108 – SocGen

DXY to stay bid in the 106-107 range this week – ING

DXY: Significant move lower requires major shift in longer term rate differentials against USD – Scotiabank

DXY technical outlook

Hourly candlesticks sees the US Dollar Index trading into the top side after rebounding off of the 200-hour Simple Moving Average (SMA) last week, bouncing from 105.70 to soar into its highest values in almost a year.

The US Dollar has climbed steadily since July's bottom near 99.50, and the DXY is on pace to close in the green for the twelfth straight week, climbing over 7% inside three months.

Daily candlesticks have the US Dollar index chalking in a notably strong rising trendline from July's lows, and price action has pulled well away from meaningful technical support at the 200-day SMA currently turning bullish from above 103.00.

DXY hourly chart

DXY daily chart

DXY technical levels

• XAG/USD continues its downside tumble on Monday, shedding value and slumping back into $21.00.
• Silver prices peaked at $23.56 last Friday before stumbling as broad-market risk appetite sours.
• Rising US Treasury yields coupled with a climbing US Dollar sees Silver getting knocked lower.

The XAG/USD continues to sag, crashing into the $21.00 handle as Monday see Silver prices extend declines kicked off in Friday's broad-market sell-off as investors clamor into the US Dollar in a safe haven bid.

Climbing US Treasury yields are putting pressure on Silver as investors churn on rising expectations of a global recession, coupled with market jitters stemming from the US government's recent budget standoff, where government officials brought the US to the eleventh hour on funding agreements and threatened to spark the fourth US government shutdown in a decade.

The US was able to secure itself a last-minute funding deal, but the temporary measure is set to run out of time once again in mid-November, where budget brinkmanship is expected to again rile global markets.

Forex Today: US Dollar shows its strength, RBA to keep rates unchanged

XAG/USD technical outlook

Hourly candles show Silver essentially in freefall in the near-term, with the XAG/USD down over 11% from Friday's peak at $23.56, and intraday action has pulled the bids far away from the 200-hour Simple Moving Average (SMA) currently turning bearish into $22.80.

Daily candlesticks are not fairing much better, with the XAG/USD failing to catch any meaningful bullish momentum from the bottom of the previous consolidation range, and dropping further into new seven-month lows.

Silver is now down over 12% for 2023, and further bearish momentum will see the XAG/USD even further underwater and set to claim new lows for 2023 below March's bottom near $19.90.

XAG/USD hourly chart

XAG/USD daily chart

XAG/USD technical levels

• GBP/USD tanks over 100 pips, reaching around 1.2080s, as the US Dollar Index advances to a 10-month high, and US bond yields rise.
• UK manufacturing activity continues its contractionary trend, and declining house prices add to the economic gloom, pressuring the Sterling.
• With GBP/USD losses extending, a breach below the 1.2000 figure could open the door for a further slide towards the 1.1800 level.

The British Pound (GBP) tanks more than 100 pips versus the US Dollar (USD), after hitting a daily high of 1.2219. Nevertheless, offers at around 1.2200 sent the GBP/USD plummeting to a new eight-month low at around the 1.2080s area.

British Pound experiences a sharp decline against the US Dollar, hitting a new eight-month low, as robust US economic data and a soaring Dollar Index weigh on the pair

Sentiment slightly improved towards Wall Street’s close, though it failed to halt the Pound Sterling slide. The US Dollar Index, a gauge of the buck’s value vs. a basket of six currencies, advances to 107.00 up almost 0.80%, and hits a 10-month high. Consequently, US bond yields advanced.

Over the weekend, news in the United States (US)  improved market sentiment as the US Congress passed a bill to fund the government, avoiding a shutdown. However, investors bracing for high interest rates, triggered a risk-off impulse in early trading in New York.

US economic data witnessed the ISM Manufacturing PMI in September, jumped from 47.9 to 49.8, at contractionary territory for the tenth straight month. Meanwhile, the Federal Reserve’s Vice Chair for Supervision Michael Barr echoed comments from Governor Bowmann that rates need to remain higher, but the latter opted for supporting another hike.

On the UK front, data revealed that manufacturing activity continued to slow sharply in September, though improved from 43.0 to 44.3 but remained in contractionary territory. Earlier, house prices in the UK were 5.3% lower than a year earlier.

Given the backdrop, the GBP/USD extended its losses, and investors eye the 1.2000 figure. A drop beneath that level, and the 1.1800 figure is on the cards.

GBP/USD Price Analysis: Technical outlook

The daily chart remains downward biased, as sellers eye the 1.2010 March 15 daily low, which could pave the way for further losses once cleared. A breach of that level, the GBP/USD would drift towards the next cycle low at 1.1802, the March 8 low. Conversely, if the major reclaims 1.2100. that could open the door for a pullback toward 1.2200 before the downtrend continues.

The key event in the Asian session will be the Reserve Bank of Australia meeting. Later in the day, Switzerland will report consumer inflation, and in the US, the JOLTS Job Openings data will be released.

Here is what you need to know on Tuesday, October 3:

The US Dollar opened the week on a strong note, resuming the rally that started on Friday. The US Dollar Index rose above 107.00, posting its highest daily close since November. Higher US yields, cautious market sentiment, and positive US data continue to support the Greenback's rally.

The US 10-year yield reached 4.70% for the first time since 2007. US data came in above expectations, with the ISM Manufacturing PMI at 49, surpassing the market consensus of 47.7. On Tuesday, the JOLTS Job Openings report is due. Later in the week, more US employment data will be released with the ADP report and the Nonfarm Payrolls.

EUR/USD broke below 1.0500, reaching fresh year-to-date lows. The pair remains under pressure after sustaining the bearish trend. A potential support level lies around 1.0460. The strong US Dollar also weighed down GBP/USD, which broke below 1.2100, hitting three-month lows.

USD/JPY continues to gradually approach the 150.00 level amid higher yields. A break above 150.00 could trigger volatility and speculations about intervention from Japanese authorities. 

AUD/USD extended its reversal from 0.6500 and dropped to 0.6360. The Reserve Bank of Australia (RBA) will announce its monetary policy decision on Tuesday, with no change expected. This will be the first meeting with Michele Bullock as governor.

The kiwi fell versus the US Dollar; however, it outperformed the AUD and CAD. NZD/USD pulled back to 0.5950 after failing to hold above 0.6000 but remained above the 20-day Simple Moving Average (SMA). The Reserve Bank of New Zealand (RBNZ) will hold its monetary policy meeting on Wednesday.

USD/CAD is back at September highs, slightly below the 1.3700 area, which is a key resistance level. A break higher would clear the way for more gains. Canada will report employment data on Friday.

Metals had another terrible day, with Gold falling more than $20 to $1,828, the lowest level since March, and Silver collapsing by more than 5% to $21.00. XAG/USD lost more than 10% from Friday's high.
 

• WTI crude drops 2.37% to $88.54 per barrel as profit-taking ensues and the US Dollar strengthens, driven by rising US Treasury bond yields.
• Concerns over economic slowdown, highlighted by weaker manufacturing data from China and Europe, pose potential risks to oil demand.
• Increased oil output from OPEC countries and potential supply increments from Turkey and Saudi Arabia add to the downward pressure on oil prices.

West Texas Intermediate (WTI), the US crude oil benchmark, sinks after hitting a daily high of $91.84 per barrel, though profit-taking and recent news of an increase in oil output weighed on oil prices. Therefore, WTI is trading at $88.54 a barrel, down 2.37%.

West Texas Intermediate crude experiences a downturn amid a strengthening US Dollar, increased oil output, and concerns over global economic deceleration impacting demand

The rise of the Greenback (USD) is seen as the main driver, while traders booked profits, as noted by Reuters. US Treasury bond yields, particularly the 10-year benchmark note hitting 4.70%, sponsored a leg-up to the buck, as shown by the US Dollar Index (DXY). The DXY, which measures the US Dollar performance against six currencies, trades at around 106.94, posting gains of 0.72%, a headwind for US dollar-denominated commodities.

Oil traders must be aware of an ongoing economic slowdown. The latest China’s Caixin Manufacturing PMI, which decelerated, spurred a revision in the global economic outlook. Fitch Ratings said that despite the resilience in US consumer demand, , reviewed its forecast downwards, for 2024, due to China’s deepening property slump.

That data and weaker-than-expected factory activity data in Europe weighed on WTI’s prices, as an economic deceleration could dent oil’s demand.

Lately, a survey revealed by Reuters showed that oil output climbed for the second straight month in September, as the Organization of Petroleum Exporting Countries (OPEC) revealed. Increases were led by Nigeria and Iran, as OPEC countries pumped 27.73 million barrels per day, up from 120,000 in August.

Oil supply growing

In the meantime, Turkey announced the country would restart operations this week on Iraq’s pipeline, while Saudi Arabia could begin to ease its additional supply cut of 1 million barrels per day.

WTI Price Analysis: Technical outlook

Despite falling, the US crude oil benchmark remains upward biased, but if WTI tumbles below the latest cycle low of $88.24 achieved on September 26, that could open the door for further losses. A breach of the latter would expose as next support the 50-day moving average (DMA) at $84.66. Conversely, to resume its uptrend, WTI must climb past the $94.99 year-to-date (YTD) high so that buyers can remain hopeful of challenging $100 per barrel.

• Gold is extending declines on moody markets going risk-off.
• Interest rate concerns driving the price of bullion as Treasury yields climb.
• Gold spot prices set to challenge eight-month lows if downside resumes.

The XAU/USD is down $20 per ounce for Monday, declining to $1,830.00 on the charts as Gold continues its decline. Gold spot prices are set to close in the red for the sixth consecutive trading day, and the XAU/USD has closed flat or bearish for nine of the last ten daily candles.

Gold remains significantly oversold on the charts as investors flock to safer havens in the face of rising interest rates and US Treasury yields consistently tapping into new highs. 

Gold traders will be quick to note that much of the downside for XAU/USD is largely based on market concerns of a global economic slowdown, and if broader market sentiment is able to shrug off the jitters, Gold spot could easily see a rebound.

While the Federal Reserve (Fed) is set to hold interest rates higher for longer, it would take a notable appreciation in inflation expectations moving forward to drive the Fed into a new rate hike cycle, and investors will be hoping that a lack of upside shifts in the Fed's rate expectations, or the "dot plot", will cap further losses for the precious metal.

XAU/USD technical outlook

Gold spot prices are firmly bearish on Monday, down 1% from the day's open near $1,830.00 and the XAU/USD has so far entirely failed to mark in any kind of rebound after last Friday's decline from $1,880.00.

Daily candlesticks sees Gold so bearish that it is firmly breaking technical indicators: the Relative Strength Index is at its most oversold since 2018, with a reading of 20.55, and the Moving Average Convergence-Divergence (MACD) histogram is at its lowest reading since the first quarter of 2023.

Gold spot has declined over 6% from September's peak at $1,947.00, and if bulls fail to stage a successful relief rally from here it will see the XAU/USD heading into red territory for the year, below the year's floor of $1,804.76.

XAU/USD daily chart

XAU/USD technical levels

• USD/CHF floating back to the top side as Greenback rises on risk aversion.
• Franc buyers will be looking ahead to Tuesday's Swiss CPI reading.
• Another NFP Friday looms ahead, investors will be positioning early.

The USD/CHF sees a Monday rebound after last Friday's decline, and broad-market risk flows are seeing investors pile into the US Dollar (USD) ahead of another US Non-Farm Payrolls Friday.

US Manufacturing Purchasing Manager Index (PMI) figures on Monday came in mixed, with September's Manufacturing PMI printing a healthy 49 versus the expected uptick to 47.7. Upside potential was limited by manufacturing prices, with the ISM manufacturing inflation index declining to 43.8, missing the forecast improvement to 48.6.

Next up on the data docket for the USD/CHF will be the Swiss Consumer Price Index (CPI), which is slated for Tuesday at 06:30  GMT.

Swiss inflation is expected to improve from 1.6% to 1.8%, but momentum heading into the mid-week will be capped off by the US ISM Services PMI printing, forecast to decline from  54.5 to 53.6. US services inflation data is slated for Wednesday at 14:00 GMT.

USD/CHF: Downward path will eventually resume – UBS

USD/CHF technical outlook

The USD/CHF bounded 85 pips from Monday's early low to mark in an intraday high just shy of the 0.9200 handle, and the pair is currently softening into the midpoint near 0.9170. The pair remains well-bid above the 200-hour Simple Moving Average near 0.9110, but the near-term ceiling remains last week's swing high into 0.9225.

Daily candlesticks see the USD/CHF extending above the 200-day SMA near 0.9050, and a bearish confirmation would first have to decisively fall below the 34-day Exponential Moving Average (EMA) which is currently rising into the 0.9000 major handle and set for a bullish cross of the 200-day SMA.

USD/CHF daily chart

USD/CHF technical levels

• AUD/USD sees Monday declines as market risk appetite sours.
• RBA rate call in the pipe for Tuesday.
• Market sentiment set to be titled to the downside for NFP week.

The AUD/USD is washing back into familiar lows for Monday, trading into 0.6340 as broad-market sentiment turns risk-off.

The Aussie (AUD) is down 1.2% from Monday's early high of 0.6445 and off of the day's opening bids by around 65 pips. Market flows are broadly favoring the US Dollar (USD) as investors get spooked by fears of a global economic slowdown.

US ISM Purchasing Manager Index (PMI) figures came in mixed on Monday, limiting Greenback support to safe haven market flows. The US Manufacturing PMI ticked from the previous 47.6 to 49, but prices paid by manufacturers declined, printing at 43.8 versus the expected uptick to 48.6.

Tuesday brings the latest rate call from the Reserve Bank of Australia (RBA), which will be tabled by the RBA's new head, Governor Michele Bullock will be making her debut appearance as the head of the RBA, and investors are broadly anticipating the RBA holding rates steady at 4.1%.

Markets are still anticipating one more rate hike from the RBA, likely due in November, and investors will be keeping a close eye on the RBA rate statement for any clues about the Australian central bank's path forward.

The RBA rate call lands on Tuesday at 03:30 GMT.

Read More:

RBA Preview: Forecasts from eight major banks, no change in rates, hiking in November?

RBA expected to keep rates unchanged – UOB

Mixed data docket for the week heading into NFP Friday

Australian Trade Balance figures land on Thursday, with the RBA's latest Financial Stability Review on Friday. Friday's action is set to be entirely overshadowed by US Non-Farm Payrolls. Forecasts see the NFP for September printing a decline from 187K to 163K.

AUD/USD technical outlook

The AUD/USD has fallen back into familiar consolidation for Monday, facing a clean rejection from the 34-day Exponential Moving Average (EMA) near 0.6450.

The 0.6350 region has become familiar territory for the Aussie, a level that has chained price action since August's slide into the price region.

The AUD/USD's long-term outlook is notably bearish, and a bullish reversal will quickly run into technical resistance from the 100-day Simple Moving Average (SMA) currently settling into 0.6575.

AUD/USD daily chart

AUD/USD technical levels

• USD/JPY rises to 149.75, gaining 0.28%, as high US Treasury bond yields and avoidance of a US government shutdown bolster the US Dollar.
• Hawkish sentiments from Federal Reserve officials, focusing on price stability and potential additional rate increases, underpin the Greenback.
• Japanese authorities’ vocal stance on potential Forex market intervention and the Bank of Japan’s dovish policies add a layer of caution to the pair’s ascent.

The US Dollar (USD) climbs against the Japanese Yen (JPY) late in the North American session, gaining 0.28%, though it remains shy of testing the 150.00 mark amid fears of an impending intervention by Japanese authorities. The USD/JPY is exchanging hands at 149.75 after hitting a daily low of 149.38.

US Dollar advances against the Japanese Yen, buoyed by rising US Treasury yields and a hawkish Federal Reserve, but fears of Japanese intervention cap gains

The US Dollar remains underpinned by high US Treasury bond yields, with the 10-year benchmark note climbing close to ten basis points at 4.672% and risk aversion. In addition, the avoidance of a US government shutdown lent a lifeline to the Greenback (USD), which extended its gains versus a basket of six currencies, also called the US Dollar Index (DXY) at 106.85, up 0.69%.

In the meantime, Federal Reserve officials remained hawkish on Monday. Fed Governor Michelle Bowman favors an additional rate increase in the thesis that inflation is too high and that elevated oil prices could trigger another raft of inflation. Recently, Fed Chair Powell said the US central bank is focused on price stability.

The data front showed that business activity, although showing signs of recovery, remains at contractionary territory, with the ISM remaining below the 50 expansion/contraction threshold at 49.8, up from 47.9 in August.

On the Japanese front, authorities remain vocal in intervening in the Forex markets amid further Japanese Yen's (JPY) deterioration. Although they expressed that fundamentals should be expressed in the USD/JPY exchange rate, the major should climb further due to the Bank of Japan (BoJ) sticking to its dovish stance of negative interest rates while keeping its ultra-loose monetary policy.

USD/JPY Price Analysis: Technical outlook

The USD/JPY is upward biased, trading above the Tenkan and Kijun-Sen lines and above the Ichimoku Cloud (Kumo). Fears of intervention refrained buyers from challenging the 150.00 figure, seen as the first resistance, followed by the latest year 151.94 mark. Conversely, if intervention occurs, key support levels are seen at the Tenkan-Sen at 148.59, the Senkou Span A at 147.87, followed by the Kijun-Sen at 147.15.

USD/JPY Price Anction - Daily chart

• GBP/JPY down 0.70% in Monday trading as Pound Sterling recedes.
• Risk aversion market flows are sending investors into safe havens.
• Market concerns about an economic slowdown continue to sap market confidence.

The GBP/JPY has declined 125 from Monday's peak near 182.25 as the Pound Sterling (GBP) swoons against the safer Japanese Yen (JPY). Broader market sentiment has soured to kick off the new trading week, and early gains are giving way to deepening red as Monday rounds the corner into Tuesday's Asia market session.

The Pound Sterling is broadly expected to suffer with an overly cautious Bank of England (BoE) at the helm; an unexpected rate hike pause from the UK's central bank, coupled with incredibly dovish language from various BoE officials, exposes the GBP to the downside unless inflation returns in a meaningfully-enough way to jumpstart the BoE's rate hike decision-making.

Traders hoping for inspiration from the economic calendar are in for a disappointing trading week, with little of note on the data docket for either currency.

Japan's Tankan Manufacturing Index & Outlook figures for the third quarter exceeded expectations on Monday. The Tankan Manufacturing Index printed at a solid 9, well above the forecast 6 and easily beating the previous print of 5.

The Tankan Manufacturing Outlook also beat the books, climbing from the previous 9 to print at a nice round 10, handily wiping out the market forecast of 5.

The only remaining notable data for the week will be Thursday's wage figures from Japan, due at 23:30 GMT.

GBP/JPY technical outlook

The Guppy's backslide from Friday's peak near 182.80 is seeing hourly candles bounce from a near-term raising trendline marked in from last week's swing low into 180.90, and bidders will be looking to gain enough momentum to make a break for the 200-hour Simple Moving Average (SMA) near 181.90.

The downside is starting to open up wide, and short-side pressure is mounting to take the GBP/JPY into September's lows near 180.80.

On the daily candlesticks, the GBP/JPY continues to lose its nerve, waffling from August's swing high above 186.00 to trade on the bearish side of the 34-day Exponential Moving Average (EMA) currently settling into the 183.00 handle.

With technical support coming from the 100-day SMA just south of the 181.00 handle, GBP traders will have their work cut out for them if they're going to halt a long-term decline to the 200-day SMA far below current price action at 172.00.

GBP/JPY hourly chart

GBP/JPY daily chart

GBP/JPY technical levels

Federal Reserve (Fed) Vice Chair for Supervision Michael Barr said on Monday that the central bank should proceed cautiously with monetary policy. According to him, the most crucial question is not how much higher interest rates will go but rather how long they will remain at a sufficiently restrictive level. 

Barr explained that the labor market is tight but is gradually achieving a better balance between worker supply and demand. Regarding the economic outlook, Barr expressed optimism that the Fed can control inflation without causing a significant deterioration in the jobs market.

Market reaction

The US Dollar Index is up 0.60%, trading at 106.80, on its way to its highest daily close since November. 

• The Kiwi is following the broader market into the downside against the US Dollar.
• Risk aversion is the name of the game for Monday as the DXY extends its climb.
• Kiwi traders will be looking ahead to Wednesday’s rate call from the RBNZ.

The NZD/USD is backsliding for Monday, falling around fifty pips and facing rejection from the 0.6000 major handle as risk-off flows drive the Greenback (USD) higher across the board.

The Kiwi peaked last Friday at 0.6050 before getting knocked back as market risk appetite evaporates, extending risk asset declines against the US Dollar. Fears of a global recession, hawkish comments from Federal Reserve (Fed) officials, and climbing US Treasury yields are all intertwining to send the Greenback higher across the board.

NZD traders will be looking ahead to Wednesday’s latest rate call and monetary policy statement from the Reserve Bank of New Zealand (RBNZ); with the RBNZ broadly expected to hold rates steady at 5.5%, traders will be focusing on the RBNZ’s statement to glean any hints about the future of the rate hike cycle moving forward.

NZD/USD technical outlook

The Kiwi's decline for Monday sees the NZD/USD pair slipping into the bearish side of the 200-hour Simple Moving Average (SMA). The pair is down over a hundred pips from Friday's top at 0.6050, leaving the NZD/USD down 1.7% and set for a bearish tip into last week's bottom near 0.5900.

Daily candlesticks have the NZD/USD hung up on the 34-day Exponential Moving Average, with technical resistance from the 100-day SMA near 0.6075.

A sustained bear run will see the pair set to challenge 2023's lows of 0.5510, while a bullish reversal will need to overcome the 200-day SMA currently parked just below the 0.6200 handle.

NZD/USD daily chart

NZD/USD technical levels

• EUR/USD drops to 1.0500, down 0.69%, as rising US Treasury bond yields and expectations of additional Fed tightening weigh heavily on the pair.
• Contrasting economic outlooks with improving US business activity and decelerating Eurozone factory activity contribute to the Euro’s decline.
• The EUR/USD is bearish biased, with significant support at 1.0500 and potential further losses towards 1.0290 and 1.0222 if declines continue.

The Euro (EUR) losses traction gains the US Dollar (USD) in early morning trading during the North American session, after hitting a daily high of 1.0592 but failing to crack the 1.0600 mark, exacerbated its fall, with the EUR/USD approaching towards the 1.0400 figure, for the third time in the last couple of week. At the time of writing, the major trades at 1.0495,, down 0.77%.

Euro struggles against the US Dollar as stronger US economic data, climbing US Treasury yields, and a hawkish Federal Reserve overshadow weakening Eurozone factory activity

Market participant's mood remains mixed, with US equities registering losses, except for the Nasdaq 100. The latest round of US economic data showed that business activity is improving, as shown by two reports from S&P Global and the Institute for Supply Management (ISM). The S&P Global Manufacturing PMI rose by 49.8, above 48 expected for September, while the ISM Manufacturing PMI, the most sought by economists, witnessed an improvement from 47.9 to 49.8, exceeding forecasts of 47.8.

In the meantime, the latest round of Federal Reserve (Fed) officials crossing newswires remain hawkish, led by Michelle Bowman, who said inflation is too high, and the current jump in energy prices could reverse “some of the recent progress on lowering inflation.”  Bowman added she favors another hike at a future meeting. Fed Chair Jerome Powell recently stated the economy is coming through the other side of the pandemic. and added the Fed is focused on achieving price stability.

Across the pond, Eurozone factory activity continued to decelerate, as revealed by HCOB Manufacturing PMIs for September, coming as expected at 43.4 but below August’s 43.5. At the same time, Germany, the largest economy in the bloc, appears to have bottomed after showing signs of deterioration in manufacturing activity, as its PMI came at 39.6, below forecasts of 39.8 but rose slightly above August’s 39.1.

The EUR/USD continued to drop sharply as US Treasury bond yields climbed more than 10 basis points, as shown by the 10-year benchmark note yield at 4.693%. Although advancing, the 10-year German bund yield remains heavy compared to the US one, just six bps up at 2.918%. Additionally, expectations for additional tightening by the Fed, while the European Central Bank (ECB) is seen halting its tightening cycle, could trigger further downside on the major.

EUR/USD Price Analysis: Technical outlook

The daily chart portrays the pair as downward biased, further confirmed by a “death-cross,” with the 50-day moving average (DMA) crossing below the 200-DMA. The Relative Strength Index (RSI) dives further into oversold territory but shy of reaching the lowest level hit on September 27, which could pave the way for EUR/USD’s additional losses. First, support is seen at 1.0500, followed by the November 30, 2022, daily low of 1.0290, and the November 21, 2022, swing low of 1.0222. the pair could shift slightly neutral if it reclaims 1.0600.

EUR/USD Price Action - Daily chart

• Canadian Dollar turns bearish as broader markets go risk-off.
• Canada Manufacturing PMI declined on Monday to 47.5.
• Rest of the week to be determined by US Dollar flows heading into another NFP Friday.

The Canadian Dollar (CAD) has fallen 0.70% against the US Dollar (USD) in Monday trading as broader market risk appetite turns south and jittery investors pile into the USD. The USD/CAD is rounding into the midpoint of the US trading session just south of 1.3680.

The Canadian Manufacturing Purchasing Manager Index (PMI) declined from 48 to 47.5 on Monday, further draining support for the Loonie and helping to prop up the USD/CAD pair even higher. Next up for the CAD on the economic calendar will be Thursday’s Ivey PMI for September, which is forecast to decline from 53.5 to 50.8.

Daily Digest Market Movers: Canadian Dollar declines in risk-off markets

• Risk appetite has soured further on Monday, driving the US Dollar Index (DXY) higher across the entire market.
• The CAD is slipping as Greenback gains couple neatly with a backslide in Crude Oil prices, kicking the legs out from underneath CAD support.
• Oil-dependent CAD is finding little support in markets as Canadian PMIs continue to worsen, exacerbating concerns about a slowdown in the Canadian domestic economy.
• Market flows and US data are set to drive the USD/CAD into the mid-week with little of note on the economic calendar for CAD traders until Thursday’s Ivey PMI.
• Canadian labor data on Friday is set to be overshadowed by the US Non-Farm Payrolls (NFP).
• DXY flows are being guided by US Treasury yields, and currency traders will want to keep an eye on bond markets to determine directional shifts in the US Dollar.
• USD/CAD traders will also want to watch Wednesday’s US ISM PMI figures on Wednesday

Technical analysis: Canadian Dollar continues to backslide against the US Dollar, USD/CAD seeking 1.3700

The USD/CAD pair is trading into 1.3670 on Monday, climbing over a hundred pips from the day’s bottom and extending the topside run that started from Friday’s lows near 1.3420.

The USD/CAD has climbed over 1.8% in two trading days and is poised for further gains as the pair shakes loose from recent bearish momentum.

September’s swing low into the 1.3400 handle saw technical support arrest declines and spark a reversal from the 200-day Simple Moving Average (SMA) currently sitting on the high side of 1.3450, and the US Dollar’s broad-market rebound has sent the USD/CAD pair back into September’s peaks near 1.3700.

USD bulls will be looking to gather enough momentum to make a decisive break of 1.3700, while CAD bidders will be looking for a way to send the pair back into the 34-day Exponential Moving Average (EMA) just north of 1.3500.

• Mexican Peso erases last Friday’s 0.70% gains on risk aversion.
• Mexico’s Consumer Price Index (CPI) for the 12 months to September will be the highlight of the economic agenda for the next week.
• USD/MXN is forming a bullish-engulfing candlestick chart pattern, which could exacerbate a rally to the 200-day SMA.

The Mexican Peso (MXN) weakened versus the US Dollar (USD) during the North American session on Monday due to some risk aversion, with market participants awaiting a speech by the US Federal Reserve (Fed) Chairman Jerome Powell later in the day. Although there was a slight improvement in Mexico’s Business Confidence, the USD/MXN reclaimed the 17.50 area, posting gains of 0.70%.

Business Confidence in Mexico rose slightly to 53.8 in September from 53.7 in August, revealed the Instituto Nacional de Estadistica Geografia e Informatica (INEGI). The data showed optimism about investment prospects, Mexico’s future economic outlook, and regarding the company's current financial situation. However, there’s some caution amongst economists as Mexico’s financial system stability committee said the economy could slow down due to a complex external scenario, although domestic demand is expected to underpin the economy.

Daily Digest Market Movers: Mexican Peso rally loses steam as the USD/MXN climbs back above 17.50

• The Bank of Mexico (Banxico) held rates at 11.25% and revised its inflation projections from 3.5% to 3.87% for 2024, above the central bank’s 3% target (plus or minus 1%).
• Banxico’s Government Board highlighted Mexico’s economic resilience and the strong labor market as the main drivers to keep inflation at the current interest rate level.
• BBVA updated Mexico’s economic growth forecast, with the Gross Domestic Product rising by 3.2% from 2.4% in 2023 to 2.6% from 1.8% in 2024.
• Mexico posted an August MXN 38,944.3 million deficit.
• Mexico’s Unemployment Rate edged lower from 3.1% in July to 3.0% in August, according to the National Statistics Agency (INEGI).
• September’s first-half inflation in Mexico was 4.44%, down from 4.64% in August, according to INEGI.
• Being an emerging market currency, the Mexican Peso weakens amid risk aversion. 
• The drop in Oil prices weighs on the Mexican currency, as its economy relies on crude exports.
• Moody’s rating agency warned the fiscal strategy of the Mexican government in 2024 must be credible after the June elections in defining the country’s stable outlook.
• In July, Moody’s lowered Mexico's rating to “Baa2” with a “stable” outlook but warned of fiscal pressures for the next government due to the 2024 economic budget.

Technical Analysis: Mexican Peso, could extends its losses past the 200-day SMA

The Mexican Peso (MXN) is erasing last Friday’s gains, with the USD/MXN beginning to form a bullish-engulfing candle pattern after the pair bottomed at around 17.41. The emerging market currency could continue its depreciation if the exotic pair manages to break resistance at September’s 27 high at 17.81, immediately followed by the 200-day Simple Moving Average (SMA) at 17.82. Once those two areas are cleared, the USD/MXN next stop could be 18.00.

The US Dollar Index closed September and Q3 off highs after profit-taking on Friday. Economists at Société Générale analyze DXY outlook. 

Dollar dips look set to continue to attract buying interest 

The bond market will go on dominating currency trends, Kit Juckes, Chief Global FX Strategist at Société Générale, reports.

Can USD/JPY be turned around without JGB yields rising?

EUR/USD resumes the downside to start the last quarter of the year. Economists at Société Générale analyze the pair’s outlook outlook. 

Seasonality bearish in October

See – EUR/USD: The 1.0490/1.0500 area could easily be retested this week – ING

It will likely be appropriate to raise the policy rate further and hold it at restrictive levels for some time, Federal Reserve Governor Michelle Bowman said on Monday, as reported by Reuters.

Key takeaways

"Inflation remains too high."

"Seeing risk that high energy prices could reverse some of the recent progress on lowering inflation."

"Frequency and scope of recent data revisions complicates task of projecting how economy will evolve."

"Expecting progress on inflation to be slow given the current level of monetary policy restraint."

"Willing to support rate increase at a future meeting if data indicates progress on inflation has stalled or is too slow to return to it to 2% in a timely way."

"Regulators seem to be engaging in heavy-handed supervision of banks, should consider if approach is appropriate."

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen rising 0.55% on the day at 106.75.

• Silver price dives perpendicularly to near $21.50 amid strength in the US Dollar.
• The US Dollar eyes more upside as the US Manufacturing PMI outperformed expectations but remained below the 50.0 threshold.
• Silver price delivers a breakdown of the Head and Shoulder pattern, which results in a vertical sell-off.

Silver price (XAG/USD) faces an immense sell-off as the United States Institute of Supply Management (ISM) reported a higher-than-anticipated Manufacturing PMI for September. The economic data landed at 49.0, much higher than estimates and the former release of 47.7 and 47.6 respectively.

In spite of upbeat factory activities, the Manufacturing PMI remained below the 50.0 threshold for the 10th time in a row. The New Orders Index for the US factory also outperformed expectations and jumped to 49.2 from the August reading of 46.8.

The US Dollar Index (DXY) recovered its entire gains, and jumped to near 106.80, as the market mood dampened after weak Caixin Manufacturing PMI data for September. China’s factory activities missed estimates by a wide margin but managed to remain above the 50.0 threshold. The economic data landed at 50.6 lower than estimates and the August reading of 51.2 and 51.0 respectively.

The US Dollar is expected to remain volatile ahead of the speech from Federal Reserve (Fed) chair Jerome Powell. Investors anticipate a hawkish interest rate guidance as the United States economy is resilient. The US economy is outperforming other developed economies due to upbeat labor market conditions, robust consumer spending, and strong wage growth.

Silver technical analysis

Silver price deliver a breakdown of the Head and Shoulder chart pattern on a daily scale, which results in a vertical sell-off. The white metal breaks sharply below the neckline of the aforementioned chart pattern plotted from June 23 low at $22.11. The declining 20-day Exponential Moving Average (EMA) at around $23.00 indicates that the short-term trend has turned bearish.

The Relative Strength Index (RSI) (14) slips into the bearish range of 20.00-40.00, which warrants more downside.

Silver daily chart

The Reserve Bank of Australia (RBA) will announce its next Interest Rate Decision on Tuesday, October 3 at 03:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of 10 major banks regarding the upcoming central bank's decision.

The RBA is expected to keep rates steady at 4.10%. This will be new Governor Bullock’s first meeting. At the last meeting, the bank kept rates steady at 4.10% but warned that further tightening may be required.

Standard Chartered

ANZ

TDS

Westpac

ING

UOB

Citi

Wells Fargo

The Pound moves lower after the meek attempt to turn the tide last Thursday and Friday into month-end. Economists at Société Générale analyze GBP/USD outlook. 

CFTC longs collapse to 6.9% of OI last week from 17.6%

• EUR/USD resumes the downside and retargets the 1.0500 zone.
• The September low at 1.0490 comes next for EUR-bears.

EUR/USD leaves behind a two-day recovery and shifts its attention to the downside and the 1.0500 neighbourhood on Monday.

If bears remain in control, another visit to the September low of 1.0488 (September 27) should start emerging on the horizon just ahead of the 2023 low of 1.0481 (January 6).

Meanwhile, further losses remain on the table as long as the pair navigates the area below the key 200-day SMA, today at 1.0826.

EUR/USD daily chart

Economists at HSBC expect the CAD to strengthen further against the USD over the near term.

CAD could capitalise on high Oil prices

• DXY adds to Friday’s gains and approaches 106.70.
• Next on the upside comes the yearly high past 106.80.

DXY’s upside momentum gathers extra pace and trades at shouting distance from the area of 2023 peaks around 106.70 at the beginning of the week.

In the meantime, extra gains appear likely in the dollar for the time being. Once the index clears the YTD high of 106.83 (September 27), it could encourage bulls to challenge the weekly top at 107.19 (November 30, 2022) prior to another weekly peak at 107.99 (November 21 2022).

In the meantime, while above the key 200-day SMA, today at 103.10, the outlook for the index is expected to remain constructive.

DXY daily chart

• EUR/JPY reverses some of the recent weakness.
• Immediately to the upside aligns the monthly high of 158.65.

EUR/JPY comes under some mild downside pressure and reverses two consecutive sessions of gains on Monday.

In the meantime, the cross remains stuck within the consolidative range and the breakout of it exposes a visit to the so far monthly high of 158.65 (September 13) prior to the 2023 top at 159.76 (August 30), which precedes the key round level at 160.00.

So far, the longer term positive outlook for the cross appears favoured while above the 200-day SMA, today at 149.57.

EUR/JPY daily chart

• Manufacturing sector's economic activity continued to contract in September.
• USD/CAD continues to edge higher toward 1.3650 after the data.

The business activity in Canada's manufacturing sector continued to contract in September, with the S&P Global Manufacturing PMI declining to 47.5 from 48 in August.

Commenting on the survey's findings, "in line with the global industrial downturn, the Canadian manufacturing sector continued to experience lacklustre performance during September,"  said Paul Smith, Economics Director at S&P Global Market Intelligence. "Output and new orders both fell to steeper degrees amid evidence of slow market demand. Price levels remain a problem for many clients, especially as Canadian manufacturers continued to hike their charges to a solid degree."

Market reaction

USD/CAD continued to edge higher after this data and the pair was last seen gaining 0.45% on the day at 1.3637.

USD is a touch firmer, alongside higher UST yields. Economists at OCBC Bank analyze Greenback’s outlook.

Potential for USD bull exhaustion after 11 consecutive weeks of rise

• AUD/USD drops to near 0.6400 as Caixin Manufacturing PMI remains weaker than anticipated.
• The US Dollar Index extends its recovery to near 106.60 as the market mood remains downbeat.
• AUD/USD trades in a 0.6363-0.6522 range from the past one-and-a-half months.

The AUD/USD pair extended downside to near the round-level support of 0.6400 in the early New York session. The Aussie asset faces selling pressure as Caixin Manufacturing PMI remained weaker than anticipated.

Caixin Manufacturing PMI for September failed to match expectations but managed to remain above the 50.0 threshold. A figure below the 50.0 threshold is considered a contraction in economic activities. The economic data landed at 50.6 lower than estimates and the August reading of 51.2 and 51.0 respectively.

The US Dollar Index (DXY) extends its recovery to near 106.60 as the market mood remains downbeat after China’s weak factory activity data. Meanwhile, investors await the speech from Federal Reserve (Fed) chair Jerome Powell. Fed Powell would provide cues about the likely monetary policy action in November.

AUD/USD trades in a 0.6363-0.6522 range from the past one-and-a-half months. The Aussie asset is declining towards the lower portion of the consolidation. The 200-period Exponential Moving Average (EMA) at 0.6450 is considered a barricade for the Australian Dollar bulls.

The Relative Strength Index (RSI) (14) skids into the bearish range of 20.00-40.000, which warrants more downside.

A fresh downside would appear if the Aussie asset will drop below August 17 low around 0.6360. This would expose the asset to the round-level support of 0.6300 followed by 03 November 2022 low at 0.6272.

In an alternate scenario, a decisive break above August 15 high around 0.6522 will drive the asset to August 9 high at 0.6571. Breach of the latter will drive the asset towards August 10 high at 0.6616.

AUD/USD four-hour chart

The New Zealand Dollar has been one of the best performing G10 currencies in September. Economists at MUFG Bank analyze Kiwi’s outlook ahead of RBNZ’s Monetary Policy Review.

RBNZ to provide a more hawkish signal

See: NZD/USD has reasonable poise heading into this week’s RBNZ – ANZ

USD/JPY is trading at a marginal new high near 149.80. Economists at Rabobank analyze the pair’s outlook.

Intervention a matter of when USD/JPY cross 150

• USD/CAD climbs to near 1.3600 as the US Dollar resumes its upside journey.
• Investors await the Fed Powell’s speech and US Manufacturing PMI data.
• Global slowdown risks elevated further as Caixin Manufacturing PMI failed to match expectations.

The USD/CAD pair moves vertically to near the round-level resistance of 1.3600 in the late European session. The Loonie asset strengthens as the US Dollar concludes its correction and resumes its upside journey to near fresh 11-month high around 106.80.

S&P500 futures added some losses in the London session, portraying further strengthening of the risk-off theme. US equities are expected to remain cautious despite US government managing to ditch a government shutdown in a last-minute deal. The agreement between the US House and Senate approved a funding bill until November 17.

Meanwhile, investors await the speech from Federal Reserve (Fed) chair Jerome Powell, which will shape expectations about the interest rate outlook. As per the CME Fedwatch tool, investors price in that interest rates will remain steady at 5.25%-5.50% at the November monetary policy. Meanwhile, chances for interest rates remaining unchanged at 5.25%-5.50% until the end of 2023 dropped to 56%.

Apart from that, the focus will be on the US Institute of Supply Management (ISM) Manufacturing PMI, which will be published at 14:00 GMT. The US factory activities are expected to remain below the 50.0 threshold as US firms are operating at a lower capacity due to a deteriorating demand environment. The economic data is seen nominally by 10 basis points (bps) to 47.7.

The US Dollar Index (DXY) climbs above 106.50 after concluding the correcting move as the market mood remains downbeat. The global slowdown risks elevated further as Caixin Manufacturing's PMI failed to match expectations.

On the Canadian Dollar front, investors await the employment data for September, which will be released later this week. The economic data will shape upcoming monetary policy meetings.

USD regains momentum in quiet trade. Shaun Osborne, Chief FX Strategist at Scotiabank, analyzes the Grenback’s outlook. 

Gains in the US Dollar Index look hugely overextended

See: DXY to stay bid in the 106-107 range this week – ING

Extra gains in USD/IDR seems favoured in the short-term horizon, argues Markets Strategist Quek Ser Leang UOB Group.

Key Quotes

GBP/USD slips back after late week rebound stalls. Economists at Scotiabank analyze the pair's outlook. 

Bearish momentum is strong

See – EUR/GBP: A 0.8600-0.8700 range may be the story for the majority of October – ING

USD/CAD moves sharply back to the 1.36 area. Economists at Scotiabank analyze the pair's outlook. 

Support aligns at 1.3520/1.3525

• Traders quickly lose the risk-on sentiment from early Monday with US government shutdown avoided over the weekend.
• Focal point this week will be right at the end with US Nonfarm Payrolls on Friday.  
• US Dollar Index’s 11th consecutive weekly gain followed by Monday continuing its trend. 

The US Dollar (USD) did not get much time to enjoy the party over its eleventh straight week of gains. Last week was a close call  as the US Dollar Index (DXY) was able to lock in its gains only in the last few trading hours. Although the US government shutdown might be solved for now, with the US Congress pushing the budget showdown to November, the can has merely been kicked down the road for roughly six weeks.

On the data front, the current stance of the US Federal Reserve got confirmed yet again with the Personal Consumption Expenditures (PCE) index. Although headline PCE saw energy adding to inflation, the Core numbers pointed to further abating inflation. The question for this Monday will be how the Purchasing Managers Indices (PMI) will behave, as a further decline into contraction might start to hurt. 

Daily digest: US Dollar faces chunky week

• A packed economic calendar starts the week off with the S&P Global Manufacturing Purchase Managers Index for September at 13:45 GMT. The number should remain steady, though still in contraction, near 48.9.
• At 14:00 GMT the Institute of Supply Management (ISM) is due to print its monthly numbers for September: Employment is expected to drop from 48.5 to 48.3. New Orders hit 46.8, though no forecast is available this time. The Purchasing Managers Index (PMI) is expected to stay in contraction from 47.6 to 47.7. The Prices Paid element is expected to tick up a bit from 48.4 to 48.6.
• Markets are expecting to hear from Federal Reserve Chairman Jerome Powell and Patrick Harker from the Philadelphia Fed near 15:00 GMT.
• The US Treasury is scheduled to auction a 3-month and 6-month bill at 15:00 and 15:30 GMT.
• More Fed speakers round up this eventful Monday with John Williams from New York at 17:30 GMT and Loretta Mester from Cleveland at 23:30 GMT. 
• Equities are slightly in the red in Japan with both the Topix and the Nikkei 225 dropping, less than 0.50%. European equities are ticking up, and US Futures are pointing to a firm green opening later this Monday.
• The CME Group FedWatch Tool shows that markets are pricing in a 69.2 % chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. The sudden drop from the previous 81.7% comes with the print in PCE where a few elements saw inflation ticking up again. 
• The benchmark 10-year US Treasury yield is lower at 4.60%, a bit in the middle of the range from last week between 4.50% and 4.68%. 

US Dollar Index technical analysis: Gearing up for volatility

The US Dollar Index booked its eleventh straight weekly gain on Friday. There isn’t much reason for champagne and festivities though as it was a very close call with the Greenback starting to wobble on its pedestal. With a chunky batch of data set to come out this week, including the US jobs report on Friday as cherry on the cake, the DXY might see its rally come to an end. 

The US Dollar Index opened around 106.21, though the overheated Relative Strength Index (RSI) is acting up again and heads back into an overbought regime. Traders that want to hit a new 52-week high need to be aware that a lot of road needs to be covered toward 114.78. Rather look for 107.19, the high of November 30, 2022,  as the next profit target on the upside. 

On the downside, the recent resistance at 105.88 should be seen as first support. Still, that barrier has just been broken to the upside, so it isn’t likely to be strong. Instead, look for 105.12 to do the trick and keep the DXY above 105.00.

EUR/USD starts Q4 on the defensive.  Economists at Scotiabank analyze the pair's outlook. 

Support 1.0490/1.0500, Resistance 1.0600/1.0610

• Oil (WTI) heads higher on Monday, halting the sell-off at the end of last week.
• The US Dollar is flat and under a bit of pressure from a risk-on market mood.
• The door is open towards $94 with more headlines underway in the wake of the Adipec meeting.

Oil prices are recovering from the firm decline registered on Thursday and Friday. Crude briefly touched $94 before selling off nearly 4.5%. Energy ministers and the Oil industry are gathering for the biggest energy conference in the Middle East, which could become a key catalyst for Oil prices throughout the week.

The US Dollar (USD) did not get much time to enjoy the party over its eleventh straight week of gains. It was a close call last week, with the US Dollar Index (DXY) locking in gains in the last few trading hours. The US government shutdown might be solved for now, but the US Congress pushed the budget showdown to November, kicking the can down the road for roughly six weeks as in mid-November the US Treasury will once again run out of funds.

Crude Oil (WTI) trades at $90.26 per barrel, and Brent Oil trades at $92.17 per barrel at the time of writing. 

Oil news and market movers

• The annual Adipec summit is to take place in Abu Dhabi this week, with all important ministers and Oil producers in the Middle-East joining. 
• In the wake of the start of the Adipec Summit, the United Arab Emirates (UAE) energy minister  Suhail al Mazrouei said that OPEC+ has the right policy in place to deal with current market conditions.
• The crude Oil pipeline running from the Kurdistan region in Iraq to the Mediterranean coast of Turkey will resume operations this week, Turkish Energy Minister Alparslan Bayraktar said.
• Eni, the Italian energy company, and its CEO Claudio Descalzi said in a Bloomberg interview that more OPEC+ production cuts are highly unlikely and that the worst is over. 

Oil Technical Analysis: $94 emerges as nearby target

Oil prices are recovering after the firm price decline  recorded on Thursday and Friday. The fact that the sell-off gets halted that quickly means that traders and market participants are still buying the dip. This should see Crude  pushing back up to $94 soon. 

On the upside, the double top from October and November of last year at $93.12 remains the level to beat. Although it got breached on Thursday, the level never got a daily close above it. Should $93.12 be taken out, look for $97.11, the high of August 2022.

On the downside, a new floor is formed near $88 with the high of September 5 and 11 underpinning the current price action. Proof of this already exists with the dip of September 13 and September 21, which reversed ahead of $88. Should $88 break , the peak of August 10 needs to be enough to catch the dip near $84.20. 

US WTI Crude (Daily Chart)

The Mexican Peso weakened significantly last week. Economists at  Société Générale analyze USD/MXN outlook.

A large downside is not envisaged

Further upside appears on the cards for USD/MYR in the near term, notes Markets Strategist Quek Ser Leang UOB Group.

Key Quotes

Why has the Euro been so weak for so long? Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, analyzes the shared currency outlook.

Europeans are getting poorer on a permanent basis

• AUD/JPY falls back from 96.00 as investors remain cautious ahead of RBA policy.
• The RBA is expected to maintain a neutral stance on interest rates along with hawkish guidance.
• Caixin Manufacturing PMI missed estimates but remained below the 50.0 threshold in September.

The AUD/JPY pair faces selling pressure after a pullback move to near 96.00 in the European session. The risk barometer found offers as investors shift focus to the interest rate decision by the Reserve Bank of Australia (RBA), which will be announced on Tuesday.

According to a Reuters poll, the RBA is expected to keep interest rates unchanged at 4.10% but one more interest rate hike is expected by the year-end.

An interest rate hike of 25 basis points (bps) is expected in the remainder of 2023 as wages are expected to spike further after a large mandated increase in the minimum and award wages. Meanwhile, the monthly Consumer Price Index (CPI) in Australia accelerated to 5.2% in August from a 4.9% reading from July due to a rise in energy prices.

The impact of the rise in gasoline prices is seen as limited for consumer inflation but inflation above 5% would not be a cakewalk for RBA policymakers.

The Australian Dollar struggles for a firm footing as Caixin Manufacturing PMI for September missed estimates by a wide margin but managed to remain above the 50.0 threshold, released on the weekend. The economic data landed at 50.6 lower than estimates and the August reading of 51.2 and 51.0 respectively despite supportive measures from expansionary monetary policy by the People’s Bank of China (PBoC). The Australian Dollar, being a proxy for China’s economic growth, faces pressure against the Japanese Yen.

On the Japanese Yen front, risks of a stealth intervention by the Bank of Japan (BoJ) have elevated as Japan’s Chief Cabinet Secretary Hirokazu Matsuno reiterated on Monday, that he was “closely watching FX moves with a high sense of urgency.” He added that it is “important for currencies to move in a stable manner reflecting fundamentals.”

USD has corrected weaker and could extend further over the very short-term, economists at MUFG Bank report.

Scope for Dollar strength to remerge

See: USD unlikely to soften by more than 0.5% despite US shutdown averted – TDS

• Gold price refreshes six-month low near $1,840.00 as US Treasury yields extend upside.
• A soft US core PCE report has trimmed consumer inflation expectations.
• Fed’s Williams sees interest rates near their peak as the labor market imbalance declines.

Gold price (XAU/USD) continues its losing spell despite the fact that Friday’s soft core Personal Consumption Expenditures (PCE) inflation vanishes odds of a hawkish interest rate decision from the Federal Reserve (Fed) in the November monetary policy meeting. The precious metal struggles for a firm footing as Treasury yields continue their bullish run as the Fed is expected to stick to the ‘higher for longer’ stance in interest rates.

The US Dollar struggles to recapture the 11-month high near 106.80 as investors turn cautious ahead of the US Institute for Supply Management (ISM) Manufacturing PMI data for September, which will be published at 14:00 GMT. US factory activity has been contracting for the last 10 months and a continuation in the contracting spell is widely anticipated.

Daily Digest Market Movers: Gold price extends downside despite soft US PCE report

• Gold price continues a five-day losing spell to near $1,840.00 in the context of ‘higher for longer’ interest rates by the Federal Reserve to tame the so-called ‘last leg’ of inflation.
• The precious metal also faces pressure from higher US Treasury yields, which have jumped to near 4.63% as Fed policymakers still favor more interest rates to ensure price stability.
• New York Fed Bank President John C. Williams said on the weekend that the Fed is at or near peak levels of interest rates. Williams sees signs of inflation pressures waning and labor market imbalance diminishing.
• The yellow metal failed to find bids on Friday despite a soft PCE report, which is majorly used by the Fed for policy decision-making.
• Monthly Core PCE grew at a nominal pace of 0.1%, slower than expectations and the former pace of 0.2%. The annual core PCE data decelerated to 3.9% as expected against July's reading of 4.3%. The headline PCE expanded at a higher pace of 0.4% against July's reading of 0.2% but slower than expectations of 0.5%. On an annual basis, PCE inflation accelerated to 3.5% as expected due to rising energy prices.
• A soft core PCE inflation report has decreased the chances of one more interest rate hike from the Fed before the year ends. As per the CME Group Fedwatch tool, investors price in that interest rates will remain steady at 5.25%-5.50% at the November monetary policy. Meanwhile, chances for interest rates remaining unchanged at 5.25%-5.50% until the end of 2023 dropped to 56%.
• A slowdown in consumer spending on core goods has eased consumer inflation expectations, making Fed policymakers comfortable in holding interest rates.
• On a broader note, the US economy is resilient due to a stable labor demand, upbeat wage growth, and robust retail demand, which would keep hopes for a rebound in inflation intact and Gold price on the back foot.
• While the US economy is performing well on grounds of the labor market and retail demand, the country’s manufacturing sector is still struggling, according to PMI data..
• As per the estimates, the US Manufacturing PMI is seen improving to 47.7 from August’s reading of 47.6, below the 50.0 threshold which signals a contraction in activity. This would be the 11th month of contraction in a row.
• The market mood improves as the US government manages to ditch a government shutdown in a last-minute deal. The agreement between the US House and Senate approved a funding bill until November 17.
• China’s new home prices rose slightly after declining for four months as home-builders ramped up property selling, capitalizing on supportive measures from China’s government and expansionary monetary policy by the People’s Bank of China (PBoC).
• Improved market sentiment is restricting recovery in the US Dollar index (DXY). The USD Index aims to stabilize above the 106.00 resistance as global slowdown fears persist.

Technical Analysis: Gold price eyes more downside to near $1,800

Gold price weakens after a bearish crossover by the 20-day and 200-day Exponential Moving Averages (EMAs). The precious metal sticks to the fresh six-month low near $1,840.00 and is expected to extend its downside journey towards the crucial support at $1,800.00. Momentum oscillators shift into a bearish trajectory, warranting more downside.

Economists at ING analyze EUR/GBP outlook.

Bank of England survey to help cement expectations for a November pause

In the opinion of Markets Strategist Quek Ser Leang UOB Group, USD/THB could still advance further and surpass the 37.00 hurdle in the near term.

Key Quotes

• GBP/JPY approaches 184.00 as the risk-aversion theme eases.
• UK’s Manufacturing PMI remains below the 50.0 threshold for the 14th time in a row.
• GBP/JPY trades in a Rising Channel pattern in which each pullback is considered a buying opportunity.

The GBP/JPY pair falls back after the S&P Global reported a nominal improvement in the United Kingdom’s Manufacturing PMI for September. The economic data landed at 44.3, marginally higher than expectations and the former release of 44.2. The Manufacturing PMI remains below the 50.0 threshold for the 14th time in a row as firms continue to operate at lower capacity due to a deteriorating demand environment.

Investors await the UK Finance Minister Jeremy Hunt’s speech at the annual Conservative Party conference. Jeremy Hunt is expected to raise minimum pay wages at least by 11 pounds to ease households’ burden against stubborn inflation.

GBP/JPY trades in a Rising Channel chart pattern on a four-hour chart in which each pullback is considered a buying opportunity by the market participants. The cross rebounds from below 181.00 and climbs above the 20-period Exponential Moving Average (EMA), which trades around 182.20.

The Relative Strength Index (RSI) (14) aims to shift into the bullish range of 60.00-80.00. If the RSI (14) manages to do so, a bullish impulse will get triggered.

A recovery move above September 19 high at 183.50 would drive the asset toward September 5 high at 185.75, followed by August 22 high at 186.77.

On the flip side, a breakdown below September 21 low at 180.82 would drag the asset further toward July 20 low at 179.74 and July 26 low at 176.32.

GBP/JPY four-hour chart

Economists at MUFG Bank analyze EUR outlook after sharply weaker Eurozone inflation data released last week.

Weaker inflation data will reinforce expectations for no further hikes from the ECB

• EUR/GBP continues to gain due to the positive sentiment surrounding the BoE to manage the impact of higher interest rates.
• Investors seek further cues on the ECB’s stance on addressing economic challenges.
• Eurozone’s PMI and Unemployment Rate remained unchanged.
• UK S&P Global/CIPS Manufacturing PMI for September surpassed the expected reading in September.

EUR/GBP continues to move on the upward path for the third successive day, trading higher around 0.8670 during the European trading hours on Monday. This upward movement is supported by investor expectations of an improvement in the United Kingdom's (UK) ability to navigate the consequences of higher interest rates set by the Bank of England (BoE).

The BoE, after raising rates to 5.25%, has temporarily halted its policy-tightening measures to protect the economy from further slowdown. The anticipation of the UK's learning curve in managing the impact of elevated interest rates is contributing to the positive momentum in the EUR/GBP pair.

Anticipate heightened volatility in the Pound Sterling (GBP) as UK Finance Minister Jeremy Hunt is expected to announce an increase in the minimum wage while dismissing tax cuts at the annual Conservative Party conference.

UK S&P Global/CIPS Manufacturing PMI for September improved to 44.3 from the previous 44.2, which was expected to remain consistent.

On the Euro side, speculation prevails in the market about a potential stalemate in policy changes at the European Central Bank (ECB). This is despite inflation levels exceeding the bank's objective and increasing concerns about the possibility of a recession.

Traders and investors are closely monitoring any indications or statements from the ECB for insights into the central bank's stance on addressing current economic challenges.

Germany’s HCOB Manufacturing PMI reduced to 39.6 from the previous reading of 39.8, which was expected to remain unchanged in September.

The Eurozone’s PMI and Unemployment Rate remained unchanged at 43.4 and 6.4% respectively, as anticipated.

The upcoming week promises a series of speeches from European Central Bank (ECB) officials, with particular attention likely focused on President Christine Lagarde's address at a monetary policy conference scheduled for Wednesday.

Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group note that further downside looks likely once USD/CNH breaches the 7.2800 level.

Key Quotes

• NZD/USD struggles to gain traction and is influenced by a combination of diverging factors.
• The risk-on impulse caps gains for the safe-haven USD and benefits the risk-sensitive Kiwi.
• Bets for one more rate hike by the Fed in 2023 act as a tailwind for the buck and keep a lid.

The NZD/USD pair lacks any firm intraday direction on Monday and seesaws between tepid gains/minor losses through the first half of the European session. Spot prices currently trade below the 0.6000 psychological mark, though remain well within the striking distance of a nearly two-month high touched on Friday.

A generally positive tone around the equity markets is seen undermining the US Dollar's (USD) relative safe-haven status and benefitting the risk-sensitive Kiwi. The official Chinese PMIs released over the weekend showed that business activity in the manufacturing sector recorded growth for the first time in six months and the services sector remained in expansion territory during September. This, along with the passage of a stopgap funding bill to avert a US government shutdown, overshadows a slight disappointment from the private Chinese PMI prints and boosts investors' confidence.

That said, a fresh leg up in the US Treasury bond yields, bolstered by the prospects for further policy tightening by the Federal Reserve (Fed), acts as a tailwind for the Greenback and caps the upside for the NZD/USD pair. Investors seem convinced that the US central bank will stick to its hawkish stance and have been pricing in the possibility of one more lift-off by the year-end. Even the US PCE Price Index data released on Friday, which indicated that the underlying inflation moderated in August, did little to change the market view that the Fed will keep rates interest higher for longer.

The aforementioned mixed fundamental backdrops hold back traders from placing aggressive directional bets around the NZD/USD pair and leading to subdued ragen-bound price action on the first day of a new week/month/quarter. Market participants now look to the release of the US ISM Manufacturing PMI, which, along with the US bond yields and the broader risk sentiment, might drive the USD demand. Apart from this, scheduled speeches by influential FOMC members, including Fed Chair Jerome Powell, should produce short-term trading opportunities around the NZD/USD pair.

Technical levels to watch

• USD/CHF weakens ahead of Switzerland’s Consumer Price Index on Tuesday.
• Market expects Swiss CPI to grow at 1.8% against the previous figures of 1.6%.
• Fed’s hawkish stance on interest rates trajectory strengthens the US Dollar (USD).
• Higher US Treasury yields contribute support to underpin the Greenback.

USD/CHF continues to move on the downward pathway, trading lower around 0.9120 during the early European trading hours on Monday. The pair experiences downward pressure due to upbeat economic data from Switzerland.

Swiss Real Retail Sales (YoY) data revealed a less decline in Swiss consumer demand for August. The report showed a contraction of 1.8% as expected compared to the previous 2.5% decline.

The Swiss Consumer Price Index (CPI) data is scheduled to be released on Tuesday, which is expected to grow at 1.8% against the previous figures of 1.6%. This event can potentially influence market dynamics and impact the movements in the Swiss Franc.

Additionally, over the weekend, Chinese Manufacturing PMI data showed improvement into positive territory, which could impact the strength of the Greenback. This development might have provided support for the Swiss Franc (CHF) as it is considered the safe-haven currency.

China’s NBS Manufacturing PMI for August grew to 50.2 from the previous 49.7 figures, exceeding the 50.0 expected. Additionally, the Non-Manufacturing PMI rose to 51.7 from the 51.0 previous reading, surpassing the market consensus of 51.5.

However, the Fed is expected to attempt another 25 basis points (bps) rate hike through the end of the year. Additionally, the market is factoring in the likelihood of higher interest rates for a prolonged period, which could provide support to underpin the US Dollar (USD).

The US Dollar Index (DXY) holds ground at around 106.20 at the time of writing. The US Dollar (USD) strengthened after the release of moderate economic data on Friday. The US Michigan Consumer Sentiment Index for September improved to 68.1 from the previous figure of 67.7, beating expectations for no change.

The US Core Personal Consumption Expenditures (PCE) - Price Index (YoY) for August rose as estimated, reaching 3.9%, but showed a slight easing from the previous reading of 4.3%. Core PCE (MoM) recorded a softer reading of 0.1% against the market consensus for it to remain consistent at the 0.2% prior.

Moreover, the positive performance of US Treasury Yields provides further support for the USD. The yield on the 10-year US Treasury bond stands at 4.61% at the moment, marking a 0.96% increase.

After the Friday session, bills were successfully passed in the US to prevent a government shutdown, securing funding until November 17. This positive development has led to a renewed upward trajectory for the US Dollar Index (DXY).

The avoidance of a government shutdown typically contributes to stability in financial markets, and the resumption of the DXY's upward movement suggests increased confidence in the US dollar among investors.

Traders will likely pay close attention to the upcoming US ISM Manufacturing PMI for September ahead of a speech by Fed Chair Jerome Powell on Monday.

Last week's late bounce in EUR/USD looks to have petered out above 1.06. Economists at ING analyze the pair’s outlook.

EUR/USD to stay lower for a little longer

At the 11th hour, Congress managed to avert a US government shutdown. The shutdown was not expected to be a major market driver. Economists at TD Securities expect a short-term pullback in USD.

How will markets react?

• Pound Sterling finds bids near 1.2180 and is expected to recapture the weekly high.
• Investors remain uncertain whether UK PM Sunak fulfills the promise of halving inflation by year-end.
• Jeremy Hunt is expected to raise the minimum wage to offer some relief to workers against high inflation.

The Pound Sterling (GBP) has resumed its upside journey after a mild correction from its weekly high as investors expect an improvement in the United Kingdom’s learning curve in handling the repercussions of higher interest rates by the Bank of England (BoE). The BoE has paused its policy-tightening spell after raising them to 5.25% to safeguard the economy from further slowdown.

A sheer volatility is anticipated in the Pound Sterling ahead as UK Finance Minister Jeremy Hunt is expected to raise the minimum wage and ignore tax cuts at the annual Conservative Party conference. Apart from that, S&P Global Manufacturing PMI data for September will be keenly watched. The Manufacturing PMI is expected to remain below the 50.0 threshold for the 14th time in a row.

Daily Digest Market Movers: Pound Sterling rebounds despite UK recession risks

• Pound Sterling recovered from 1.2180 despite investors remaining worried about the upside risks of a recession in the UK economy.
• Higher interest rates by the Bank of England and consumer inflation risks due to a pause in policy tightening have dented the demand outlook.
• Like other developed economies, the UK’s manufacturing sector has also gone through a vulnerable phase. Its labor demand and Services PMI were performing well, but now they are also facing the wrath of tight monetary policy and stubborn inflation.
• UK employers reduced their labor force in the last two months as firms aim to achieve efficiency through controlling costs in an uncertain demand environment. Services PMI has landed below the 50.0 threshold two times in a row, which indicates a contraction in service activities.
• For more clarity on UK factory activities, investors will focus on the S&P Global Manufacturing PMI data for September, which will be published at 08:30 GMT. The economic data is foreseen to remain unchanged at 44.2. This would be the 14th contraction in a row.
• The UK’s housing market consistently faces the consequences of higher interest rates. The BoE reported on Friday that credit approvals for house purchases dropped sharply to 45,354 vs. Reuters’ expectations of 49,532 as mortgage rates rise.
• Going forward, investors will focus on the announcement of a higher minimum wage by UK FM Jeremy Hunt at the annual Conservative Party conference. This weekend, UK Hunt announced, "We are waiting for the Low Pay Commission to confirm its recommendation for next year. But I confirm today, whatever that recommendation, we will increase it next year to at least 11 pounds an hour," as reported by Reuters.
• Jeremy Hunt ruled out tax cuts ahead of November’s mid-year fiscal statement to support UK PM Rishi Sunak’s promise of halving headline inflation by year-end.
• Meanwhile, the market mood has begun improving as investors shrug off the risk associated with a global slowdown. The US Dollar Index (DXY) faces selling pressure around 106.00.
• The USD index remained volatile on Friday despite a soft core Personal Consumption Expenditure (PCE) report for August. Monthly Core PCE expanded at a nominal pace of 0.1% in August against expectations and the former release of 0.2%. The annualized Core PCE has softened to 3.9% as expected from the former release of 4.3%.
• The Federal Reserve’s preferred inflation tool, Core PCE, now makes it less likely that the central bank will add another rate hike this year.

Technical Analysis: Pound Sterling recovers from six-month low

The Pound Sterling aims to keep recovering from its six-month low near 1.2110 intact. The outlook for the GBP/USD pair would improve on a recovery extension above the weekly high at 1.2270. The GBP/USD pair discovered buying interest as momentum oscillators turned oversold. The Cable could deliver a mean-reversion move to near the 20-day Exponential Moving Average (EMA) at 1.2340. The broader bias remains weak as the Cable is trading below the 200-DEMA, which trades around 1.2465.

Here is what you need to know on Monday, October 2:

Financial markets held steady during the Asian trading hours on Monday amid thin trading conditions, with stork markets in China, Hong Kong and India remaining closed for holidays. In the second half of the day, September ISM Manufacturing PMI survey will be featured in the US economic docket. Market participants will also pay close attention to comments from Federal Reserve officials, including Chairman Jerome Powell.

ISM Manufacturing PMI Preview: US factory sector set to extend contraction into September.

Over the weekend, US Congress passed a stopgap funding bill to avert a government shutdown. With this agreement, the previous budget will be extended for 45 days and government will be funded through November 17. Reflecting the positive impact of this development on risk mood, US stock index futures trade in positive territory in the European morning. Meanwhile, the US Dollar Index consolidates the previous week's gains at around 106.00 and the benchmark 10-year US Treasury bond yield fluctuates at around 4.6%.

The data from China showed early Sunday that the Caixin Manufacturing PMI declined to 50.6 in September from 51 in August. Additionally, the Services PMI fell to 50.2 from 51.8 in the same period. AUD/USD showed no immediate reaction to these figures due to the Labour Day holiday in Australia and was last seen fluctuating in a tight channel above 0.6400. In the Asian session on Tuesday, the Reserve Bank of Australia (RBA) will announce its policy decisions. The RBA is forecast to hold the policy rate unchanged at 4.1%.

Following a quiet Asian session, EUR/USD gained traction in the European morning and edged higher toward 1.0600. Eurostat will publish the August Unemployment Rate later in the session.

GBP/USD closed virtually unchanged on Friday but suffered large losses in the previous week. The pair managed to find a foothold at the beginning of the new week and was last seen trading modestly higher on the day above 1.2200.

USD/JPY opened on a bullish note and advanced toward the critical 150.00 level in the Asian trading hours on Monday. Japanese Finance Minister Shunichi Suzuki repeated that they are watching currency moves cautiously. The pair retreated modestly but held above 149.50 by the European morning. Similarly, Japan’s Chief Cabinet Secretary Hirokazu Matsuno said they were “closely watching FX moves with a high sense of urgency.”

Gold price started the week under modest bearish pressure and declined to its lowest level since early March near $1,840.

Japan’s Chief Cabinet Secretary Hirokazu Matsuno said on Monday, he was “closely watching FX moves with a high sense of urgency.”

He added that it is “important for currencies to move in a stable manner reflecting fundamentals.”

Market reaction

USD/JPY is off the 11-month highs, trading at 149.65, at the time of writing. The pair is gaining 0.20% on the day.

• The Euro picks up extra pace against the US Dollar.
• Stocks in Europe open Monday’s session with decent gains.
• EUR/USD prints humble gains near 1.0580.
• The USD Index (DXY) meets initial hurdle near 106.30.
• Final Manufacturing PMIs in the euro zone come next.
• The ISM Manufacturing PMI takes centre stage across the pond.

The Euro (EUR) gains ground against the US Dollar (USD) on Monday, motivating the EUR/USD to reclaim the area around 1.0590 and advance for the third session in a row following the opening bell on the old continent.

Meanwhile, the Greenback appears under some pressure, just above the 106.00 hurdle when measured by the USD Index (DXY). This is followed by the extended recovery in the risk complex seen in the latter part of last week.  

Looking at the fixed-income markets on both sides of the ocean, yields appear directionless.  

The monetary policy forecast remains unaltered, with investors expecting the Federal Reserve (Fed) to raise interest rates by 25 bps before the end of the year. Meanwhile, market talks about a probable stalemate in policy changes at the European Central Bank (ECB) continue, despite inflation levels that surpass the bank's objective and rising fears about a potential recession.

On the positioning front, EUR net longs extended the decline during the week ended on September 26, according to CFTC’s report, falling in line with the sharp sell-off observed in spot in the last few weeks.

In the domestic docket, the final Manufacturing PMIs in the eurozone are seconded by the bloc's Unemployment Rate.

In the US, all the attention is expected to be on the release of the ISM Manufacturing PMI, seconded by Construction Spending, the final S&P Global Manufacturing PMI, and speeches by Federal Reserve Bank of Philadelphia President Patrick Harker (voter, hawk), FOMC Governor Michael Barr (permanent voter, centrist), and Federal Reserve Bank of New York President John Williams (permanent voter, centrist).

Daily digest market movers: Euro appears supported by risk appetite trends

• The EUR extends the recovery against the USD.
• US and German yields show marginal price action.
• Markets factor in an extra rate hike by the Fed before year-end.
• Investors foresee an impasse at the ECB’s tightening campaign.
• Chinese PMIs came in mixed for September.
• FX intervention fears remain well and sound around USD/JPY.

Technical Analysis: Immediate support emerges at 1.0490-1.0480 band

EUR/USD looks to consolidate the rebound from last week’s lows around 1.0490.

If the EUR/USD rebound gets more serious, the pair should encounter the next up-barrier at the September 12 high of 1.0767, before reaching the crucial 200-day Simple Moving Average (SMA) at 1.0827. If the pair breaks beyond this level, it may set up a challenge of the transitory 55-day SMA at 1.0843, ahead of the August 30 top at 1.0945 and the psychological barrier of 1.1000. The surpass of the latter might prompt the pair to test the August 10 peak of 1.1064 ahead of the July 27 high of 1.1149 and the 2023 top of 1.1275 seen on July 18.

On the downside, the September 28 low of 1.0491 emerges as the next support prior to the 2023 low of 1.0481 from January 6.

As long as the EUR/USD remains below the 200-day SMA, the possibility of more negative pressure exists.

FX option expiries for Oct 2 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts

• 1.0600 373m

- GBP/USD: GBP amounts     

• 1.2150 300m
• 1.2275 947m
• 1.2300 411m

- USD/JPY: USD amounts                     

• 149.00 932m
• 150.00 729m

- USD/CHF: USD amounts        

• 0.9115 230m
• 0.9120 361m

- AUD/USD: AUD amounts

• 0.6450 330m
• 0.6500 740m

- NZD/USD: NZD amounts

• 0.5900 350m

The US Dollar Index strengthened by 3.2% in the third quarter. Economists at ING analyze DXY outlook.

Settling into a stronger Dollar

NZD/USD ended the week just shy of 0.60. Economists at ANZ Bank analyze the pair’s outlook.

Moves of late have been very USD-centric

• USD/CAD retraces to 1.3570, and holds above the 50- and 100-hour EMAs on the four-hour chart. 
• The key resistance level is seen at 1.3600; the initial support level is located at 1.3515.
• Relative Strength Index (RSI) is located in the bullish territory above 50. 

The USD/CAD pair loses some ground after being rejected from the 1.3600 barrier during the early European session on Monday. Traders await the Canadian S&P Global Manufacturing PMI for September ahead of the US ISM Manufacturing PMI due later in the North American session on Monday. The pair currently trades near 1.3570, losing 0.06% on the day. 

From the technical perspective, USD/CAD holds above the 50- and 100-hour Exponential Moving Averages (EMAs) on the four-hour chart, which supports the buyers for the time being.

The immediate resistance level for the pair is seen near the confluence of a psychological round figure and the upper boundary of the Bollinger Band of 1.3600. The additional upside filter to watch is near a high of May 31 at 1.3651. Further north, the pair will see a rally to a high of September 5 at 1.3670. Any follow-through buying above the latter will pave the way to a high of September 7 at 1.3695. 

On the flip side, the initial support level is located near the 100-hour EMA at 1.3515. any decisive break below the latter will see a drop to the next contention at 1.3450 (a low of May 25). Further south, the next downside stop will emerge at 1.3428, representing the lower limit of the Bollinger Band. 

It’s worth noting that the Relative Strength Index (RSI) is located in the bullish territory above 50, which means the path of the least resistance of USD/CAD is to the upside.

USD/CAD four-hour chart

USD/JPY is now predicted to navigate the 148.50-150.50 range in the next few weeks, comment Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group.

Key Quotes

• The US ISM Manufacturing PMI is foreseen at 47.7 in September, improving further after June’s bottom.
• ISM Prices Paid Index and Employment Index could give hints about the Federal Reserve’s next steps.
• The risk for a EUR/USD corrective advance increased as the pair has fallen for 11 weeks in a row.

The Institute for Supply Management (ISM) will publish the United States September Manufacturing Purchasing Managers’ Index (PMI) on Monday, October 2. The index is expected to have ticked modestly higher to 47.7 from its previous monthly reading of 47.6. The official Manufacturing PMI has been within contraction levels ever since falling to 49 in November 2022 and slowly moving away from the multi-year low posted last June at 46.

What to expect from the ISM manufacturing PMI report?

Beyond the modest uptick in the headline figure, market players anticipate an improvement in all sub-components. The Employment Index is foreseen at 49 from 48.5 in August, while New Orders are expected to print 47 after posting 46.8 in August. Finally, the ISM Manufacturing Prices is anticipated at 48.9 in September, up 0.5 percentage points from the former reading.

Back in August, the report indicated a ninth month of contraction after a 30-month period of expansion. More relevant, the Prices Index registered 48.4, up 5.8 percentage points compared to the July figure of 42.6. Inflation in the United States (US), as measured by the Consumer Price Index (CPI), rose by more than anticipated in August, while the core Personal Consumption Expenditures (PCE) Price Index – the Federal Reserve (Fed) favorite inflation figure –, met expectations while easing from July,  up 3.9% YoY in the same month. 

A higher-than-anticipated ISM Manufacturing PMI Price Index sub-component, which gauges the price change that US manufacturers pay for its inputs, would hint at persistently high inflation extending into September. That should fuel speculation about at least one more rate hike in the US and support the central banks’ idea of “higher for longer” rates. As a result, the risk of an economic setback should increase, and the US Dollar benefits from a continued run to safety.

Investors will also pay attention to the employment-related sub-component ahead of the Nonfarm Payrolls (NFP) report scheduled for Friday. The tight US labor market is a critical factor when it comes to monetary policy decisions, as it allows the central bank to maintain the restrictive policy. Policymakers see modest signs of loosening labor market conditions, not enough, however, to change the course of monetary policy.

Offering a sneak peek into the US data, analysts at BBH noted: “ISM PMIs will also be important.  Manufacturing PMI will be reported Monday and the headline is expected at 47.9 vs. 47.6 in August. Keep an eye on employment and prices paid, which stood at 48.5 and 48.4 in August, respectively.”

When will the ISM Manufacturing Purchasing Managers’ Index report be released and how could it affect EUR/USD?

The ISM Manufacturing PMI report is scheduled for release at 14:00 GMT on October 2. Ahead of the data, the US Dollar trades near fresh multi-month highs against most major rivals, backed by mounting risk aversion and signs of a resilient American economy.

An upbeat headline should confirm the economy remains strong enough and that the country may dodge a recession. Such speculation should lift the mood and put pressure on the US Dollar, at least in the near term.

Strong inflation and employment sub-components, however, may spur speculation for tighter for longer Fed policy and boost USD demand amid renewed fears.

From a technical perspective, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, notes that “EUR/USD is struggling below the 1.0600 threshold on its road to recovery, as 14-day Relative Strength Index (RSI) indicator continue to sit beneath the 50 level.”

“Any recovery will gather steam on a sustained move above the 1.0650 psychological level, above which the 1.0700 round figure will be on the Euro’s radar. Meanwhile, powerful support aligns near 1.0490, below which a fresh downside will open up toward the 1.0400 mark.”

Considering advanced prints from CME Group for natural gas futures markets, open interest rose for the second session in a row on Friday, now by nearly 8K contracts. Volume, instead, dropped for the third straight session, this time by more than 2K contracts.

Natural Gas: Upside remains capped around $3.00

Natural gas prices rose to fresh monthly tops near the $3.00 mark before ending Friday’s session with modest losses. The move was amidst rising open interest and opens the door to further correction in the very near term. That said, the $3.00 region per MMBtu remains a tough barrier for natural gas bulls for the time being.

On Saturday, Congress passed a bill that funds the US federal government through November 17. We could still be looking at a government shutdown after November 17, economists at Commerzbank report.

US shutdown averted, for now

• Silver price persists as market caution prevails regarding the Fed's interest rate trajectory.
• Momentum indicators signal a potential bearish sentiment in the price movements.
• The psychological level at $21.50 emerges as the immediate support.

Silver price continues to follow its downward trajectory, trading lower around $21.80 during the Asian session on Monday. The prices of non-yielding assets like Silver face challenges, primarily due to the upbeat US Treasury Yields. The yield on the 10-year US Treasury bond stands at 4.61%, up by 0.96% by the press time.

Furthermore, China released its Manufacturing PMI data over the weekend, indicating improvement and entering positive territory. However, this positive development did not seem to have a favorable impact on Silver prices.

Chinese NBS Manufacturing PMI for August increased to 50.2 from the previous 49.7 figures, surpassing the anticipated 50.0. Additionally, the Non-Manufacturing PMI climbed to 51.7 from the previous reading of 51.0, exceeding the market consensus of 51.5.

The current downward momentum in the pair appears to have a bearish bias, given that the 14-day Relative Strength Index (RSI) remains below the 50 level.

The XAG/USD pair could meet support at the $21.50 psychological level, following the $21.00 level.

On the upside, the 23.6% Fibonacci retracement at $22.46 lined up with the seven-day Exponential Moving Average (EMA) at $22.49.

A firm break above the latter could influence the XAG/USD pair to explore the area around the 14-day EMA at $22.79, followed by the $23.00 psychological level.

The Moving Average Convergence Divergence (MACD) indicator is providing a weak signal for the Silver bulls. The MACD line lies below the centerline and the signal line. This configuration suggests that there is potentially weak momentum in the XAG/USD's price movement.

XAG/USD: Daily Chart

Further upside could encourage AUD/USD to revisit the 0.6525 level in the short-term horizon, suggest Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group.

Key Quotes

• The index advances modestly early on Monday.
• The dollar regains traction on risk-off sentiment.
• ISM Manufacturing takes centre stage later in the NA session.

The greenback, in terms of the USD Index (DXY), adds to Friday’s small gains and revisits the 106.30 region at the beginning of the week.

USD Index focuses on data

The index advances for the second session in a row on Monday on the back of further correction in the risk-linked universe, while US yields remain directionless ahead of the opening bell in Euroland.

In the meantime, the greenback puts further distance from Friday’s lows in the 105.70/65 band and appears to be retargeting the area of recent 2023 peaks near 106.80 (September 27).

There have been no changes to the monetary policy front so far, where investors continue to price in an extra 25 bps rate hike by the Federal Reserve before year-end. In addition, the dollar gained extra strength after the US averted a federal government shutdown at the last minute, all following a Congress vote to pass a short-term funding bill over the weekend.

Additionally, the recent rally in the greenback appears supported by the speculative community after net longs in the dollar rose to levels last seen in early January in the week ended on September 26, according to the CFTC’s positioning report.

In the US docket, the ISM Manufacturing PMI will be in the limelight later in the session, seconded by Construction Spending, the final figures of the S&P Global Manufacturing PMI, and speeches by Philly Fed P. Harker (voter, hawk), FOMC Governor M. Barr (permanent voter, centrist), and NY Fed J. Williams (permanent voter, centrist).

What to look for around USD

The greenback looks to extend Friday’s lows, although it seems to have met some initial resistance in the 106.30 region so far.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending, Fed J. Powell (Monday) – MBA Mortgage Applications, ADP Employment Change, Final Services PMI, ISM Services PMI, Factory Orders (Wednesday) - Initial Jobless Claims, Balance of Trade (Thursday) – Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change (Friday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is gaining 0.03% at 106.20 and a breakout of 106.83 (2023 high September 27) would open the door to 107.19 (weekly high November 30, 2022) and finally 107.99 (weekly high November 21 2022). On the other hand, initial support emerges at 104.42 (weekly low September 11) ahead of 103.10 (200-day SMA) and then 102.93 (weekly low August 30).

• USD/JPY edges higher to 149.70, near the 11-month highs on Monday.
• BoJ Governor said there was "a distance to go" before exiting its ultra-easy policy.
• The potential FX intervention from the Japanese authorities might warn traders from the bullish bet.
• Market players await the US ISM PMI while keeping an eye on the 150.00 level.

The USD/JPY pair hovers around 149.70 after retreating from the 11-month highs of 149.82 during the early European trading session on Monday. The renewed US Dollar (USD) broadly boosts the major pair ahead of the US ISM PMI due later on Monday. However, traders might turn cautious amid the fear of possible FX intervention by Japanese authorities.

The higher for longer narratives in the US boosts the Greenback broadly. Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD relative to a basket of foreign currencies, resumes its upward path by climbing to 106.28, the highest since November last year. The Federal Reserve (Fed) Bank of New York President John Williams said on Friday that the central bank is at or near peak for the federal funds rate while mentioned that Fed will need a restrictive policy stance for some time to achieve goals, while the Fed Bank of Richmond President Thomas Barkin said that the central bank holding steady at the September FOMC meeting was appropriate and Fed has time to see data before deciding what’s next for rates.

On Friday, the Personal Consumption Expenditures (PCE) Price Index climbed 3.5% YoY in August from 3.4% in July, meeting market expectations. Meanwhile, the annual Core PCE Price Index, the Federal Reserve's preferred inflation indicator, grew 3.9% from 4.3% in July, in line with expectations.

On a monthly basis, the PCE Price Index and the Core PCE Price Index rose 0.4% and 0.1% MoM, respectively. Both of these figures fell short of experts' expectations. Additionally, Personal Income and Personal Spending rose by 0.4% on a monthly basis as expected.

Market players will take cues from the Fed’s Chair Jerome Powell's speech later in the American session on Monday. The hawkish comments from officials could boost the US Dollar (USD) and act as a tailwind for the USD/JPY pair. However, the potential FX intervention from the Japanese authorities might warn traders from the bullish bet as the pair trades near the 150.00 level, a psychological round mark, and the zone that BoJ intervened in the market last year.

Early Monday, Japanese Finance Minister Shunichi Suzuki continued with the verbal intervention. Suzuki stated that he was watching currency moves “cautiously”. BoJ Governor Kazuo Ueda said on Saturday that there was "a distance to go" for BoJ before exiting its ultra-loose monetary policy. According to the BoJ Summary of Opinions at the Monetary Policy Meeting on September 21 and 22, BOJ said that they do not need to make additional tweaks to YCC as long-term rates moving fairly stably and said that end to negative rate must be tied to the success of achieving 2% inflation target.

Market participants will monitor the US ISM Manufacturing PMI for September due on Monday, followed by the Fed Chair Powell’s speech. Later this week, the US ADP Employment Change and ISM Services PMI for September will be released on Wednesday. The attention will shift to the US Nonfarm Payrolls on Friday. These events could give a clear direction to the USD/JPY pair.

The Malaysian Ringgit has been under increasing pressure over the past month. Economists at ANZ Bank analyze USD/MYR outlook.

A meaningful turnaround in China’s economic activity will be a strong driver for the Ringgit

In the view of Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group, GBP/USD could now trade between 1.2100 and 1.2380 in the next few weeks.

Key Quotes

Open interest in crude oil futures markets shrank for the second session in a row on Friday, this time by just 692 contracts according to preliminary readings from CME Group. In the same line, volume went down for the second straight session, now by around 208.6K contracts.

WTI retargets the 2023 highs

Prices of WTI dropped for the second session in a row on Friday following Thursday’s YTD peaks. The daily drop came on the back of shrinking open interest and volume and could leave the door open to a near-term rebound with the immediate target on the 2023 top at $94.99 (September 28).

• GBP/USD remains under selling pressure near 1.2180 amid the rally of USD.
• The US annual Core PCE Price Index grew 3.9% vs. 4.3% prior, in line with expectations.
• Market players will focus on the US ISM Manufacturing PMI for September, followed by the Fed Chair Powell’s speech.

The GBP/USD pair remains on the defensive below the 1.2200 barrier and trades in negative territory for the fifth consecutive week during the early European session on Monday. The major pair trades around 1.2180, losing 0.16% on the day.

The US Bureau of Economic Analysis revealed on Friday that the Personal Consumption Expenditures (PCE) Price Index climbed 3.5% YoY in August from 3.4% in July, meeting market expectations. Meanwhile, the annual Core PCE Price Index, the Federal Reserve's preferred inflation indicator, grew 3.9% from 4.3% in July, in line with expectations.

On a monthly basis, the PCE Price Index and the Core PCE Price Index rose 0.4% and 0.1% MoM, respectively. Both of these figures fell short of experts' expectations. Additionally, Personal Income and Personal Spending rose by 0.4% on a monthly basis as expected.

The Federal Reserve (Fed) Bank of New York President John Williams said on Friday that the central bank is at or near peak for the federal funds rate while mentioning that the Fed will need a restrictive policy stance for some time to achieve goals. Fed Bank of Richmond President Thomas Barkin said that the central bank holding steady at the September FOMC meeting was appropriate and Fed has time to see data before deciding what’s next for rates.

However, market players will take cues from the Fed’s Chair Jerome Powell's speech later in the American session on Monday. The hawkish comments from officials could boost the US Dollar (USD) and act as a headwind for the GBP/USD pair.

On the GBP’s front, BoE policymakers stated that the central bank could raise or halt interest rates if necessary after the BoE decided to halt its rate-hiking cycle earlier last month. However, the market expects BoE to maintain its monetary policy in the next meeting, which exerts pressure on the British Pound (GBP).

In the absence of economic data released from the UK docket this week, the GBP/USD pair remains at the mercy of USD price dynamics. The US ISM Manufacturing PMI for September will be due on Monday, followed by the Fed Chair Powell’s speech. Later this week, the US ADP Employment Change and ISM Services PMI for September will be released on Wednesday. The attention will shift to the US Nonfarm Payrolls on Friday.

Economist Lee Sue Ann at UOB Group sees the RBA maintaining its OCR at 4.10% at its event on October 3.

Key Takeaways

CME Group’s flash data for gold futures markets noted traders added around 5.6K contracts to their open interest positions after six consecutive daily pullbacks on Friday. Volume followed suit and went up by around 10.3K contracts, partially reversing the previous daily drop.

Gold: Next on the downside comes $1800

Gold prices extended the multi-session leg lower on Friday. The move was amidst increasing open interest and volume and suggests that extra decline appears on the cards in the very near term. Looking at the longer run, the precious metal faces the next support of note around the key $1800 region per troy ounce.

• Crude oil prices receive downward pressure due to the Fed’s hawkish stance on interest rates trajectory.
• US Crude oil production has surged to multi-year highs.
• Higher US Treasury yields contribute support to underpin the US Dollar.
• US passed bills to avert a government shutdown, securing funding until November 17.

Western Texas Intermediate (WTI) oil price hovers around $90.00 per barrel during the Asian session on Monday. The Crude oil price struggles to recover from recent losses due to market caution on the US Federal Reserve’s (Fed) interest rates trajectory.

Fed is expected to attempt another 25 basis points (bps) rate hike through the end of the year. Additionally, the market is factoring in the likelihood of higher interest rates for a prolonged period. The higher interest costs raise borrowing costs, which can affect the demand for Crude oil.

Recent weeks have witnessed a significant decline in US oil reserves, intensifying the bullish momentum in the oil market. However, according to the Energy Information Administration (EIA), US crude oil production has surged to multi-year highs.

This increase in fossil fuel production is driven by the effort to meet the demand gap left by the extended production cuts of 1.3 million barrels per day by Saudi Arabia and Russia through the end of the year. Despite the drawdown in reserves, the surge in production is indicative of the complex dynamics influencing global oil markets.

The total US crude reserves have sharply declined to approximately 420 million barrels, with the crucial Cushing, Oklahoma reserves plummeting to a mere 20 million barrels. Despite these supply constraints and diminishing reserves, there is an anticipation of US oil production reaching record highs.

Investors are swiftly adapting their forward-looking expectations for crude costs in response to these developments, reflecting the intricate balance between supply, reserves, and production levels.

Over the weekend, Chinese Manufacturing PMI data showed improvement into positive territory, which could provide support for the prices of black gold as China is the largest oil importer in the world.

China’s NBS Manufacturing PMI for August grew to 50.2 from the previous 49.7 figures, exceeding the 50.0 expected. Additionally, the Non-Manufacturing PMI rose to 51.7 from the 51.0 previous reading, surpassing the market consensus of 51.5.

The US Dollar Index (DXY) holds ground, continuing to gain on the second trading session following moderate datasets from the United States (US). The spot price trades higher around 106.20.

Further support for the strength of the USD comes from the positive performance of US Treasury Yields. The yield on the 10-year US Treasury bond stands at 4.61% at the moment, marking a 0.96% increase.

Crude oil faces challenges, primarily due to the upbeat US Dollar (USD) following the release of moderate economic data on Friday. The US Michigan Consumer Sentiment Index for September improved to 68.1 from the previous figure of 67.7, beating expectations for no change.

The US Core Personal Consumption Expenditures (PCE) - Price Index (YoY) for August rose as estimated, reaching 3.9%, but showed a slight easing from the previous reading of 4.3%. Core PCE (MoM) recorded a softer reading of 0.1% against the market consensus for it to remain consistent at the 0.2% prior.

Following Friday's session, bills were successfully passed in the US to prevent a government shutdown, securing funding until November 17. This development has prompted a resumption of the US Dollar Index (DXY) on an upward trajectory.

Traders in the Crude oil market will likely pay close attention to the upcoming US ISM Manufacturing PMI for September ahead of a speech by Fed Chair Jerome Powell on Monday. These events can potentially influence market dynamics and impact the performance of both the US Dollar and Crude oil.

EUR/USD is now expected to have entered in a consolidative phase, according to Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group.

Key Quotes

• Asian equities trade higher amid the light volume due to holidays in China and India.
• Chinese Caixin/S&P Global Manufacturing PMI dropped to 50.6 in September vs. 51.0 prior.
• BoJ Governor Kazuo Ueda said that there was "a distance to go" for BoJ before exiting its ultra-loose monetary policy.
• The Reserve Bank of India (RBI) is likely to maintain a status quo on interest rates on Friday.

Asian stocks posts modest gains on Monday amid the light trading volume. Investors digest economic data from China and Japan while awaiting the US PMI data due later in the American session on Monday.

Chinese markets are closed for the Golden Week holiday. Stock markets in Hong Kong and India are also closed for holidays. At press time, Japan’s Nikkei is up 0.55% to 32,025, while the Topix rose 0.45%.

In China, data released on Saturday showed that the Chinese Caixin/S&P Global Manufacturing Purchasing Managers' Index (PMI) dropped to 50.6 in September from the previous reading of 51.0, below the market consensus of 51.2. The Service PMI came in at 50.2 from 51.8 in the previous month. These figures indicated a sign of stabilization in the world's second-largest economy. However, the future is clouded by a housing downturn and plummeting exports.

Earlier Monday, BoJ Summary of Opinions at the Monetary Policy Meeting on September 21 and 22 stated that BOJ does not need to make additional tweaks to YCC as long-term rates moving fairly stably and said that end to negative rate must be tied to the success of achieving 2% inflation target. One board member added that given recent FX and oil price moves, there is a chance inflation may not slow much and overshoot expectations.

BoJ Governor Kazuo Ueda said on Saturday that there was "a distance to go" for BoJ before exiting its ultra-loose monetary policy. Japan’s overall business conditions of the large manufacturing companies in Japan improved in the third quarter (Q3). The Japanese Tankan Large Manufacturing Index (Q3) came in at 9.0 from the previous reading of 5.0, better than the expectation of 6.0.

Apart from this, BoJ announced on Monday an unscheduled purchase of the Japanese government bonds (JGB), to slow down the ongoing surge in in yields. The 10-year JGB yield hit the highest level since September last year at 0.775% in the early Asian session.

In India, the Reserve Bank of India (RBI) will begin its three-day meeting on Wednesday and the interest rate decision will be announced on Friday. RBI is likely to maintain a status quo on interest rates for the fourth consecutive time at its upcoming monetary policy meeting.

Looking ahead, market players will take cues from the US ISM Manufacturing PMI for September, followed by the Fed Chair Powell’s speech on Monday.

 

On Monday, the Bank of Japan (BoJ) announced an unscheduled purchase of the Japanese government bonds (JGB), in an effort to slow down the ongoing surge in in yields.

This comes after the benchmark 10-year JGB yield rose 1 basis point in early Asia to reach the highest since September last year at 0.775%.

Market reaction

USD/JPY is uninspired by the BoJ operation, keeping 0.29% higher on the day at 149.80. The pair is sitting at the highest level in 11 months and closing on in the critical 150.00 level.

• EUR/USD is seen consolidating in a narrow range through the Asian session on Monday.
• The formation of a downward-sloping channel on the daily chart favours bearish traders.
• A sustained strength beyond the 1.0700 mark is needed to negate the negative outlook.

The EUR/USD pair struggles to gain any meaningful traction on the first day of a new week and oscillates in a narrow trading band, just above mid-1.0500s through the Asian session.

The prospects for further policy tightening by the Federal Reserve (Fed) trigger a fresh leg up in the US Treasury bond yields, which continues to underpin the US Dollar (USD). Apart from this, expectations that additional ECB rate hikes may be off the table for now act as a headwind for the EUR/USD pair. That said, the risk-on impulse holds back traders from placing fresh bets around the safe-haven Greenback and lends some support to spot prices.

From a technical perspective, the recent downfall witnessed over the past two-and-half months or so has been along a downward-sloping channel and points to a well-established short-term downtrend. Moreover, the Relative Strength Index (RSI) on the daily chart has also recovered from the oversold territory and favours bearish traders. This, along with the occurrence of a death cross, suggests that the path of least resistance for the EUR/USD pair is to the downside.

Some follow-through selling below the daily low, around the 1.0555 area, will reaffirm the negative bias and drag spot prices back below the 1.0500 psychological mark, or the lowest level since January touched last week. The latter coincides with the lower end of the aforementioned trend channel and should act as a pivotal point. A convincing break below will, in turn, set the stage for an extension of the downward trajectory towards testing the 1.0400 round figure.

On the flip side, the 1.0600 mark, closely followed by Friday's swing high, around the 1.0615 region, should cap the immediate upside for the EUR/USD pair. A sustained strength beyond might trigger a short-covering rally and lift spot prices towards the trend-channel barrier, currently pegged near the 1.0700 round figure. Some follow-through buying, meanwhile, will suggest that the pair has bottomed out and shift the near-term bias in favour of bullish traders.

EUR/USD daily chart

Technical levels to watch

European Central Bank (ECB) Vice President, Luis de Guindos, in a Financial Times (FT) interview on Monday, dismissed rate cuts and said that “getting back to the 2% target of inflation will not be easy.”

He added that the “last mile of disinflation is the hardest.”

Market reaction

The above comments fail to move the needle around the Euro, as EUR/USD sticks to its sideways movement around 1.0570 so far this Monday.

• USD/INR gains momentum above 83.00 as the US Dollar (USD) resumes its upward path.
• Reserve Bank of India (RBI) is likely to maintain a status quo in the upcoming interest rate meeting.
• The annual Core PCE Price Index grew 3.9% from 4.3% in July, in line with expectations.
• RBI rate decision will be a closely watched event on Friday.

USD/INR holds positive ground around 83.15 during the Asian session on Monday. The uptick of the pair is supported by the stronger US dollar (USD) and the higher-for-longer rate narrative in the US. Investors await the Reserve Bank of India (RBI) rate decision, which is expected to keep the policy repo rate steady on Friday.

RBI will begin its three-day meeting on Wednesday and the interest rate decision will be announced on Friday. RBI is likely to maintain a status quo on interest rates for the fourth consecutive time at its upcoming monetary policy meeting. Due to elevated retail inflation and global factors, including high crude oil prices, the benchmark repo rate was raised to 6.5% in February and remained unchanged since then

On the USD front, Federal Reserve (Fed) Bank of New York President John Williams said on Friday that the central bank is at or near peak for the federal funds rate while mentioning that the Fed will need a restrictive policy stance for some time to achieve goals. Fed Bank of Richmond President Thomas Barkin said that the central bank holding steady at the September FOMC meeting was appropriate and Fed has time to see data before deciding what’s next for rates.

About the data on Friday, the Personal Consumption Expenditures (PCE) Price Index rose by 3.5% YoY in August from the previous month of 3.4%, in line with the market estimation. The annual Core PCE Price Index grew 3.9% from 4.3% in July, meeting the expectation. On a monthly basis, the PCE Price Index and the Core PCE Price Index rose by 0.4% and 0.1% MoM, respectively. Both of these figures came in below the market estimations.

Traders will take cues from the Fed’s Chair Jerome Powell's speech later in the American session on Monday. The hawkish comments from officials could boost the US Dollar (USD) and act as a tailwind for USD/INR.

Market players will monitor the US ISM Manufacturing PMI for September due on Monday, followed by the Fed Chair Powell’s speech. Later this week, S&P Global India Services PMI for September will be released on Thursday. On Friday, RBI will announce the monetary policy decision. These figures could give a clear direction of the USD/INR pair.

• Gold price continues losing ground for the sixth straight day and drops to a fresh six-month low.
• Bets for further policy tightening by the Fed turn out to be a key factor weighing on the “XAU/USD”.
• The risk-on impulse further contributes to driving flows away from the safe-haven precious metal.

Gold price (XAU/USD) settled deep in the red on Friday to end September down over 4.5% and lower for the second quarter in a row. The yellow metal also recorded its biggest weekly decline in more than two years on growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer. In fact, the US central bank left the benchmark rate unchanged at its September meeting, though maintained the projection for one more rate hike by the year-end.

Gold price did gain some respite on Friday following the release of the Personal Consumption Expenditures (PCE) Price Index from the United States (US), though the uptick ran out of steam rather quickly. The data does little to change the view that the Fed will continue to tighten its monetary policy. The outlook, meanwhile, triggers a fresh leg up in the US Treasury bond yields on Monday and continues to drag the XAU/USD lower for the sixth successive day.

This also marks the ninth day of a negative move in the previous ten and drags the Gold price to its lowest level since March 13, around the $1,843-1,842 region during the Asian session. Apart from hawkish Fed expectations, the risk-on impulse is seen as another factor undermining the safe-haven precious metal. The global risk sentiment gets a boost in reaction to slightly better official Chinese PMIs and the passage of a stopgap US government funding bill over the weekend.

The aforementioned fundamental backdrop suggests that the path of least resistance for the Gold price is to the downside, though extremely oversold conditions warrant caution for bearish traders. Investors might also refrain from placing fresh directional bets ahead of important US macro data scheduled at the beginning of a new month. A rather busy week kicks off with the release of the US ISM Manufacturing PMI on Monday, though the focus will remain on the closely watched monthly employment details, popularly known as the NFP report on Friday.

Daily Digest Market Movers: Gold price refreshes multi-month low on hawkish Fed expectations

• Market participants seem convinced that the Fed will stick to its hawkish stance and keep rates higher for longer.
• The US PCE Price Index rose in line with consensus estimates, to 3.5% over the past twelve months through August.
• The annual Core PCE Price Index – the Fed's preferred gauge of inflation – decelerated from 4.3% in July to 3.9%.
• The rise in consumer spending, meanwhile, along with surging gasoline prices, points to higher prices going forward.
• Hawkish Fed expectations keep the 10-year US Treasury yield elevated near a 16-year top and underpin the US Dollar.
• The official Chinese PMIs showed that business activity in the manufacturing sector grew for the first time in six months.
• The US Congress on Sunday approved the stopgap funding bill to avert a government shutdown for another 45 days.
• Traders now look to the US ISM Manufacturing PMI, expected to come in at 47.9 in September, for a fresh impetus.
• Investors might refrain from placing fresh directional bets ahead of the closely-watched US NFP report on Friday.

Technical Analysis: Gold price could pause the descending trend amid oversold conditions

From a technical perspective, the Relative Strength Index (RSI) on the daily chart is already flashing oversold conditions and warrants some caution for bearish traders. Hence, it will be prudent to wait for some near-term consolidation or a modest bounce before positioning for an extension of the ongoing downward trajectory. Nevertheless, the Gold price seems poised to test the next relevant support near the $1,820 level before eventually dropping to the $1,800 mark. On the flip side, the $1,850 level is likely to act as an immediate barrier, which if cleared might trigger a short-covering move. The subsequent move up, however, might still be seen as a selling opportunity and cap the XAU/USD near the $1,863-1,864 resistance zone.

• Gold price faces challenges after the moderate US data on Friday.
• US passed bills to avert a government shutdown, securing funding until November 17.
• Higher US Treasury yields put pressure on non-yielding assets like Gold.

Gold price extends its losing streak that began on September 25, trading lower around $1,840 per troy ounce during the Asian session on Monday.

China’s Manufacturing PMI data was released over the weekend, which showed improvement into positive territory but failed to provide any support for the Gold prices. China’s NBS Manufacturing PMI for August grew to 50.2 from the previous 49.7 figures, exceeding the 50.0 expected.

Additionally, the Non-Manufacturing PMI rose to 51.7 from the 51.0 previous reading, surpassing the market consensus of 51.5.

The US Dollar Index (DXY) holds ground to continue to gain in the second trading session after the moderate datasets from the United States (US). The spot price bids higher around 106.20.

Additionally, the upbeat US Treasury Yields are contributing support to the USD’s strength. The yield on the 10-year US Treasury bond stands at 4.61% by the press time, up by 0.96%.

The prices of precious metals face challenges, primarily due to the upbeat US Dollar (USD) after the moderate economic data released on Friday. US Michigan Consumer Sentiment Index (Sep) improved to 68.1 from the previous figure of 67.7, which was expected to remain unchanged.

US Core PCE - Price Index (YoY) for August rose 3.9% as estimated, eased from the previous reading of 4.3%. Core PCE (MoM) showed a soft reading of 0.1% against the market consensus to be consistent at the 0.2% prior.

Following the Friday session, bills were successfully passed in the US to avert a government shutdown, securing funding until November 17. This development has prompted a resumption of the US Dollar Index (USD) upward trajectory.

The Gold traders will likely watch the upcoming US ISM Manufacturing PMI for September ahead of the Fed’s Chair Jerome Powell's speech on Monday.

• USD/CAD receives upward support after the moderate US data on Friday.
• US bills were successfully passed to avert a government shutdown, securing funding until November 17.
• The recovery in Crude oil prices could limit the losses of the Canadian Dollar.

USD/CAD kicks off the week by continuing the gains in the second trading session. The spot price is bidding the quotes higher around 1.3580 during the early Asian session on Monday.

The US Dollar Index (DXY) holds ground to continue to gain in the second trading session after the moderate datasets from the United States (US). The spot price bids higher around 106.20.

Additionally, the upbeat US Treasury Yields are contributing support to the USD’s strength. The yield on the 10-year US Treasury bond stands at 4.61% by the press time, up by 0.96%.

The USD/CAD pair faces upward support, primarily due to the upbeat US Dollar (USD) after the moderate economic data released on Friday. The US Michigan Consumer Sentiment Index (Sep) improved to 68.1 from the previous figure of 67.7, which was expected to remain unchanged.

US Core PCE - Price Index (YoY) for August rose 3.9% as estimated, eased from the previous reading of 4.3%. Core PCE (MoM) showed a soft reading of 0.1% against the market consensus to be consistent at the 0.2% prior.

Following the Friday session, bills were successfully passed in the US to avert a government shutdown, securing funding until November 17. This development has prompted a resumption of the US Dollar Index (USD) upward trajectory.

On the other side, the CAD received downward pressure due to the downbeat Gross Domestic Product (MoM) data for July, which reported flat at 0.0% against the market expectations of 0.1% growth. The GDP was at 0.2% contraction in June.

Crude oil prices retreated from one-year highs over the last two trading sessions in the previous week, due to market caution on the Fed’s interest rates trajectory. This development weakened the Canadian Dollar (CAD) against the Greenback as Canada is the biggest oil exporter to the United States (US).

However, Western Texas Intermediate (WTI), the US crude oil benchmark attempts to break the losing streak on Monday, trading around $90.10 per barrel.

Traders await US ISM Manufacturing PMI for September ahead of the Fed’s Chair Jerome Powell's speech on Monday. The Canada’s S&P Global Manufacturing PMI (Sep) will also be eyed.

• USD/MXN remains depressed for the third successive day on Monday.
• The mixed technical setup warrants some caution for bearish traders.
• Any further decline towards the 17.2500 support could get bought into.

The USD/MXN pair attracts some sellers near the 17.4420 area during the Asian session and trades with a mild negative bias for the third successive day on Monday. Spot prices, however, manage to hold above a multi-day touched on Friday and currently hover around the 17.4000 level, down just over 0.10% for the day.

From a technical perspective, last week's failure near the 17.8175 confluence – comprising a declining trendline extending from the July swing high and the very important 200-day Simple Moving Average (SMA) – and the subsequent slide favours bearish traders. That said, oscillators on the daily chart are holding in the positive territory and warrant some caution before positioning for any further losses for the USD/MXN pair.

Hence, any further decline is more likely to find decent support near the 17.2510-17.2500 horizontal zone. The mentioned area should act as a pivotal point, which if broken decisively will reaffirm the negative outlook and drag the USD/MXN pair to the next relevant support near the 17.0400 area en route to sub-17.0000 levels (September 20 low). The downward trajectory could get extended further towards the 16.7550 support.

On the flip side, the 17.5415-17.5420 region now seems to act as an immediate hurdle ahead of the 17.6695-17.7000 area. Some follow-through buying should allow the USD/MXN to challenge the aforementioned confluence, around the 17.8100-17.8175 zone. A convincing breakout through will be seen as a fresh trigger for bullish traders and pave the way for an extension of the recent recovery from a multi-year low touched in August.

USD/MXN daily chart

Technical levels to watch

• USD/JPY gains traction near 149.70 amid the USD demand.
• BoJ Governor said that the central bank has a long way to go before exiting its ultra-loose monetary policy.
• The US annual Core PCE Price Index grew 3.9% from 4.3% in July, in line with expectations.
• Investors will monitor the US ISM Manufacturing PMI, Fed Chair Powell’s speech.

The USD/JPY pair holds positive ground around 149.70 during the early Asian session on Monday. The pair trades at the highest level in 11 months after bouncing off the low of 148.52 following the release of the Bank of Japan (BoJ) Summary of Opinions. Meanwhile, the US Dollar Index (DXY) holds above 106.00 amid the renewed demand.

On Saturday, BoJ Governor Kazuo Ueda said that there was "a distance to go" for BoJ before exiting its ultra-loose monetary policy. Earlier Monday, BoJ Summary of Opinions at the Monetary Policy Meeting on September 21 and 22 stated that BOJ does not need to make additional tweaks to YCC as long-term rates moving fairly stably and said that the end to negative rate must be tied to success of achieving 2% inflation target. One board member added that given recent FX and oil price moves, there is a chance

Furthermore, the latest data from the BoJ showed overall business conditions of the large manufacturing companies in Japan improved in the third quarter (Q3). The Japanese Tankan Large Manufacturing Index (Q3) came in at 9.0 from the previous reading of 5.0, better than the expectation of 6.0.

Across the pond, Federal Reserve (Fed) Bank of New York President John Williams said on Friday that the central bank is at or near peak for the federal funds rate while mentioning that the Fed will need a restrictive policy stance for some time to achieve goals. Traders will take cues from the Fed’s Chair Jerome Powell's speech later in the American session on Monday.

About the data, the US Bureau of Economic Analysis reported on Friday that the Personal Consumption Expenditures (PCE) Price Index climbed 3.5% YoY in August from the previous month of 3.4%, in line with the market estimation. The annual Core PCE Price Index grew 3.9% from 4.3% in July, meeting the expectation. On a monthly basis, the PCE Price Index and the Core PCE Price Index rose by 0.4% and 0.1% MoM, respectively. Both of these figures came in below the market estimations.

In the absence of top-tier economic data released from the Japanese docket this week, the USD/JPY pair remains at the mercy of USD price dynamics. However, traders will be cautious about the potential FX intervention from Japanese authorities as the pair trades near the 150.00 mark. Also, the US ISM Manufacturing PMI for September will be due on Monday ahead of the Fed Chair Powell’s speech.

Japanese Finance Minister Shunichi Suzuki is crossing the wires early Monday, continuing with the verbal intervention, as the USD/JPY pair approaches 150.00 once again.

Suzuki said that he was watching currency moves "cautiously", per Bloomberg.

Market reaction

At the time of writing, USD/JPY is adding 0.30% on the day to trade near 149.70.

• GBP/USD struggles to gain any meaningful traction and oscillates in a narrow trading range.
• The risk-on impulse is seen undermining the safe-haven USD and lending support to the major.
• The divergent Fed-BoE policy outlook should keep a lid on any meaningful upside for the pair.

The GBP/USD pair finds some support near the 100-hour Simple Moving Average (SMA) during the Asian session on Monday, albeit struggles to attract any meaningful buying and oscillates in a range just below the 1.2200 mark.

A small gap higher opening for the US equity futures holds back traders from placing fresh bullish bets around the safe-haven US Dollar (USD), which, in turn, is seen acting as a tailwind for the GBP/USD pair. The global risk sentiment gets a goodish lift in reaction to the encouraging weekend news on China's economy and the funding for the US government. The official Chinese PMIs showed that business activity in the manufacturing sector recorded growth for the first time in six months and the services sector remained in expansion territory during September. Adding to this, the US Congress approved the stopgap funding bill to avert a government shutdown for another 45 days and further boosted investors' confidence.

The US macro data released on Friday, meanwhile, does little to change the view that the Federal Reserve (Fed) will stick to its hawkish stance and help limit the downside for the USD, capping gains for the GBP/USD pair. The US PCE Price Index rose in line with consensus estimates, to 3.5% over the past twelve months through August from the the previous month's upwardly revised reading of 3.4%. that said, the annual Core PCE Price Index – the Fed's preferred gauge of inflation – eased from the 4.3% (revised from 4.2%) increase recorded in July and dipped below 4% for the first time in over two years. Inflation, however, remains elevated above the 2% target and supports prospects for further tightening by the Fed.

The outlook remains supportive of a fresh leg up in the US Treasury bond yields and favours the USD bulls. Apart from this, the fact that the Bank of England (BoE) surprisingly paused its rate-hiking cycle earlier this month and provided little hints of its intention to raise rates any further contributes to keeping a lid on the GBP/USD pair. This makes it prudent to wait for strong follow-through buying before positioning for any meaningful recovery from the vicinity of the 1.2100 mark, or the lowest level since March touched last week. Market participants now look to the release of the US ISM Manufacturing PMI for some impetus ahead of Fed Chair Jerome Powell's scheduled speech later during the early North American session.

Technical levels to watch

• Australian Dollar holds ground ahead of the RBA interest rates decision on Tuesday.
• Australia’s TD Securities Inflation grew 5.7% in September, lower than 6.1% in August.
• US Core PCE for August rose as estimated but lowered than July’s figures.

The Australian Dollar (AUD) holds ground to continue the winning streak on the third successive day on Monday. The AUD/USD pair receives upward support, primarily supported by the Chinese upbeat PMI data released on the weekend. However, the US Dollar (USD) continues to demonstrate resilience after the moderate economic data released on Friday.

Australia’s TD Securities Inflation (YoY) data showed that inflation estimation in September was lower than August’s readings. The Reserve Bank of Australia (RBA) is expected to keep the interest rate unchanged in the upcoming policy meeting on Tuesday.

However, the Consumer Price Index (CPI) in Australia for the month showed improvement compared to July, which could be attributed to the increasing energy prices. The rise in inflation could impact the RBA’s policy decision.

The US Dollar Index (DXY) holds ground to continue to gain in the second trading session after the moderate datasets from the United States (US). Core Personal Consumption Expenditures (PCE) - Price Index (YoY) for August rose as estimated but lowered than July’s figures.

US Core PCE (MoM) showed a soft reading against the market consensus. While the Michigan Consumer Sentiment Index (Sep) improved from the previous figures.

Additionally, the USD’s strength is attributed to the positive performance of US Treasury yields. The yield on the 10-year US Treasury note hovers below the record highs.

Daily Digest Market Movers: Australian Dollar attempts to gain amid market caution surrounding Fed’s interest rates trajectory, RBA decision

• AUD/USD extends gains, trading around 0.6430 at the time of writing during early Asian trading hours on Monday.
• The Aussie Dollar could further face challenges due to increased market caution surrounding the US Federal Reserve (Fed) interest rates trajectory.
• RBA is expected to keep current interest rates at 4.1% in the upcoming policy meeting on Tuesday. 
• Australia’s TD Securities Inflation (YoY) rose 5.7% in September, lower than 6.1% in August.
• Australia’s Monthly Consumer Price Index (CPI) year-over-year for August rose 5.2% as expected, up from the previous rate of 4.9%.
• China’s Manufacturing PMI data rose into positive territory. China’s NBS Manufacturing PMI for August grew to 50.2 from the previous 49.7 figures, exceeding the 50.0 expected.
• Additionally, the Non-Manufacturing PMI rose climbed to 51.7 from the 51.0 previous reading, surpassing the market consensus of 51.5 readings.
• US Core PCE - Price Index (YoY) for August rose 3.9% as estimated, eased from the previous reading of 4.3%. Core PCE (MoM) showed a soft reading of 0.1% against the market consensus to be consistent at the 0.2% prior.
• US Michigan Consumer Sentiment Index (Sep) improved to 68.1 from the previous figure of 67.7, which was expected to remain unchanged.
• After the Friday session, bills were successfully passed in the US to avert a government shutdown, securing funding until November 17. This development has prompted a resumption of the US Dollar Index (USD) upward trajectory.
• Chicago Fed President Austan Goolsbee expressed confidence on Thursday that the Fed will bring inflation back to its target. Goolsbee also highlighted the rare opportunity to achieve this without a recession, indicating the US Federal Reserve’s (Fed) commitment to managing inflation while sustaining economic growth.
• Fed President Thomas Barkin acknowledged that recent inflation data has been positive but emphasized that it's premature to determine the future course of monetary policy. Barkin also noted that the data lost during a government shutdown could complicate the understanding of the economy.
• Traders await US ISM Manufacturing PMI for September ahead of the Fed’s Chair Jerome Powell's speech on Monday. The RBA interest rate decision will be eyed on Tuesday.

Technical Analysis: Australian Dollar hovers below 0.6450, barrier at 23.6% Fibonacci retracement

Australian Dollar trades around 0.6430, followed by 0.6450 psychological level. A firm break above the latter could support the Aussie Dollar (AUD) to explore the region around 23.6% Fibonacci retracement at 0.6464 level, followed by the 50-day Exponential Moving Average (EMA) at 0.6482. On the downside, September’s low at 0.6331, followed by the 0.6300 psychological emerges as the key support.

AUD/USD: Daily Chart

• NZD/USD remains flat around 0.5994 ahead of the Reserve Bank of New Zealand (RBNZ) rate decision.
• New Zealand’s Building Permits for August came in at -6.7% MoM vs. -5.4% prior.
• The annual Core PCE Price Index grew 3.9% from 4.3% in July, in line with expectations.
• Market players await the US ISM Manufacturing PMI, RBNZ monetary policy meeting.

The NZD/USD pair consolidates below the 0.6000 mark after retracing from the seven-week highs of 0.6048 during the early Asian session on Monday. Traders prefer to wait on the sidelines ahead of the US ISM Manufacturing PMI data and the Reserve Bank of New Zealand (RBNZ) rate decision. The pair currently trades near 0.5996, up 0.05% for the day.

The latest data from Statistics New Zealand on Monday revealed that the nation’s Building Permits for August came in at -6.7% MoM from the previous reading of -5.4%. The Reserve Bank of New Zealand (RBNZ) will announce its interest rate decision on Wednesday, and the Official Cash Rate (OCR) is expected to remain steady at 5.5%. 

Apart from this, economic data released on Saturday showed that the Chinese Caixin/S&P Global Manufacturing Purchasing Managers' Index (PMI) dropped to 50.6 in September from the previous reading of 51.0, below the market consensus of 51.2. The Service PMI came in at 50.2 from 51.8 in the previous month. These figures indicated a sign of stabilization in the world's second-largest economy. However, the future is clouded by a housing downturn and plummeting exports, which could weigh on the China-proxy New Zealand Dollar (NZD).

On the US dollar front, the US Bureau of Economic Analysis showed on Friday that the Personal Consumption Expenditures (PCE) Price Index rose by 3.5% YoY in August from 3.4% in July, meeting market estimation. The annual Core PCE Price Index grew 3.9% from 4.3% in July, in line with expectations. On a monthly basis, the PCE Price Index and the Core PCE Price Index rose 0.4% and 0.1% MoM, respectively. Both of these figures came in below the market consensus.

Federal Reserve (Fed) Bank of New York President John Williams said on Friday that the central bank is at or near peak for the federal funds rate while mentioning that the Fed will need a restrictive policy stance for some time to achieve goals. Traders will take cues from the Fed’s Chair Jerome Powell's speech later in the American session on Monday.

On Saturday, the US Congress passed a bill to prevent a government shutdown and keep the government running for 45 days. The vote extends government funding through November 17.

Market participants will focus on the US ISM Manufacturing PMI for September ahead of the Fed Chair Powell’s speech on Monday. The key event will be the RBNZ Interest Rate Decision on Wednesday. Traders will take cues from these events and find trading opportunities around the NZD/USD pair.

• EUR/USD struggles for a firm direction and oscillates in a narrow band on Monday.
• The risk-on impulse undermines the safe-haven USD and lends support to the pair.
• Expectations that further ECB rate hikes may be off the table undermine the Euro.
• Traders look to the US ISM PMI for a fresh impetus ahead of Fed Powell’s speech.

The EUR/USD pair kicks off the new week on a subdued note and oscillates in a narrow trading band, just above mid-1.0500s during the Asian session.

The global risk sentiment gets a goodish lift in reaction to slightly better-than-expected official Chinese PMIs and the passage of a stopgap US government funding bill over the weekend. The upbeat market mood keeps a lid on any meaningful upside for the safe-haven US Dollar (USD) and lends some support to the EUR/USD pair. That said, growing acceptance that the next move by the European Central Bank (ECB) is likely to be a rate cut continues to act as a headwind for the shared currency.

Signs of the beginning of the end of the high inflation in the Eurozone, along with speculations about a possible contraction in GDP during the second half of the year, have been fueling bets that additional ECB rate hikes may be off the table for now. The expectations were reaffirmed by the latest Eurozone consumer inflation figures released on Friday, which showed that that the core gauge, which strips out the volatile categories of food, fell to 4.5% in September from the 5.3% previous.

The US Personal Consumption Expenditures (PCE) data, on the other hand, does little to change the market view that the Federal Reserve (Fed) will continue to tighten its monetary policy. This continues to underpin the USD and hold back bulls from placing aggressive bets around the EUR/USD pair. In fact, the US PCE Price Index rose in line with consensus estimates, to 3.5% over the past twelve months through August from the the previous month's upwardly revised reading of 3.4%.

That said, the annual Core PCE Price Index – the Fed's preferred gauge of inflation – eased from the 4.3% (revised from 4.2%) increase recorded in July to 3.9% during the reported month. Meanwhile, the rise in consumer spending, along with surging gasoline prices, points to higher prices going forward. This ensures that the US central bank will stick to its hawkish stance and keep rates higher for longer, which remains supportive of elevated US Treasury bond yields and favours the USD bulls.

Hence, it will be prudent to wait for strong follow-through buying before positioning for an extension of the EUR/USD pair's modest bounce from sub-1.0500 levels, or a multi-month low touched last week. Traders might also prefer to wait on the sidelines ahead of important US macro data scheduled at the beginning of a new month. A rather busy week kicks off with the release of the US ISM Manufacturing PMI, which, along with a speech by Fed Chair Jerome Powell, will influence the USD price dynamics later during the early North American session and provide some impetus to the pair.

Technical levels to watch

The Bank of Japan (BoJ) Summary of Opinions at the Monetary Policy Meeting on September 21 and 22, 2023, per Reuters.

Key quotes

Market reaction

This headline had little to no impact on the Japanese Yen's performance against its rivals. As of writing, the USD/JPY pair was up 0.15% on the day at 149.60.