Новини ринків

• EUR/JPY hovers at 157.66, seeking direction amidst a prevailing consolidation phase.
• Upside capped by Ichimoku Cloud; a breach of 158.26 needed to target September highs.
• Bearish signals from Chikou Span and Tenkan-Kijun cross may direct focus towards 156.40/49.

EUR/JPY traded sideways for the second straight day, though it printed gains of 0.52% on Tuesday and closed at 157.70. As Wednesday’s Asian Pacific session begins, the cross-currency pair is trading at 157.66, registering minuscule losses of 0.02%, at the time of writing.

Although the daily chart shows the pair remains in consolidation, it remains tilted to the downside as it has failed to record higher highs, since October 6 at 158.26. A breach of the latter is needed, which would put into play, the next cycle high printed on September 13 daily high at 158.65.

Consequently, the EUR/JPY is capped on the upside by the top of the Ichimoku Cloud (Kumo), which if broken could pave the way for further upside. Nevertheless, price action is tracking the top of the Kumo, and with market sentiment being fragile and the Chikou Span crossing below price action, a bearish signal, the pair could test the bottom of the Kumo at 155.50/60. Additionally, the Tenkan-Sen crossing below the Kijun-Sen could act as a magnet, and price action aims towards the 156.40/49 area.

EUR/JPY Price Action – Daily chart

EUR/JPY Technical Levels

Analysts with Toronto-Dominion Securities (TDS) note that US Consumer Price Index (CPI) figures due this week are likely to see a mild printing for September.

US CPI Scanner: Looking for firmer signs of deflationary pressures

• US equities saw mild lift on Tuesday, with broader indexes rising across the board.
• Investors are leaning into expectations of no more rate hikes from the Fed.
• With US inflation figures due later this week, investors will get the chance to readjust their expectations.

The Standard & Poor's 500 major equity index climbed on Tuesday, reaching an intraday peak of $4,382.92 before settling back slightly into $4,357, gaining 22.58 points, or 0.52%.

The other major equity boards saw similar gains for the day, with the Dow Jones Industrial Average (DJIA) climbing 134.65 points to $33,739.30, gaining 0.40%, and the NASDAQ Composite index rising 78.60 point to close up 0.58% at $13,562.84.

Federal Reserve (Fed) officials came in mixed on Tuesday, but mostly on-brand for the US central bank; inflation remains elevated, but the Fed sees price growth pressures subsiding into the future, and if inflation figures continue to waft softly lower, it's unlikely that the Fed will see additional rate hikes to close out 2023.

Fed officials cool inflation expectations, but warn that policy room remains

Fed's Bostic: We don't need to increase rates any more

NY Fed's Perli: No sign yet Fed needs to change balance sheet plans

Fed's Kashkari: We may have to raises rates further if the economy stays too strong

The weekend's geopolitical escalation of the long-running Israel-Hamas conflict saw concerns about stability in the Middle East on the rise, but equities have absorbed the escalation, and investors will be keeping an eye out for an escalation of combative rhetoric from the US against Iran or Saudi Arabia.

The US, an ardent supporter of Israel, has a finger on the trigger if Iran makes any moves to prop up the Palestinian Hamas, but despite the risks, equity markets have shrugged off the potential for escalation until more evidence presents itself.

S&P 500 Technical Outlook

Tuesday's gains see the S&P 500 edge higher and close in the green for the third consecutive trading day, and the index has closed higher for four of the last five market sessions.

The S&P 500 recently rebounded from the 200-day Simple Moving Average (SMA) near $4,225, but a continuation of bullish momentum will need to overcome a bearish 50-day SMA, currently descending into $4,400.

S&P 500 Daily Chart

S&P 500 Technical Levels

• USD/PEN trades with losses at the 3.8200 area.
• Investors await inflation figures from the US on Thursday, which are expected to have decline in September.
• Dovish Fed officials make the US Dollar lose interest, but the escalation of the Israeli conflict may limit the losses.

On Tuesday, the USD/PEN saw downward movements and declined to 3.8200. On the one hand, Federal Reserve (Fed) officials are delivering dovish messages which weaken the green currency, while the PEN is seen as vulnerable after last week’s rate cuts by the Peruvian Central Bank.

In line with that, after Lorie Logan stated on Monday that the Fed has “less need to continue hiking”, Raphael Bostic added during Tuesday’s session that the bank “doesn't need to increase rates any more”. As a reaction, US bond yields are retreating but remain high, with the 2,5 and 10-year rates standing at 4.96%,4.61% and 4.67%.

On Wednesday, the Federal Open Market Committee (FOMC) will release its September meeting minutes. For Thursday’s session, investors will closely watch the September Consumer Price Index (CPI) figures from the US, which is expected to decline to 3.6% YoY and the Core measure, which is seen falling to 4.1%. In that sense, both events will impact the expectations of the following Fed decisions and, hence, the USD price dynamics.

On the PEN side, the currency seems to be losing interest after last Thursday's Banco Central de Reserva del Peru (BCRP) decision to reduce the rate to 7.25%. However, the policy statement indicated that the decision doesn’t imply a cycle of successive interest rate cuts, as further adjustments will depend on incoming information. 

USD/PEN Levels to watch 

 The technical outlook for the USD/PEN is bullish for the short term, but indicators flash overbought conditions, suggesting that more downside may be on the horizon. The Relative Strength Index (RSI) stands above 70, while the Moving Average Convergence (MACD) prints stagnant green bars. Also, the pair is above the 20,100,200-day Simple Moving Average (SMA), implying that the bulls retain control on a broader scale.

Support levels: 3.7705, 3.7484 (20-day SMA), 3.7350.

 Resistance levels: 3.8360, 3.8490, 3.8600.

USD/PEN Daily Chart

• XAU/USD is sticking close to Tuesday's opening bids after Monday's 1.5% gainer.
• Market sentiment is shifting, but holding steady after the weekend's Gaza Strip escalation.
• US Treasury yields are easing for Tuesday, sapping momentum from spot Gold.

The XAU/USD Gold spot price is holding flat for Tuesday's trading session after the weekend's geopolitical strain from an escalating Gaza Strip conflict sent Gold climbing nearly 3% from a near-term low of $1,810.51.

Gold's response to a ramping up of geopolitical tensions in the Middle East is likely subdued by inflation expectations and investors leery of the Federal Reserve's (Fed) rate outlook; the Fed has kept the door wide open for an additional rate hike before the end of 2023, but a mix of dovish and hawkish comments from different Fed officials on Tuesday are obscuring the way forward.

Fed's Kashkari: We may have to raises rates further if the economy stays too strong

NY Fed: Year-ahead expected inflation edges higher to 3.7% from 3.6% in August

Inflation risks remain a key driver of Gold spot prices, and investors will be keeping a close eye on the Fed before making any major market moves.

Upshot commodity prices on geopolitical tensions and inflation fears will likely remain muted moving forward until investors draw a sharper forecast on the Fed's "dot plot" rate hike expectations looking towards 2024.

XAU/USD Technical Outlook

Spot Gold remains firmly bearish in the medium-term despite the recent rebound in XAU/USD prices, trading far below the 200-day Simple Moving Average (SMA) near $1,930, and an extended bullish move for Gold will quickly run into resistance from the 50-day SMA currently sinking into the $1,900 handle.

XAU/USD sees itself well off 2023's highs near $2,080, with spot Gold down over 10.5%, or $220 per ounce.

If Gold prices continue to sink, the XAU/USD will be set to make a fresh low for the year and make a challenge of the $1,800 major handle, a price that hasn't been by spot Gold since last December.

XAU/USD Daily Chart

XAU/USD Technical Levels

During the Asian session, RBA Deputy Governor Kent will deliver a speech. Additionally, Japan will release its Machinery Tool Orders report. Later in the day, the key reports to watch for will be the US Producer Price Index (PPI) and the release of the FOMC minutes.

Here is what you need to know on Wednesday, October 11:

The US Dollar lost ground again as the improvement in market sentiment continued, and US yields remained far from recent highs. The 10-year yield settled at 4.65%, while the 2-year yield slipped below 5%. The DXY index posted its lowest daily close since September 18, dropping below 106.00.

On Wednesday, the US will release the September Producer Price Index (PPI), which could have significant implications if it surprises to the upside. Later in the day, the Federal Reserve (Fed) will release the minutes from the September FOMC meeting. On Thursday, the Consumer Price Index (CPI) is due.

Wall Street finished with gains on Tuesday, which weighed on the US dollar. Crude oil pulled back modestly, trading within moderate ranges. Commodity prices showed mixed moves, holding onto recent gains. The situation in the Middle East continues to be a source of uncertainty.

EUR/USD rose above the 20-day Simple Moving Average (SMA) for the first time since August. The pair is trading around 1.0600 and faces key resistance at 1.0630. Germany will release the final CPI for September on Wednesday.

GBP/USD also rose above the 20-day SMA. The rally faded near 1.2300, but short-term momentum still favors the Pound.

The Japanese yen was the underperformer on Tuesday among G10 currencies. The modest rebound in yields combined with rising equity prices weighed on the currency. USD/JPY peaked above 149.00 but then pulled back to 148.60.

AUD/USD rose for the fifth consecutive day. The pair is holding firm above 0.6400, looking set to extend the recovery. Key resistance awaits at 0.6500.

NZD/USD held above 0.6000 and posted its highest daily close in two months at 0.6040. It also rose for the fifth consecutive day.

USD/CAD moved sideways near the 1.3600 area as the Canadian Dollar consolidated recent gains. A flat 20-day SMA is awaits at 1.3555.

• EUR/GBP lingers at 0.8631, with 0.8628 emerging as a formidable demand zone.
• A breach below 0.8628 could unlock targets at 0.8605 and the pivotal 0.8600.
• Recovery above 0.8655 may pave the way for a test of the crucial 0.8700 barrier.

EUR/GBP prolongs its agony to seven straight days of losses, though it is capped on the downside by the latest cycle low reached on September 28 at 0.8628, which has acted as a strong demand zone. At the time of writing, the cross-currency pair is trading at 0.8631, losing 0.03%.

The daily chart portrays the pair as neutral to downward biased, but EUR/GBP sellers remain unable to crack 0.8628. A breach of the latter, and the 50-day moving average (DMA) at 0.8605 would be up for grabs, before challenging 0.8600. Once cleared, the next support would be the year-to-date (YTD) low of 0.8492.

Conversely, if EUR/GBP buyers lift the spot price past the October 10 daily high of 0.8655, they could test the 200-DMA and the 0.8700 figure confluence. A decisive break would expose the 0.8750 area, followed by the May 3 daily high at 0.8834.

EUR/GBP Price Action – Daily chart

EUR/GBP Technical Levels

Minneapolis Federal Reserve Bank President Neel Kashkari said on Tuesday that he believes the US economy is headed toward a soft landing but warned that it is not yet time to declare victory. Such a scenario would involve the unemployment rate not rising sharply and inflation gradually moving towards the 2% target.

Speaking at a town hall hosted by Minot State University, Kashkari mentioned that the US economy has shown unexpected resilience. He cautioned that if the economy becomes too strong, the central bank may have to raise rates further. Kashkari described the recent increase in the 10-year Treasury yield as "perplexing."

Market reaction

The US Dollar Index is falling for the fifth consecutive day, trading below 106.00, as US yields consolidate a recent decline. 
 

• AUD/USD lifts to 0.6422, benefiting from USD pressure as US Treasury yields recede.
• Geopolitical tensions, with conflict between Israel and Hamas, introduce potential headwinds for AUD.
• Upcoming US and Australian inflation data, alongside continued Fed commentary, to steer pair’s direction.

The Australian Dollar (AUD) registered modest gains versus the US Dollar (USD) late in the North American session, with the latter remaining under selling pressure as US Treasury bond yields began to pair their earlier losses. At the time of writing, the AUD/USD is trading at 0.6422, gaining 0.21% after bouncing from daily lows of 0.6390.

Aussie Dollar gains traction vs. a wavering US Dollar, while geopolitical and economic data looms large

AUD/USD continues to be driven by market mood as Wall Street prints gains of between 0.43% and 0.70%. Nevertheless, it could take a hit as the White House asks the US Congress to provide additional help to Israel amidst a conflict between the latter and Hamas that erupted over the weekend.

Data-wise, the US economic agenda featured the New York Fed Inflation expectations poll for September, which showed Americans are pessimistic about elevated prices, as they see inflation to remain at 3.7%, up from 3.6% in 12 months from now. For three years, they revised its target upward from 2.8% in August to 3%. Other data showed US small businesses are turning pessimistic, as the NFIB index came at 90.8, below forecasts of 91.4. The reasons behind the sentiment is high prices and labor shortages.

On the Australian side, business conditions remained resilient in September as inflation decelerated. At the same, October’s Consumer Sentiment rebounded as rates remained unchanged, but the mood remained clouded amid the increase of cost living.

Ahead of the week, the US economic agenda will feature the producer and consumer inflation on Wednesday and Thursday, respectively, while the Fed parade continues. On the Australian front, Consumer inflation expectations will be featured on Thursday.

AUD/USD Price Analysis: Technical outlook

The AUD/USD daily chart portrays the pair was shy of testing the 50-day moving average (DMA) at 0.6436, which exacerbated a retracement towards the 0.6420 area, opening the door for a downtrend continuation. For sellers, they must drag prices below 0.6400 to gather momentum to drive the spot price towards the year-to-date (YTD) low of 0.6285. Conversely if AUD/USD buyers reclaim the 50-DMA, that would open the door to challenge the 0.6500 figure.

The National Bank of Canada's Stéfane Marion is out with a report on Canada's record housing deficit which set an all-time low in the third quarter.

With Canadian housing costs soaring, supply constraints will only push mortgage lending costs and rents even higher, with Canadian home and shelter costs already seen dragging down economic growth for the foreseeable future.

Canada housing supply hits all-time deficit

• GBP/JPY advanced near 182.50, up by 0.44%.
• The 100 and 20-day SMA are converging towards 181.50.
• Indicators on the daily chart suggest that bullish momentum is still weak.

In Tuesday's session, the GBP/JPY gained ground and jumped to 182.50, but the daily chart's bullish momentum appears weak.

In line with that, the GBP/JPY has a neutral to bearish technical stance, with the bears gradually recovering and asserting themselves. Despite the Relative Strength Index (RSI) maintaining a positive slope above its midline, bulls appear not to have the necessary momentum to continue climbing. In addition, the Moving Average Convergence (MACD) exhibits stagnant green bars. To add to that, the 20 and 100-day Simple Moving Average are converging towards the 181.50 area, and in case of completing the cross, the bears could gather momentum, usually typical when a short-term crosses below a longer-term moving average.

In that sense, support levels line up at the 181.50 area, followed by the 181.00 and 180.00 area. On the other hand, resistances are seen at 183.00, 183.50 and 184.00.

GBP/JPY Daily chart

• The NZD/USD is seeing small gains on Tuesday, but is struggling to climb over near-term resistance.
• The Kiwi is getting knocked back from 0.6040 after building a floor from the 0.6000 handle.
• With the economic calendar anemic on the Kiwi side, market direction will be determined by US inflation figures this week.

The NZD/USD found some soft support for Tuesday's trading session, putting in a daily floor near 0.5998, but bullish momentum remains limited and the Kiwi (NZD) is struggling to find a foothold above 0.6040 against the US Dollar (USD).

Economic data on the calendar is incredibly thin and low-impact for the Kiwi this week, though NZD traders will want to keep one eye on the New Zealand Business NZ Purchasing Manager Index (PMI) for September, which last read at a contracting 46.1, and is slated to print at 21:30 GMT on Thursday.

Wednesday brings US Producer Price Index (PPI) figures, with the annualized September reading expected to tick upwards from 2.2% to 2.3%, while Thursday's Consumer Price Index (CPI) for the same period is forecast to print slightly back at 4.1% versus the previous 4.3%.

NZD/USD Technical Outlook

The Kiwi's Tuesday bounce is dragging the NZD/USD higher, but the 0.6050 handle remains the level to clear before the pair can claim new six-week highs, with the 50-day Simple Moving Average (SMA) now providing technical support from 0.5950, with technical resistance from the 200-day Simple Moving Average (SMA) sitting just below 0.6175.

Despite a near-term rebound from 2023's lows near 0.5850, the Kiwi remains firmly lower against the US Dollar for the year, down nearly 6% from the last meaningful swing high at July's peak near 0.6410, and in the red over 7.5% from 2023's February high at 0.6540.

NZD/USD Daily Chart

NZD/USD Technical Levels

With the Chinese Yuan depreciating against the US Dollar, keeping the USD/CNY pinned into yearly highs, economists at Nataxis note that things could continue to deteriorate for the Renminbi as foreign direct investment in China has collapsed recently, sparked by hostility from the Chinese government towards foreign corporate entities and a slumping domestic Chinese economy.

Direct investment by foreign companies has completely collapsed, from $400 billion annually in 2020 to just $20 billion in 2023.

Direct investment by foreign companies has collapsed in two years

• Silver price struggles beneath the $22 mark, forming a bearish 'harami' pattern on daily charts.
• Potential bearish continuation looms, with sights set on the October 9 low of $21.57.
• Recovery above $22.00 necessitates claiming $22.11, with subsequent hurdles noted at 20-day EMA.

Silver price (XAG/USD) loses some of its bright, retreats from around weekly highs of $22.01 and is back below the figure, exchanging hands at around $21.75, even though US Treasury bond yields continued to extend their losses.

The daily chart portrays the white metal was shy of reclaiming the June 23 swing low of $23.11, but failure to do it, exacerbated selling pressure at around the $22.00 mark. Consequently, XAG/USD dropped and is forming a two-candlestick bearish pattern, called a ‘bearish-harami’, the equivalent of an ‘inside day.’ A bearish continuation would happen, once Silver price slides below the October 9 swing low of $21.57, putting into play a test of the year-to-date (YTD) low of $19.90.

On the other hand, if XAG/USD recovers the $22.00 figure, buyers must claim a June 23 low of $22.11. A breach of the latter will expose the 20-day Exponential Moving Average (EMA) at $22.38 before testing the 50-day moving average (DMA) at $22.98.

XAG/USD Price Action – Daily chart

XAG/USD Technical Levels

• USD/CHF declined towards 0.9040,  consolidating below the 20-day SMA.
• Federal Reserve officials will be on the wires later in the session.
• FOMC minutes on Wednesday and CPI figures from September from the US the next week highlights.

The USD/CHF declined near the 0.9040 level and tallied its fifth straight day of losses. For the US Dollar, the economic calendar will remain empty on Tuesday. The only highlights are Christopher Waller and Neel Kashkari from the Federal Reserve (Fed) speaking later in the session. As Lorie Logan stated yesterday, tighter financial conditions may put less pressure on the Fed to continue hiking; both speakers could generate volatility in the bond markets if they provide clues on forward guidance and affect the US Dollar price dynamics. Likewise, no relevant reports or data will be released on the Swiss economic calendar.

In the meantime, the focus is set on Wednesday’s Federal Open Market (FOMC) minutes from the September meeting, where investors will look for further clues on the Fed official's stance. In addition, the US September inflation figures are due on Thursday, which are expected to see the headline and core Consumer Price Index (CPI) decelerating. Furthermore, traders should monitor the conflict in Israel as growing tensions could benefit the US Dollar as a safe haven.

USD/CHF Levels to watch 

The daily chart analysis indicates a bearish outlook for the USD/CHF in the short term. The Relative Strength Index (RSI) is below its midline in negative territory, with a negative slope, aligning with the negative signal from the Moving Average Convergence Divergence (MACD), which displays red bars, reinforcing the strong bearish sentiment. Additionally, the pair is below the 20-day Simple Moving Average (SMA), but above the 100 and 200-day SMAs, suggesting that the bulls are in command over the bears on the bigger picture.

Support levels: 0.9050, 0.9030, 0.9000.

 Resistance levels: 0.9073 (20-day SMA), 0.9150, 0.9170.
 

USD/CHF Daily Chart

• WTI in play near $85.00, trading flat after clipping higher following the weekend's Hamas-Israel conflict escalation.
• Crude Oil prices jumped as investors grow uneasy about geopolitical instability in the Middle East.
• Investors concerned about the potential for spillover from Gaza Strip into nearby countries, threatening major oil production in the region.

West Texas Intermediary (WTI) Crude Oil prices jumped on Monday after the long-running Gaza Strip conflict between Israel and Palestinian Hamas saw its largest escalation in over fifteen years. WTI barrels are trading near $85.00/bbl after the jump, from last week's lows near $80.60.

While Israel and Hamas are not major players in the oil scene, investors are concerned that geopolitics will spill over into neighboring Iran and Saudi Arabia, and a spreading conflict in the region could also threaten the stability of the Strait of Hormuz, a critical oil supply route that sees nearly a fifth of global oil distribution.

Iran, a public supporter of Hamas, has so far denied any connection or involvement in the Gaza conflict escalation, but market unease remains high about the possibility of further Iranian sanctions from the US, a supporter of Israel.

US politicians are doing little to assuage energy investor fears, with US Senator Lindsey Graham noting on Monday that the US should threaten Iranian oil infrastructure, stating that "If there is an escalation in this conflict, if hostages start getting killed, if Hezbollah in the north attacks Israel in strength, we should tell the Ayatollah we will destroy your oil refineries and your oil infrastructure." Oil barrel traders will be keeping a close eye on any rhetoric escalations from the US.

The US eased Iranian oil restrictions back in August as crude oil supplies drastically undershoot global demand, drawing down US oil reserves into record lows.

Keeping oil prices from spiraling out of control is slumping global demand for crude barrels and a massive overhang in gasoline reserves after refiners capitalized on recent spikes in crude prices, and investors will be looking out for further stimulus programs from China, which could re-ignite demand for oil, further constraining supply lines.

WTI Technical Outlook

WTI Crude Oil barrels climbed over 5.5% on Monday, and are currently splashing around near $85.00/bbl. Despite Monday's spike, WTI remains firmly lower from the recent peak of $93.98.

The recent chart decline in WTI barrel costs saw US oil prices tumble below a rising trendline from the June low of $67.14, and prices are currently hung up on the 50-day Simple Moving Average (SMA), with technical support coming from the 200-day SMA just south of the $78.00 handle.

WTI Daily Chart

WTI Technical Levels

• US Dollar continues consolidating early October gains.
• Inflation in the United States is expected to have decelerated in September.
• Christopher Waller and Neel Kashkari will be on the wires.

The US Dollar (USD) measured by the US Dollar DXY Index trades with losses despite US Treasury yields recovering and a cautious market mood amid the Middle East geopolitical conflict between Israel and the Hamas terrorist group. Investor’s focus is set on Wednesday’s Federal Open Market Committee (FOMC) from the September meeting and the Consumer Price Index (CPI) from the same month.

In the meantime, the United States economy still shows signs of not cooling down as September’s Nonfarm Payrolls (NFP) showed that job creation accelerated while unemployment rose and wage inflation declined. In addition, Manufacturing PMIs came in better than expected and contributed to investors placing hawkish bets on the Federal Reserve (Fed), which took the DXY index to multi-month highs above 107.00. For the rest of the session, investors will look for clues on the next Federal Reserve (Fed) movements on the Christopher Waller and Neel Kashkari speeches later in the session.

Daily Digest Market Movers: US Dollar consolidates last week’s rally; resilient US economy and Middle East geopolitical tensions could reignite its bullish momentum

• The US Dollar DXY index continues consolidating and declining towards 105.70, tallying more than 1% losses in October after peaking at 107.35.
• September Nonfarm Payroll (NFP) came in at 336,000, higher than the 170,000 expected and the previous 270,000. Unemployment rose to 3.8%, and Average Hourly Earnings decelerated to 4.2%.
• US S&P Manufacturing PMI from September came in at 49.2, higher than the expected previous 48.9.
• The ISM Manufacturing PMI rose to 49 vs the expected 47.7 and the previous 47.6.
• All in all, economic activity is showing resilience, and as the labour market is not cooling down, the Federal Reserve Officials (Fed) may consider one more rate hike.
• On Monday, Lorie Logan from the Fed stated that higher bond yields and restrictive financial conditions would mean “less need” for the central bank to continue hiking.
• Christopher Waller and Neel Kashkari from the Fed will be on the wires later in the session, where investors will look for clues regarding forward guidance.
• The minutes from September’s meeting of the Federal Open Market Committee (FOMC) are due on Wednesday, and the Consumer Price Index (CPI) figures from the same month are due on Thursday.

Technical analysis: US Dollar Index slides to 105.70 below the 20-day SMA

The US Dollar Index DXY sees a neutral-to-bearish technical outlook for the short term. The Relative Strength Index (RSI) displays a negative slope near the 50 middle-point while the Moving Average Convergence Divergence (MACD) stands in negative territory, indicating that the bears hold the upper hand in the short term.

That being said, the index is comfortably above the 100 and 200-day Simple Moving Averages (SMA), indicating that the bulls command the broader scale. If they fail to defend the 20-day average at 105.90, more downside may be on the horizon, with support lining up at 105.50, 105.30 and 105.00.

• EUR/USD rebounds from daily lows, capitalizing on a 17 bps plunge in US 10-year Treasury yields.
• Dovish remarks from Fed officials, hinting at a pause in rate hikes, further dampened USD’s appeal.
• Anticipation builds for forthcoming US and German inflation data, potentially swaying ECB and Fed stances.

The Euro (EUR) recovered ground against the US Dollar (USD) amidst dovish comments from Federal Reserve (Fed) officials, which spurred a drop In US Treasury yields a headwind for the Greenback (USD). The EUR/USD is trading at 1.0616 after bouncing from a daily low of 1.0554.

Euro bounces back against faltering US Dollar amidst dovish Fed tilt

A light economic calendar on both sides of the Atlantic keeps the EUR/USD entertained on US Dollar dynamics and market mood. The US 10-year Treasury bond yield has plunged 17 bps to 4.632% since Monday, undermining the Greenback as shown by the US Dollar Index (DXY). The DXY, which measures the US Dollar performance vs. a basket of six currencies, is diving for the fifth consecutive day, down 1.62%, after hitting a yearly high of 107.34. At the time of writing, it hovers around 105.67, losses 0.36% daily.

A slew of Fed policymakers struck the markets with dovish-tilted remarks, saying that higher long-term US bond yields might prevent them from increasing rates at the upcoming meetings. Today, Atlanta’s Fed President Raphael Bostic stated that monetary policy is already restrictive and that further increases are unnecessary.

Data-wise, the IS small business sentiment moderately decelerated due to inflation and labor shortages. A poll from the New York Fed showed that consumers are expecting inflation a year from not to hit 3.7%, above August’s 3.6%, while for a three-year, they see prices at 3%, from August’s 2.8%.

The drop in German bond yields is capping the EUR/USD advance on the Eurozone front, while the European Central Bank (ECB) is expected to halt its tightening cycle, according to market participants.

Ahead of the week, the US economic docket would feature inflation data on the producer and consumer side. Across the pond, Germany’s inflation is expected to slow down, which could reinforce the thesis that the ECB might keep rates unchanged.

EUR/USD Technical Levels

• GBP/USD catches a bid on improving market sentiment, setting a new two-week high.
• UK GDP, manufacturing & production figures due later in the week, BoE Gov Bailey to speak on Friday.
• US inflation data remains a key focus for broader markets, PPI and CPI in the barrel for Wednesday, Thursday.

The GBP/USD is trading higher on Tuesday as market sentiment cautiously recovers following the weekend's Israel-Hamas conflict escalation, and the Pound Sterling (GBP) is catching a bid into fresh two-week highs just shy of 1.2300.

It's a bumper week for US inflation data, with Producer Price Index (PPI) and Consumer Price Index (CPI) figures due tomorrow and Thursday respectively, but the Pound Sterling is also represented on the calendar, with Gross Domestic Product (GDP) and Industrial & Manufacturing Production numbers in the barrel for Thursday.

Federal Reserve (Fed) officials have been hitting the newswires for Tuesday, talking down the potential for further rate hikes, keeping the US Dollar (USD) on the low side and giving risk assets a chance to recover some ground.

Read More:

Fed's Bostic: We don't need to increase rates any more

NY Fed's Perli: No sign yet Fed needs to change balance sheet plans

UK GDP figures on Thursday are expected to show a mild recovery, with the monthly figure for August forecast to print at 0.2%, against the previous -0.5%.

Industrial & Manufacturing Production for the same period is expected to improve but still show minor declines, with the industrial component expected at -0.2% versus the previous -0.7%, and the manufacturing component is seen printing at -0.4% versus the previous -0.8%.

NY Fed: Year-ahead expected inflation edges higher to 3.7% from 3.6% in August

GBP/USD Technical Outlook

The Pound Sterling is set to close in the green for the fifth straight day against the US Dollar, having climbed over 2% from the last low at 1.2037, and the GBP/USD pair is set to take another run at climbing back over the 200-day Simple Moving Average (SMA) near 1.2441, though the 50-day SMA is moving bearish rapidly, declining into 1.2495 and set for a bearish cross of the longer moving average.

GBP/USD Daily Chart

GBP/USD Technical Levels

• USD/JPY experiences restrained gains, hindered by a notable drop in US Treasury bond yields.
• Dovish undertones from Fed officials contrast with potential BoJ policy normalization, creating crosscurrents.
• Anticipated inflation data and BoJ’s upcoming meeting poised to further dictate pair’s trajectory.

USD/JPY prints minimal gains on Tuesday after beginning the week on a lower note, weighed by the fall in US Treasury bond yields, which, continued but a risk-on impulse, is a headwind for the Japanese Yen (JPY), therefore the US Dollar (USD) remains bid. The major is trading at around 148.57 after hitting a daily low of 148.16.

Yen on the defensive amidst Wall Street gains, while dipping US Treasury yields cap USD/JPY upside

Wall Street is trading with solid gains, hence a headwind for safe-haven assets, mainly the Yen, which remains on the defensive as the Bank of Japan (BoJ) is set to extend its ultra-loose policy. Nevertheless, the USD/JPY rally was capped by the US Treasury bond yields plunge as the 10-year benchmark note sits at 4.632%, dropping 17 basis points since Monday.

the main driver in US bond yields has been dovish comments by US Federal Reserve (Fed) officials. Dallas Fed President Lorie Logan said that higher US bond yields “may mean there is less need to raise Fed rates further.” Echoing her comments was the new Fed Vice-Chair Philip Jefferson, saying he would “remain cognizant of the tightening in financial conditions through higher bond yields.” Since then, US bond yields have continued its downward direction, and inflation data to be revealed late in the week, could refrain officials from adopting a dovish stance.

Recently, Atlanta’s Fed President Raphael Bostic said inflation has improved considerably, adding, "I actually don't think we need to increase rates anymore.”

Meanwhile, the latest New York Fed poll showed that consumers expect inflation year from now to stay at 3.7%, exceeding August’s 3.6%, while for a three-year, they see prices at 3%, from the prior month’s 2.8%. Other data showed the US small business sentiment declining moderately blamed on high prices and labor shortages, the poll revealed.

On the Japanese front, the Bank of Japan (BoJ) is expected to raise tis 2023 core inflation forecasts to around 3%, at the upcoming meeting in October 30 and 31. The BoJ would also update their projections for 2024 and 2025, which if upward revised, could open the door towards policy normalization.

USD/JPY Price Analysis: Technical outlook

The daily chart portrays the pair as neutral-biased but slightly tilted to the downside, capped by the October 6 high at around 149.53, the latest cycle high, before reaching the 150.00 mark. For a bearish continuation, the pair must drop below the Kijun-Sen at 148.03, followed by the October 3 swing low of 147.27. Once those levels are cleared, the USD/JPY could test the 146.00 mark. Conversely, if buyers would like to regain control, they need to claim 149.00, so they could challenge 150.00.

• The Canadian Dollar is treading water after an extended weekend.
• Crude Oil is seeing thin action for Tuesday, sapping momentum from the Loonie.
• The broad-market focus remains on Gaza Strip geopolitics.

The Canadian Dollar (CAD) is trading flat against the US Dollar (USD) through the Tuesday market session, with only minor moves on the top and bottom ends. The pair set an early-day low of 1.3569 before rebounding to 1.3617, and the USD/CAD is now bouncing around the middle, testing below 1.3580.

Canada's economic data remains thin for the trading week’s release schedule, leaving the CAD exposed to US Dollar flows and broader investor sentiment.

Market focus remains firmly planted on the ongoing Gaza Strip escalation following Israel’s ongoing response to Hamas rocket attacks over the weekend. Investors are keeping an eye out for any geopolitical spillover from the Israel-Hamas conflict spreading to nearby Middle East countries.

Daily Digest Market Movers: Canadian Dollar sees little momentum for Tuesday

• CAD flat for Tuesday as investors wait for headlines.
• Crude Oil is trading softly back, keeping the Loonie constrained.
• Broad-market sentiment is recovering cautiously from the weekend’s geopolitical escalation.
• USD/CAD traders will be looking ahead to Wednesday Producer Price Index (PPI) figures for the US; expected to show a slight increase year-on-year from 2.2% to 2.3%.
• Inflation remains a key focus for markets as investors hope for signs that the US Federal Reserve (Fed) will get pushed to making rate cuts sooner.
• Thursday brings US Consumer Price Index (CPI) numbers, markets looking for a month-on-month decline from 0.6% to 0.3%.
• Crude Oil’s price jump on-reaction to Gaza Strip conflict is unlikely to spark long-term moves.
• Oil market suppliers are struggling to meet global demand, but a massive overhang in refined gasoline reserves is pressuring prices back down.

Technical Analysis: Canadian Dollar seeing minor gains, USD/CAD slipping from 1.36

The USD/CAD pair is testing lower but still firmly planted between Tuesday’s top and bottom, though a minor uptick for the Canadian Dollar is seeing the pair shed pips from the 1.3600 level.

The Greenback-Loonie pairing tumbled below the 200-hour Simple Moving Average (SMA) near 1.3640 in Monday’s trading, and the pair is struggling to develop a rebound.

Daily candlesticks see the USD/CAD declining for three straight days, down nearly 1.5% from the last high of 1.3785, and a continued decline will set the pair for a challenge of the 50-day SMA near 1.3536.
 

• Mexican Peso gathers momentum, breaks below 18.00 on overall US Dollar weakness.
• Mexico's prices continue to deflate, though the Bank of Mexico is likely to maintain rates at 11.25% for year-end.
• USD/MXN has fallen to a new three-day low at around 17.97, bolstered by a risk-on impulse.

Mexican Peso (MXN) rallies for the third consecutive trading day against the US Dollar (USD) as risk appetite is back on the financial markets, while the sudden plunge in US Treasury bond yields takes its toll on the Greenback (USD). US Federal Reserve (Fed) officials adopted a neutral stance, mentioning that high US bond yields on the long-term of the curve “may mean there is less need to raise Fed rates further,” according to Dallas Fed President Lorie Logan. Therefore, the USD/MXN is exchanging hands at around 17.98 after hitting a multi-month high at around 18.49.

The latest economic data in Mexico showed that inflation is decelerating, approaching the Bank of Mexico (Banxico) 3% plus or minus 1% target. Even though the data might suggest the Mexican central bank could shift its approach toward easing its monetary policy, officials expressed their desire to keep rates higher for longer. Aside from this, reports suggesting that China might consider a new round of stimulus sparked a risk-on impulse, as seen by the USD/MXN pair diving beneath the 18.00 figure.

Daily Digest Market Movers: Mexican Peso could test the 18.00 figure on sentiment improvement

• Atlanta’s Fed President Raphael Bostic: “We don’t need to increase rates anymore.”
• The US 10-year Treasury bond yield has dropped to a new six day low of 4.632%, a headwind for the USD/MXN.
• Wall Street is trading with solid gains of between 0.70% and 1.17%, portraying the improvement in risk appetite.
• Mexico's auto parts industry is expected to register a $412 million hit to production by Friday, spurred by the United Auto Workers (UAW) union strike in the US.
• Mexico’s Consumer Price Index (CPI) grew by 4.45% YoY in September, below the 4.47% of estimates.
• The core CPI inflation in Mexico stood stickier at 5.76% YoY, as widely estimated, but has broken below the 6% threshold.
• A Citi Banamex poll showed economists estimate headline inflation at 4.70% and core at 5.09% for the year’s end.
• Analysts polled by Citi Banamex foresee the USD/MXN to end 2023 at 17.80, up from 17.60, and for 2024 at 18.86, up from 18.70 two weeks ago.
• Banxico’s September poll amongst economists reported that interest rates are expected to remain at 11.25% while inflation would dip to 4.66%.
• The same poll shows the USD/MXN exchange rate is set to finish at around 17.64, down from 17.75.
• The Bank of Mexico (Banxico) held rates at 11.25% in September 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.

Technical Analysis: Mexican Peso strengthens, USD/MXN at the brink of dropping below 18.00

Mexican Peso has regained its composure, with the USD/MXN pair gaining downward traction toward the 18.00 figure due to overall US Dollar weakness. Even if the USD/MXN drops below 18.00, sellers must claim key support levels on the way down to regain control and retest the September 30 low of 17.34. First, the 200-day Simple Moving Average (SMA) at 17.78, followed by the 20-day SMA at 17.54. Conversely, if USD/MXN buyers manage to keep the exchange rate above 18.00, that could pave the way to re-test October’s high of 18.48 before challenging 18.50.

The Federal Reserve Bank of New York's latest Survey of Consumer Expectations showed on Tuesday that the US consumers' one-year inflation expectation edged higher to 3.7% in September from 3.6% in August.

Key takeaways

"Three-year ahead expected inflation 3% vs. August’s 2.8%."

"Five-year ahead expected inflation 2.8% vs. August’s 3%."

"Median expected home price rise at 3% vs. August’s 3.1%."

"Expected college cost rise drops by record amount for survey."

"Credit access perceptions weakened in September."

"Consumers' view on financial situation ebbed slightly in September."

"Consumers predicted steady spending growth of 5.3% in September."

Market reaction

The US Dollar stays under modest bearish pressure following this publication. As of writing, the US Dollar Index was down 0.22% on the day at 105.82.

Analysts at TD Securities share their expectations for the upcoming September Consumer Price Index (CPI) data from the US.

Headline CPI to slow to 3.2% y/y in Q4 of 2023

"Our forecasts for the September CPI report suggest core price inflation stayed largely unchanged vs last month's 0.28% m/m gain. Indeed, we expect the series to print another “soft” 0.3% m/m increase."

"We also look for a 0.3% gain for the headline, as retail gasoline prices eased post August surge. Importantly, the report is likely to show that the core goods segment stayed modestly deflationary, while shelter-price gains probably slowed. Note that our unrounded core CPI inflation forecast is 0.26%, so we see a clear bias for a downside surprise to 0.2% m/m."

"Looking ahead: We now look for headline CPI to slow to 3.2% y/y in 23Q4, after closing 2022 at a booming 7.1% y/y pace. For core CPI, we also project deceleration to a still strong 3.9% y/y in 23Q4 from 6.0% in 22Q4."

• USD/CAD drops sharply to near 1.3600 as oil price strengthens and the US Dollar corrects sharply.
• Participation of other Middle East countries in the conflict could dampen the market mood.
• Monthly US headline and core inflation are seen expanding 0.3%

The USD/CAD pair corrected sharply to near 1.3600 in the early New York session. The Loonie asset faces selling pressure amid further downside in the US Dollar and expectations of more upside in the oil price due to the deepening Israel-Hamas conflict.

S&P500 opens on a moderately positive note amid improved market mood. The risk theme remains cheerful as investors are observing how things will develop in the Middle East. However, the participation of other Middle East countries in the conflict could dampen the market mood.

The US Dollar Index (DXY) corrects to near 106.00 as Federal Reserve (Fed) policymakers supported for keeping interest rates steady ahead. Fed policymakers believe that multi-year high Treasury yields are consistently putting pressure on inflation and the central bank needs to be very careful with further policy-tightening.

Going forward, investors will focus on the United States Consumer Price Index (CPI) data for September, which will be published on Thursday. As per the estimates, monthly headline and core inflation are seen expanding by 0.3%. The annual headline and core CPI are seen softening marginally to 3.6% and 4.1% respectively.

Rising oil prices are strengthening the Canadian Dollar. Escalating tensions in the Middle East are expected to keep oil prices upbeat. IMF chief economist Pierre Gourinchas said on Tuesday, that the “IMF research indicates a 10% increase in Oil prices would weigh down on global output by about 0.2% in the following year, boost global inflation by about 0.4%.”

Atlanta Federal Reserve President Raphael Bostic said on Tuesday that the policy rate is sufficiently restrictive to get to the 2% inflation target, per Reuters.

Key quotes

"Impact of war in Israel on the economy is uncertainty."

"Inflation has improved considerably."

"Still a long way to go to get to inflation target."

"There's certainly more for us to do."

"I don't have a recession in my dot plot."

"I think our policy rate is sufficiently restrictive to get inflation to 2%."

"A lot of our policy impact is clearly yet to come."

"If things come in differently from my outlook we might have to increase rates, but that's not my current outlook."

"We don't need to increase rates any more."

"We are in process of finding a new equilibrium on rates."

Market reaction

The US Dollar Index edged slightly lower following these comments and was last seen losing 0.15% on the day at 105.90.

• AUD/USD faces selling pressure above 0.6400 as IMF warned decline in global output due to Middle East tensions.
• The USD Index drifted lower swiftly to near 106.00 as Fed policymakers supported keeping interest rates steady.
• AUD/USD trades in a Rising channel in which each pullback is considered as a buying opportunity.

The AUD/USD pair remained offered above the round-level resistance of 0.6400 in the early New York session. The Aussie asset struggles to extend recovery as the International Monetary Fund (IMF) warned that rising oil prices due to deepening Middle East tensions could dampen global Gross Domestic Product (GDP) and rebound inflation.

The expectations of one more interest rate increase from the Reserve Bank of Australia (RBA) have increased due to rising inflation expectations, supported by higher oil prices.

Meanwhile, the US Dollar Index (DXY) drifted lower swiftly to near 106.00 as Federal Reserve (Fed) policymakers supported keeping interest rates steady at 5.25-5.50% in the November monetary policy meeting.

Going forward, investors will focus on the US inflation data, which will be published on Thursday. The monthly headline and core inflation are seen growing by 0.3% in September.

AUD/USD trades in a Rising channel chart pattern on an hourly scale in which each pullback is considered as a buying opportunity by the market participants. The 50-period Exponential Moving Average (EMA) at 0.6388 is considered as a buying opportunity by the market participants.

The Relative Strength Index (RSI) (14) skids into the 40.00-60.00 range, which indicates a consolidation ahead.

A fresh downside would appear if the Aussie asset dropped below October 03 low around 0.6286. This would expose the asset to 21 October 2022 low at 0.6212, followed by 13 October 2022 low at 0.6170.

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

• EUR/USD revisits the area above 1.0600 once again on Tuesday.
• The continuation of the rebound should target the 1.0620 area.

EUR/USD regains composure following Monday’s pessimism and breaks above the 1.0600 hurdle.

In case bulls regain the initiative, the pair should initially retarget the minor barrier at 1.0617 (September 29) ahead of the weekly peak of 1.0767 (September 12). On the flip side, if bears regain the upper hand, the pair could slip back to the area of yearly lows around 1.0450 (October 3).

Meanwhile, further losses remain on the table as long as the pair navigates the area below the key 200-day SMA, today at 1.0823.

EUR/USD daily chart

• DXY extends the bearish move to the 105.80 zone on Tuesday.
• Further losses could put a test of 105.65 back on the radar.

DXY remains under pressure and puts the 106.00 region to the test on Tuesday.

In case bears push harder, then index could then slip back to the 105.65 level (September 29). Further weakness from here could see the weekly low of 104.42 (September 11) revisited.

In the meantime, while above the key 200-day SMA, today at 103.17, the outlook for the index is expected to remain constructive.

DXY daily chart

The Federal Reserve (Fed) remains in strong control of short-term rates and there are no signs that the Fed needs to change its balance sheet plans, Roberto Perli, the New York Fed’s head of monetary policy implementation, said on Tuesday, per Reuters.

Key quotes

"Unclear when reserves will grow scarce."

"All signs suggest reserves remain abundant."

"Money market rates will signal when reserves growing scarce."

"Fed can still do repos to add liquidity if needed."

"Confident Fed can effectively stop balance sheet drawdown smoothly."

"Standing repo, conventional repos can address stress quickly."

"Federal funds rate remains influential in money markets."

"Fed rate control tools working well amid recent challenges."

"Reverse repo facility works well, responsive to market conditions."

Market reaction

These comments failed to trigger a noticeable market reaction. As of writing, the US Dollar Index was down 0.06% on the day at 106.00.

• Silver price trades sideways below $22.00 as Middle East tensions improve appeal for safe-haven assets.
•  The US Dollar remains under pressure as Fed policymakers support keeping interest rates steady.
• Silver price turns sideways in a range of $21.40-22.00 after an upside move.

Silver price (XAG/USD) trades sideways below $22.00 and seems gathering strength for a fresh upside as Middle East tensions have improved appeal for the safe-haven assets. The white metal is well expected to move higher as the US Dollar Index (DXY) is struggling for a firm footing after neutral interest rate guidance from Federal Reserve (Fed) policymakers.

S&P500 futures added some gains in the European session, portraying an improvement in the risk appetite of the market participants. The USD Index faces pressure due to improved market mood. The broader risk theme is still downbeat due to fears of stretch in the Israel-Hamas conflict beyond Gaza.

The US Dollar remains under pressure as Dallas Fed Bank President Lorie Logan and Vice Chair Philip Jefferson supported keeping interest rates steady due to rising Treasury yields, which have already ramped up borrowing rates.

Meanwhile, investors turned worried about the global economic outlook as higher oil prices could add to inflationary pressures ahead. IMF chief economist Pierre Gourinchas said on Tuesday, that the “IMF research indicates a 10% increase in Oil prices would weigh down on global output by about 0.2% in the following year, boost global inflation by about 0.4%.”

Silver technical analysis

Silver price turns sideways in a range of $21.40-22.00 after an upside move. The precious metal got strengthened after a breakout of the consolidation formed in a range of $20.70-21.40. The 50-period Exponential Moving Average (EMA) at $21.66 is acting as a support for the Silver price bulls.

The Relative Strength Index (RSI) (14) shifts into the 40.00-60.00 range, which signifies a rangebound performance ahead.

Silver hourly chart

• EUR/JPY fades Monday’s drop and climbs to the 158.00 region.
• Further side-lined trade appears favoured so far.

EUR/JPY sets aside Monday’s small pullback and resumes the upside to the boundaries of the 158.00 zone on Tuesday.

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.

On the downside, the so far monthly low of 154.34 (October 3) emerges as the initial contention in case of bearish attempts.

So far, the longer term positive outlook for the cross appears favoured while above the 200-day SMA, today at 150.00.

EUR/JPY daily chart

• The Greenback cannot bank on the risk of flight from Monday. 
• Fed’s Logan and Jefferson delivered a message that the Fed is done hiking. 
• The US Dollar Index breaks below 106 but faces selling pressure. 

The US Dollar (USD) is seeing its gains from Monday being erased as the flight to safety eased quite quickly. Markets were quite quick to assess the situation in Israel and Gaza. For a minute, markets were bracing for a possible spillover in the region to the bigger oil-producing countries, though it was until late Monday evening when Saudi Crown Prince Mohammad bin Salman issued a statement urging both parties to come to the table and discuss opinions instead of reverting to violence.

The US markets need to catch up a bit with events as several US markets were closed on Monday for the public holiday. On Monday, both Dallas Federal Reserve (Fed) President Lorie Logan and Fed Governor Philip Jefferson said that interest rates have reached the end of their hiking path. Meanwhile, the US bond markets sees prices peaking and yields dropping in a catch-up move from Monday’s reduced schedule. 

Daily digest: US Dollar facing some pressure

• At 10:00 GMT on Tuesday the National Federation of Independent Business’ (NFIB) Business Optimism Index for September was released. Previous number was 91.3, with the current number a touch lower near 90.8.
• Near 12:55 GMT, the YoY Redbook Index is due to come out. Expectations are for an unchanged print at -0.1%. Fed’s Minneapolis director Neel Kashkari is due to speak near 19:00 GMT. Mary Daly from the San Francisco Fed is due to speak near 22:00 GMT.
• The US Treasury is heading to the markets to refund some tenures. A 3-month and a 6-month bill are due to be issued together with a 3-year note auction. 
• Christopher J. Waller from the Fed’s Board of Governors is expected to speak at 17:30 GMT. 
• Equities are in the green as risk in the Middle East region looks to be contained for now. Asian equities soar over 2% with Japanese indices leading the charge. European equities are up over 1%. Meanwhile, US equity futures are rather reluctant and stick to rather flat quotations. 
• The CME Group FedWatch Tool shows that markets are pricing in an 87.5% chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. 
• The benchmark 10-year US Treasury yield was closed on Monday due to the public holiday and has played catch-up with recent events. The result was quite a move upward in bond prices higher and yields sinking lower to 4.67%, down from the 4.88% seen on Friday. 

US Dollar Index technical analysis: Questions raised

The US Dollar was unable to thrive in the risk-off sentiment on Monday and was hardly making any waves. Where one would expect the Greenback to advance substantially against most major peers, the moves from Monday have already been erased this Tuesday on the quote board. The US Dollar Index (DXY) is starting to flirt with a turn for the worse and might head lower in the coming days. 

The US Dollar Index opened around 105.96, with the Relative Strength Index (RSI) easing down further after the DXY snapped its weekly winning streak last Friday. On the topside, 107.19 is important to see if the DXY can get a daily close above that level. If this is the case, 109.30 is the next level to watch. 

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

Head of Research at UOB Group Suan Teck Kin, CFA, comments on the latest interest rate decision by the RBI.

Key Takeaways

UOB Group’s Economist Enrico Tanuwidjaja and Economist Sathit Talaengsatya assess the recently published inflation figures in Thailand.

Key Takeaways

• Natural Gas prices jump to $3.63.
• The US Dollar eases as markets turn towards risk on. 
• US Natural Gas prices could reach $4 if further supply hiccups emerge.

Natural Gas prices edge higher on renewed woes from the supply side. Strikes are set to take place in Australia after talks between the union workers and Chevron failed to lead to an agreement, cutting off nearly 10% of global LNG supply. Adding to this,  the turmoil over the weekend in Israel and Gaza has led Israel to ask Chevron to shut down its activities due to safety concerns, which means gas supply to Europe could be further hit. 

Meanwhile, the US Dollar (USD) pares part of Monday’s gains as the flight to safety eases. Investors were quite quick to assess the situation in Israel and Gaza. Markets were bracing for a possible spillover in the region to the bigger Oil-producing countries, though Saudi Crown Prince Mohammad bin Salman issued a statement late Monday urging both parties to come to the table instead of reverting to violence.

Natural Gas is trading at $3.55 per MMBtu at the time of writing.  

Natural Gas news and market movers

• Temperatures in Europe are set to dip by roughly 10 degrees Celsius in the coming two weeks. 
• Risk is being factored into Natural Gas price as the situation in Israel and Gaza remains very fragile, with  possible spillovers in the broader Middle East region. 
• Israel ordered the shutdown of the Tamar gas field run by Chevron Corp., citing safety concerns as fighting between its military forces and Hamas keeps escalating. 
• The Israeli government has not informed the Egyptian government of any halt to the Leviathan gas field, one official said. 
• Goldman Sachs sees marginal impact from Israel gas production disruption for now, according to a report.

Natural Gas Technical Analysis: Heading to $4

Natural Gas peaks again to a new year-to-date high near $3.6360, with  the Relative Strength Index (RSI) in the daily chart reaching overbought levels. Although normally this is a signal that prices should start to ease, do not expect to see a peak yet. Several more headlines are coming in, signalling more supply crunches in the nearby future. 

With the firm peak and breakthrough out of the trend channel, it will be crucial that the upper band of that same trend channel acts as support. There aren’t any significant resistance levels except for $3.65, the peak of January 17. From there, the high of 2023 near $4.3080 comes into play.

On the downside, the trend channel needs to act as support near $3.30. In case this breaks down again, Natural gas prices could sink to $.3.07, with that orange line identified from the double top around mid-August. Should the drop become a broader sell-off, prices could sink below $3 towards $2.85, near the 55-day Simple Moving Average.

XNG/USD (Daily Chart)

• WTI prepares for a fresh upside amid fears that the Israel-Palestine conflict could stretch beyond Gaza.
• The oil supply from the already tight oil market is expected to elevate inflation in oil-importing countries.
• A slowdown in the progress of inflation declining to 2% could raise hawkish Fed bets.

West Texas Intermediate (WTI), futures on NYMEX, gather strength for a fresh upside above the immediate resistance of $86.50. Investors see the oil market tightening further as conflict between Israel and Hamas could stretch beyond Gaza.

The market mood is relatively cautious but investors still have not gone for an intense sell-off as they are watching how things would develop ahead. This is because Hamas got ready for discussions over a truce while the risk of participation by other players remains persistent. Western nations supported Israel amid the Gaza attack while Saudi Arabia has extended its hands to the Palestine military group.

In response to the strike from Palestine, troops from Israel did airstrikes on the Gaza Strip. Israel Prime Minister Benjamin Netanyahu said on Monday that Israel's response to the multi-pronged attack by Palestinian gunmen from the Gaza Strip will change the Middle East.

The oil supply from the already tight oil market is expected to elevate inflationary pressures in countries, which rely on oil imports to cater to their energy requirements.

The US Dollar Index (DXY) dropped further below 106.00 as a couple of Federal Reserve (Fed) policymakers supported keeping interest rates unchanged on November 01 due to the rising US Treasury yields. The 10-year US Treasury yields have humped to a multi-year high at around 4.8% and have elevated borrowing costs.

Meanwhile, investors await the United States inflation data, which will be published on Thursday. A slowdown in the progress of inflation declining to 2% could raise bets for one more interest rate increase from the Fed by the year-end.

Haitham Al Ghais, the Secretary-General of the Organization of the Petroleum Exporting Countries (OPEC), said Tuesday that he is “not too worried about China in the medium to long term.”

Additional quotes

OPEC+ action helped to reduce oil market volatility.

Will have a pavilion at COP28 to showcase how OPEC members are dealing with emissions.

Hopes that all voices will be at the table at COP28.

Market reaction

Despite the conciliatory comments from the cartel’s chief, WTI is trading 0.41% lower on the day at $84.74, as of writing.

Economists at Australia and New Zealand Banking Group (ANZ) offer their afterthoughts on the Australian NAB’s September Business Survey.

Key quotes

“NAB’s September Business Survey shows fading cost and price pressures, with most cost/price measures at their weakest level since late 2021.”

“While we still consider the RBA November meeting live, this slowdown in cost pressures adds to the likelihood that the RBA will continue with its extended pause.”

• Gold price turns sideways after a sharp recovery as the focus shifts to US inflation data.
• Fed policymakers are worried about rising Treasury yields as they could dampen financial conditions.
• The US Dollar will dance to the tune of the FOMC minutes, consumer and producer inflation data.

Gold price (XAU/USD) holds onto a fresh weekly high, supported by the cautious market mood that is a product of the deepening Israel-Hamas conflict. The Israeli army responded to Hamas’ Saturday incursion with airstrikes on the Gaza Strip. Neutral commentary from Federal Reserve (Fed) policymakers has increased the perception that the central bank has finished raising interest rates. 

Fed policymakers are worried about rising Treasury yields and warned that the central bank needs to be careful with interest rates as further policy-tightening could damage financial conditions. The US Dollar has failed to capitalize on Middle East tensions and is expected to remain under pressure ahead of the Producer Price Index (PPI) data for September and Federal Open Market Committee (FOMC) minutes.

Daily Digest Market Movers: Gold price turns sideways ahead of inflation data

• Gold price aims to climb above $1,860.00, supported by an improvement in safe-haven appeal due to Middle East tensions and neutral commentary from Federal Reserve policymakers.
• Deepening Middle East tensions have improved the appeal for safe-haven assets as higher oil prices could elevate inflation risks.
• The risk-aversion theme is not too strong as an intense sell-off has not been witnessed yet. It seems that investors are waiting for how the situation in Israel develops.
• Israeli Prime Minister Benjamin Netanyahu said on Monday that Israel's response to the multi-pronged attack by Palestinian terror group Hamas will change the Middle East.
• As the appeal for safe-haven assets has improved, the Gold price is performing well against the US Dollar as traders are betting in favor of an unchanged interest rate policy in the monetary policy meeting on November 1.
• As per the CME FedWatch Tool, traders see an 88% chance of the Fed keeping interest rates unchanged at 5.25-5.50%, where they’ve stood since July. The odds of one more interest rate increase in any of the two remaining monetary policy meetings in 2023 have dropped to 28%.
• On Monday, Dallas Fed Bank President Lorie Logan drew less emphasis on raising interest rates further if long-term interest rates remain elevated because of higher Treasury yields. 
• About the inflation outlook, Fed Logan said, "Progress on inflation is encouraging, but it's too early to be confident it is headed to the Fed's 2% target in a sustainable, timely way."
• While addressing the public at the National Association for Business Economics conference, Fed Vice Chair Phillip Jefferson emphasized the consideration of higher Treasury yields before arriving at any decision on interest rates.
• The 10-year US Treasury yield has soared to an almost 16-year high near 4.8%, which has prompted 30-year mortgage rates to rise to 7.5%.
• Fed’s Jefferson warned that the central bank needs to be careful with a further hike in interest rates.
• Last week Cleveland Fed Bank President Loretta Mester and Fed Governor Michelle Bowman announced support for one more interest rate increase in the remainder of 2023, citing the resilient US economy and expectations that progress in inflation declining to 2% will stall.
• The US Dollar Index (DXY) finds interim support near 106.00 after facing selling pressure due to neutral guidance on interest rates from Fed policymakers.
• Further action in the USD Index will be guided by the US inflation data for September, which will be released on Thursday. 
• As per the estimates, monthly headline and Core inflation are seen expanding 0.3%. The annual headline and Core Consumer Price Index (CPI) are seen softening marginally to 3.6% and 4.1%, respectively.
• Before US CPI data, FOMC minutes for September monetary policy and producer inflation data will be released on Wednesday. 

Technical Analysis: Gold price sticks to weekly high

Gold price refreshed its weekly high at $1,860.00 on Tuesday amid a data-packed week and risk-aversion theme due to the Israel-Hamas conflict. The precious metal formed a wide Bullish Belthold candlestick pattern on Monday, which indicates a sharp recovery after a prolonged sell-off. Momentum oscillators have rebounded strongly after turning extremely oversold. 

Kit Juckes, Chief Global FX Strategist at Société Générale, assess the latest market developments:

EUR longs shrank

"US 10-year Note yields are 14bp below their highs this morning, despite the prospect of USD 111bn in 3, 10 and 30-year supply between now and Thursday. Not bad after a super-strong payroll report, even if it was accompanied by softer wage growth, Fed officials stressing that there’s less need to keep on hiking given the rise in yields and followed by the terrorist attack in Israel over the weekend. The dollar, unsurprisingly, is a little softer this morning."

"CFTC data for last week showed the market getting longer USD, as EUR longs shrank, and GBP ones vanished. Crude oil prices are USD 3p/b higher than last Friday and won’t drive much dollar strength (NOK is softer today, though it remains the pick of the G10 currencies since Friday)."

"We’ll get more Fed speak today, NFIB small business sentiment as well as the New York Fed’s measure of year-ahead expected inflation, but the data point to focus on is Thursday’s CPI."

Tobias Adrian,  the Financial Counsellor and Director of the Monetary and Capital Markets Department of the International Monetary Fund (IMF), said on Tuesday, that his “advice to central banks is to continue tightening to lower inflation.”

“Recent tightening of financial conditions has been "orderly",” Adrian added.

Additional quotes

His comments come after the IMF warned of inflation’s tenacity and weaker global growth in 2024.

In its latest World Economic Outlook report, the IMF lowered the 2024 global GDP growth outlook to 2.9% from 3.0% while raising the 2024 global CPI forecast to 5.8% from 5.2% in July.

Following a quarterly meeting, the Bank of England’s (BoE) Financial Policy Committee (FPC) said on Tuesday, “some risky asset valuations appear "stretched", such as US tech stocks and Dollar high-yield and investment-grade bonds.”

Additional takeaways

Market reaction

Amidst risk recovery, GBP/USD is building on its renewed upside to trade near 1.2272, up 0.30% on the day.

• GBP/JPY jumps swiftly to 183.00 as expectations of BoJ’s intervention in FX fade.
• Naoyuki Shinohara said that Japanese authorities could not reverse the tide against the Yen backed by easy policy.
• BoE Mann warned about higher inflation and rising consumer inflation expectations.

The GBP/JPY pair drives vertically to near the crucial resistance of 183.00 as the odds of a possible intervention by the Bank of Japan (BoJ) in the FX domain fade. Former top currency diplomat Naoyuki Shinohara said this weekend that the recent fall in the Japanese Yen is reflecting the economic fundamentals of Japan, which would refrain top diplomats from a stealth intervention.

Naoyuki Shinohara said that there is no set of rules that could define what kind of moves should be considered as ‘excess volatility’ and usually the timeframe for excess volatility should be some days or weeks not months. The tide against the Japanese Yen on the back of expansionary monetary policy for a prolonged period cannot be reversed by Japanese authorities.

Contrary, top currency diplomat Masato Kanda said last week that steady yen falls over a protracted period could also warrant intervention, as reported by Reuters.

The Pound Sterling strengthened as the Bank of England (BoE) policymaker Katherine Mann warned about higher inflation and rising consumer inflation expectations. She further added that central bankers should adopt an aggressive policy-tightening approach to bring down inflation to 2% in a timely manner.

Going forward, UK factory activity data will be keenly watched. Investors see monthly Manufacturing Production contracting by 0.3% against the 0.8% contraction recorded for July. Monthly Industrial Production is foreseen to decline at a slower pace of 0.2% against a contraction of 0.7% in July. The monthly Gross Domestic Product (GDP) is seen expanding by 0.2% against a decline y 0.5%, recorded for July.

International Monetary Fund chief economist Pierre Gourinchas said on Tuesday, the “IMF research indicates a 10% increase in oil prices would weigh down on global output by about 0.2% in the following year, boost global inflation by about 0.4%.”

Additional takeaways

Citing people familiar with the matter, Bloomberg News reported on Tuesday, China is weighing new stimulus and higher deficit to meet its annual growth target.

The Chinese authorities are mulling the issuance of at least CNY1 trillion ($137.1 billion) of additional sovereign debt for spending on infrastructure such as water conservancy projects, the sources added.

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

- EUR/USD: EUR amounts

• 1.0420 569m
• 1.0540 695m
• 1.0700 1.1b

- USD/JPY: USD amounts                     

• 148.50 760m
• 148.60 451m
• 148.75 345m
• 150.00 585m

- USD/CHF: USD amounts        

• 0.9100 300m
• 0.9150 550m
• 0.9250 574m

- AUD/USD: AUD amounts

• 0.6350 1.3b

- USD/CAD: USD amounts       

• 1.3655 659m

- NZD/USD: NZD amounts

• 0.5910 896m
• 0.5950 231m
• 0.5975 502m

- EUR/GBP: EUR amounts        

• 0.8760 396m

• NZD/USD attracts some dip-buying on Tuesday, albeit lacks follow-through.
• A positive risk tone lends some support; resurgent USD demand caps gains.
• The technical setup supports prospects for a break through the 100-day SMA.

The NZD/USD pair reverses an intraday dip to levels just below the 0.6000 psychological mark and turns neutral during the first half of the European session. Spot prices currently trade around the 0.6020 area, unchanged for the day, and just below a nearly two-week high touched earlier this Tuesday.

A generally positive tone around the equity markets turns out to be a key factor lending some support to the risk-sensitive Kiwi. That said, the emergence of some US Dollar (USD) dip-buying, bolstered by bets for at least one more rate hike by the Federal Reserve (Fed), keeps a lid on any meaningful upside for the NZD/USD pair.

From a technical perspective, the 0.6050 area coincides with the September monthly swing high and is closely followed by the 100-day Simple Moving Average (SMA), around the 0.6060 region. The latter also represents the 38.2% Fibonacci retracement level of the July-August downfall and should now act as a key pivotal point.

A sustained strength beyond will be seen as a fresh trigger for bullish traders and pave the way for additional gains. With oscillators on the daily chart gaining positive traction, the NZD/USD pair might then aim towards reclaiming the 0.6100 mark and extend the momentum to the 0.6125-0.6130 region, or the 50% Fibo.

On the flip side, weakness below the 0.6000 mark is likely to find some support near the 23.6% Fibo. level, around the 0.5980-0.5975 region. A convincing break below could drag the NZD/USD pair back to the 0.5900 mark en route to last week's swing low, around the 0.5870 zone, which is followed by mid-0.5800s, or the YTD low.

NZD/USD daily chart

Technical levels to watch

• USD/CAD rebounds from intraday gains as Crude prices attempt to extend gains.
• WTI prices could receive buying support due to the Middle-East tensions.
• Fed’s remarks led investors to downplay the likelihood of additional rate hikes.

USD/CAD has almost trimmed the intraday gains, struggling to break the three-day losing streak. The spot price trades around 1.3580 during the European session on Tuesday.

The pair is facing challenges as oil prices have rebounded from intraday losses and appear poised to extend their gains further.

Western Texas Intermediate (WTI) oil price hovers around $85.00 at the time of writing on Tuesday. Crude oil prices have experienced their most significant increase in six months, reaching $86.01 per barrel on Monday.

Middle-East tensions persist, contributing to elevated Crude Oil prices, which is contributing support to the Canadian Dollar (CAD) as Canada is the largest exporter of Crude oil to the United States (US).

On Saturday, Hamas launched an attack on Israel using land, air, and sea forces. In response, the Israeli army has initiated a robust counteroffensive in Gaza, marking the most severe military conflict in the region to date.

The US Dollar Index (DXY) loses its ground and trades lower around 105.80 to extend losses, by the press time. The US Dollar (USD) is facing challenges despite the improved US Treasury yields on the day, with the 10-year US Treasury bond yield holding up at 4.67% at the current press time.

Furthermore, statements from Federal Reserve (Fed) officials overnight caused investors to minimize the chances of more rate hikes, which led to a decline in US bond yields in the previous session. As a result, this development is seen as undermining the strength of the Greenback.

Lori Logan, president of the Dallas Fed, hinted at a reduced need to raise the Fed funds rate, while Fed Vice Chair Philip Jefferson emphasized the importance of the central bank proceeding cautiously with any additional policy rate increases.

This week, investors will closely watch economic data, particularly focusing on inflation figures. The Producer Price Index (PPI) is scheduled for Wednesday, followed by the release of the FOMC meeting minutes and the Consumer Price Index (CPI) on Thursday.

Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group review the latest Foreign Portfolio flows in Malaysia.

Key Takeaways

Analysts at Danske Bank offer a brief overview of the previous day's trading action in the US equity markets and a fall in the US Treasury bond yields, led by dovish remarks from Fed officials.

Key Quotes:

“Risk sentiment improved overnight as dovish comments from Fed members fuelled a strong rally in US bonds in Asia after the US market was closed overnight. Fed Vice Chair Philip Jefferson said Monday officials could "proceed carefully" following the recent rise in Treasury yields. Fed member Lorie Logan from Fed Bank of Dallas stated the surge in long-term rates may mean less need for further tightening. Also risk markets calmed down from the initial uncertainty in the Middle East as there are not yet signs of a broader escalation of the conflict.”

“Global equities ended yesterday higher as investors to a large extent concluded that the Middle East conflict would not end up having a material impact on the global economy. US cash bond trading was closed yesterday for Columbus Day holiday, but equity investors took notice of the futures market indicating the massive drop we see in yields this morning as cash bond trading reopened. Hence, bond markets ultimately had a bigger impact on equity markets yesterday than the conflict in the Middle East.”

• EUR/GBP attracts fresh buyers near the 0.8630 support zone or a nearly two-week low.
• Some repositioning trade ahead of President Christine Lagarde's speech lends support.
• The mixed fundamental backdrop warrants caution before positioning for further gains.

The EUR/GBP cross once again finds some support near the 0.8630 area and stages a modest intraday recovery from a near two-week low touched this Tuesday. Spot prices extend the steady ascent through the early part of the European session and climb to a fresh daily high, around mid-0.8600s in the last hour.

The shared currency's relative outperformance against its British counterpart could be attributed to some repositioning trade ahead of the European Central Bank (ECB) President Christine Lagarde's speech later today. Apart from this, the intraday move up in the EUR/GBP cross lacks any obvious fundamental catalyst and is likely to remain capped in the wake of speculations that additional ECB rate hikes may be off the table for now.

Several ECB officials have indicated that the era of monetary tightening may be coming to an end. In fact, Francois Villeroy de Galhau, the Bank of France President, said this Tuesday that a further rate hike is not the right thing to do at this stage. This, in turn, might hold back traders from placing aggressive bullish bets around the EUR/GBP cross and warrants some caution before positioning for any further near-term appreciating move.

The downside, meanwhile, seems cushioned on the back of firming expectations that the Bank of England (BoE) will maintain the status quo in November. The UK central bank surprisingly paused its rate-hiking cycle in September and provided little hints of its intention to raise rates. This, in turn, should act as a tailwind for the EUR/GBP cross, suggesting that any meaningful slide might still be seen as a buying opportunity and remain limited.

There isn't any relevant market-moving economic data due for release on Tuesday, either from the Eurozone or the UK. Hence, traders will closely scrutinize Lagarde's comments for cues about the future policy move, which should influence the Euro and produce short-term opportunities around the EUR/GBP cross.

Technical levels to watch

• USD/JPY rebounds due to positive risk sentiment amid Middle-East conflict.
• Japanese Yen failed to respond to the BoJ’s consideration of an upward revision of the core inflation estimate.
• Fed’s remarks led investors to downplay the likelihood of additional rate hikes.

USD/JPY recovers from the losses registered in the previous session, trading higher around 149.00 during the European session on Tuesday. The pair rebounded on the recovery of the US Dollar (USD).

The positive risk sentiment in the midst of the Middle-East conflict may exert pressure on the safe-haven Japanese Yen (JPY), emerging as a significant factor offering support to the USD/JPY pair.

Early on Saturday, Hamas initiated an assault on Israel using land, air, and sea forces. In retaliation, the Israeli army has commenced a forceful response in Gaza, marking the region's most intense military conflict to date.

The Bank of Japan (BoJ) is reportedly contemplating an upward revision of the fiscal year (FY) 2023/24 core Consumer Price Index (CPI) estimate to approximately 3%, as compared to the 2.5% forecast made in July, reported by the Kyodo news agency on Tuesday.

Japan’s non-seasonally adjusted Current Account for August declined to ¥2,279.7B, compared to the forecast of ¥3,090.9B and the previous reading of ¥2,771.7B. The Japanese economic calendar for the rest of the week is notably thin, with only low-impact data scheduled for release.

Japanese Finance Minister Shunichi Suzuki stated on Tuesday that the "current Yen weakening is caused in part by interest rate differentials." Suzuki also mentioned that Japan would lead a meeting of finance ministers and central bank governors from the Group of Seven (G7) advanced nations on October 12 to discuss the war in Ukraine and the world economy.

The US Dollar Index (DXY) bids around 106.00, by the press time. However, the US Dollar failed to admire the stronger US Nonfarm Payroll data released on Friday.

Moreover, the depreciation of the US Dollar (USD) can be attributed to a decline in US Treasury yields on Monday, with the 10-year US Treasury bond yield standing at 4.67% at the current press time.

Additionally, remarks made by Federal Reserve (Fed) officials overnight led investors to downplay the likelihood of additional rate hikes, contributing to a further drop in US bond yields. Consequently, this development is perceived as weakening the strength of the Greenback.

Dallas Fed president Lori Logan suggested that there might be less necessity to raise the Fed funds rate, and Fed Vice Chair Philip Jefferson acknowledged the importance of the central bank proceeding cautiously with any additional increases in the policy rate.

Investors’ focus for the week in terms of economic data will be on inflation figures, with the Producer Price Index (PPI) on Wednesday, followed by the FOMC meeting minutes and the Consumer Price Index (CPI) on Thursday.

Here is what you need to know on Tuesday, October 10:

Financial markets trade mixed early Tuesday as investors keep an eye on headlines surrounding the Israel-Hamas conflict. The US Dollar (USD) Index clings to small recovery gains slightly above 106.00 following Monday's pullback, while US stock index futures trade virtually unchanged in the early European session. In the absence of high-impact data releases, market participants will pay close attention to speeches from central bankers, including European Central Bank (ECB) President Christine Lagarde.

Following a bearish opening, Wall Street's main indexes gained traction and closed in positive territory despite escalating geopolitical tensions. Dovish comments from Federal Reserve officials made it difficult for the USD to find demand in the American session and helped the risk mood improve. Meanwhile, the benchmark 10-year US Treasury bond yield opened sharply lower below 4.7% following a three-day weekend.

In a statement released on Tuesday, Israel Defense Forces said that a dozens of fighter jets attacked more than 200 targets in Gaza overnight. Meanwhile, the United Nations Relief and Works Agency (UNRWA) reported that shelters in Gaza were at 90% capacity, with more than 137,000 people seeking refuge.

During the Asian trading hours, Chinese property developer Country Garden said that it was facing significant uncertainty about asset disposals and warned that it might not be able to meet offshore debt obligations. Despite this development, Hong Kong's Hang Seng Index gained nearly 1% on a daily basis, while Shanghai Composite lost more than 0.5%.

After starting the week on the back foot and edging lower in the European trading hours, EUR/USD staged a rebound and closed flat on Monday. Early Tuesday, the pair stretched higher and stabilized above 1.0550.

GBP/USD found support after dropping toward 1.2150 on Monday and ended the day above 1.2200. In the European morning, the pair lost its recovery momentum and went into a consolidation phase below 1.2250.

Bank of Japan (BoJ) is considering raising the fiscal year (FY) 2023/24 core Consumer Price Index (CPI) estimate to near 3% from the 2.5% forecast in July, Kyodo news agency reported on Tuesday, citing some sources with knowledge of the matter. USD/JPY showed no immediate reaction to this headline and was last seen trading in positive territory near 149.00.

Gold benefited from safe-haven demand and falling US Treasury bond yields and reached its highest point in 10 days above $1,860 before retreating slightly below that level. 

• The Euro appears mildly offered against the US Dollar.
• Stocks in Europe open Tuesday’s session with marked gains.
• EUR/USD hovers around the 1.0550 region on Tuesday.
• The USD Index (DXY) clings to daily gains above 106.00.
• ECB President Christine Lagarde speaks later in the session.

The Euro (EUR) adds to the weakness seen at the beginning of the week against the US Dollar (USD), resulting in a decline of EUR/USD to the 1.0550 region on Tuesday.

In contrast, the Greenback manages to bounce off earlier lows near 105.90 when tracked by the USD Index (DXY), against the backdrop of persistent geopolitical turmoil in the Middle East and the subsequent pickup in risk aversion.

Regarding monetary policy, investors anticipate that the Federal Reserve (Fed) will maintain interest rates at their present levels for the remainder of the year. Simultaneously, there is persisting speculation in the market regarding the potential for the European Central Bank (ECB) to pause its interest-rate hiking cycle, despite inflation levels surpassing the bank's target and mounting concerns about the possibility of a future recession or stagflation in the European region.

On the euro docket, ECB’s President Christine Lagarde will speak at the IMF/World Bank meetings.

In the US, the NFIB Business Optimism index is due, seconded by Wholesale Inventories and speeches by Atlanta Fed President Raphael Bostic (2024 voter, hawk), FOMC Governor Christopher Waller (permanent voter, hawk) and Minneapolis Fed Neel Kashkari (voter, centrist).

Daily digest market movers: Euro on the defensive amidst risk-off mood

• The EUR adds to Monday’s decline against the USD.
• US and German yields attempt a tepid rebound.
• Investors believe the Fed will hold off on hiking rates in the coming months.
• Markets anticipate that the ECB will halt its rate rise campaign.
• Escalating concerns around the Middle East support the risk-off trade.
• Speculation of USD/JPY intervention remains strong.

Technical Analysis: Euro’s upside looks limited around 1.0600

EUR/USD adds to the pessimism seen at the beginning of the week, revisiting the 1.0550 zone on Tuesday.

The persistence of selling pressure on the EUR/USD could lead to a retesting of the 2023 low at 1.0448 seen on October 3 and may even challenge the significant psychological level of 1.0400. Should this level be breached, it could open the door for a retest of the lows at 1.0290 (November 30, 2022) and 1.0222 (November 21, 2022).

On the other hand, if the pair gains upside impulse, its next target could be the 1.0617 from September 29, followed by the important 200-day Simple Moving Average (SMA) at 1.0823. If the latter is breached, there is potential for the pair to test the august 30 top at 1.0945 and approach the psychological barrier of 1.1000. Further breakthroughs beyond the August 10 peak of 1.1064 might bring the pair to the July 27 high of 1.1149 and potentially reach the 2023 top at 1.1275 from July 18.

As long as the EUR/USD remains below the 200-day SMA, there is the possibility of continued downward pressure.

• Pound Sterling capitalizes on improved market sentiment and BoE’s Mann hawkish commentary.
• Katherine Mann favored an aggressive policy-tightening approach.
• Investors shift focus to the UK August GDP data scheduled for Thursday.

The Pound Sterling (GBP) stabilizes after recovering from a six-month low as market sentiment improves and Bank of England (BoE) policymaker Katherine Mann calls for a more aggressive approach to bring down inflation to 2%. Last week, BoE Governor Andrew Bailey said he expected inflation to decline to or below 5% by year-end, but added that he doesn’t promise the achievement of price stability in a timely manner.

The UK manufacturing and construction sectors are bearing the brunt of higher interest rates. UK’s factory activity has been contracting, with the PMI gauge coming in below the 50.0 threshold for a long period. To get more insights about the current status of the economy, investors will shift focus to the UK factory activity and GDP data for August, which will be released on Thursday.

Daily Digest Market Movers: Pound Sterling recovers as US Dollar corrects

• Pound Sterling faces some selling pressure near 1.2250 against the US Dollar, but more upside seems favored as Bank of England policymakers supported more aggressive monetary policy.
• BoE’s Katherine Mann, who has been a hawkish policymaker, said on Monday that central bankers need to be more aggressive. The central bank is not solely responsible for bringing down inflation to 2% but also needs to tame rising inflation expectations, she said.
• Katherine Mann expressed concerns about how long inflation will remain above the desired target of 2%.
• UK inflation is higher compared with other G7 economies. Rising Oil prices due to deepening Middle East tensions could prompt higher inflation expectations.
• Due to higher inflation and interest rates by the BoE, the UK economy is going through a vulnerable phase. UK manufacturing output and construction spending have both declined as firms are worried about the demand outlook.
• Investors will focus on the August GDP report, which will be published on Thursday, which will provide further clues about the country’s economic performance. Economists expect monthly Manufacturing Production contract by 0.4% against a 0.8% contraction recorded for July. Monthly Industrial Production is foreseen to decline at a slower pace of 0.2% against a contraction of 0.7% in July. 
• The continued decline in UK factory activity would indicate that firms are still pessimist about forward demand despite a pause in the policy-tightening spell by the BoE.
• The monthly Gross Domestic Product (GDP) is seen expanding by 0.2%, swinging from a 0.5% decline recorded in July.
• On the global front, investors seem to be digesting the Israel-Hamas war as the latter said it is open to discussions over a truce. Still, talks about a ceasefire aren’t expected soon and the is an increasing risk of participation from other countries in the conflict. .
• The US Dollar Index (DXY) found some support after testing the crucial level of 106.00. Investors shift focus to the United States inflation data, which will be published on Thursday. The core Consumer Price Index (CPI), which excludes volatile food and Oil prices, is seen expanding at a steady pace of 0.3% on month.
• The USD Index could strengthen if the inflation report for September turns out hotter than expected. Sticky inflation and robust labor market conditions could force Federal Reserve (Fed) policymakers to opt for another interest rate hike on November 1.
• Before that, the FOMC minutes from the last Fed meeting will be keenly watched, which will be released on Wednesday. The FOMC minutes for September monetary policy will likely provide the rationale behind keeping interest rates unchanged.

Technical Analysis: Pound Sterling struggles to climb above 1.2250

Pound Sterling faces barricades near its weekly high at 1.2250, but the pair is expected to extend its upside momentum as the risk-appetite of market participants is improving. The GBP/USD pair has rebounded to near the 20-day Exponential Moving Average (EMA) at around 1.2264. However, the broader GBP/USD outlook is bearish as the 50-day and 200-day Exponential Moving Averages (EMAs) have delivered a death cross near 1.2450. Potential support is around 1.2000.

• Silver meets with a fresh supply and erodes a part of the overnight gains to a one-week high.
• The technical setup seems tilted in favour of bears and supports prospects for further losses.
• A sustained strength beyond the $22.20-30 region is needed to negate the negative outlook.

Silver comes under some renewed selling pressure on Tuesday and for now, seems to have snapped a two-day winning streak to a one-week high, around the $22.00 mark touched the previous day. The white metal maintains its offered tone through the early part of the European session and currently trades near the daily low, around the $21.70 region, down over 0.75% for the day.

From a technical perspective, the recent failure near the 200-day Simple Moving Average (SMA) and a subsequent breakdown through the $22.30-$22.20 horizontal support favours bearish traders. Moreover, oscillators on the daily chart are still holding in the negative territory and suggest that the path of least resistance for the XAG/USD remains to the downside.

Some follow-through weakness below the overnight swing low, around the $21.55 region, will reaffirm the negative bias and drag the white metal back towards a multi-day-old trading range resistance breakpoint, around the $21.3-$21.30 region. The next relevant support is pegged near the $21.00 mark, below which the XAG/USD could slide to the $20.70-$20.65 region.

The latter represents a nearly seven-month low touched last week, which if broken decisively should pave the way for the resumption of the recent descending trend witnessed over the past month or so. The XAG/USD might then turn vulnerable to prolong the downward trajectory and challenge the YTD trough – levels just below the $20.00 psychological mark.

On the flip side, momentum beyond the $22.00 mark is likely to remain capped near the aforementioned support breakpoint, now turned resistance, around the $22.20-$22.30 region. A sustained strength beyond, however, might prompt an aggressive short-covering move and allow the XAG/USD to reclaim the $23.00 mark. The momentum could get extended further towards the 200-day SMA, currently around the $23.35 area.

Silver daily chart

Technical levels to watch

Further weakness could drag USD/CNH to the 7.2700 region in the short-term horizon, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

• The index reverses an initial drop to 105.90.
• The NFIB index, Wholesale Inventories are next on tap in the docket.
• Fedspeak will take centre stage later in the NA session.

The greenback, in terms of the USD Index (DXY), navigates a tight range just above the 106.00 hurdle on turnaround Tuesday.

USD Index looks at risk trends, Fedspeak

The index so far reverses four sessions in a row of losses and hovers around the 106.00 region on the back of a cautious trade among market participants in light of geopolitical concerns and ahead of the release of US inflation figures (October 12).

In the meantime, the US bonds market resumes its activity following Monday’s Columbus Day holiday, with yields attempting a modest rebound so far on Tuesday.

On the monetary policy front, investors continue to factor in the likelihood that the Federal Reserve might keep its restrictive stance for longer than anticipated, although the perception of a potential rate hike before year-end seems to have lost traction as of late.

In the docket, the NFIB Business Optimism Index is due in the first turn seconded by Wholesale Inventories along with speeches by Atlanta Fed Raphael Bostic (2024 voter, hawk), FOMC Governor Christopher Waller (permanent voter, hawk) and Minneapolis Fed Neal Kashkari (voter, centrist).

What to look for around USD

The index attempts a rebound after briefly piercing the key 106.00 support earlier on Tuesday’s session.

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: NFIB Business Optimism Index, Wholesale Inventories (Tuesday) – MBA Mortgage Applications, Producer Prices, FOMC Minutes (Wednesday) - Initial Jobless Claims, Inflation Rate (Thursday) – Flash Consumer (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 up 0.11% at 106.17 and a breakout of 107.34 (2023 high October 3) would open the door to 107.99 (weekly high November 21 2022) and finally 110.99 (high November 10 2022). On the downside, the next support emerges at 105.65 (low September 29) ahead of 104.42 (weekly low September 11) and then 103.18 (200-day SMA).

• USD/CHF rebounds from the three-week low as the US Dollar attempts to snap the losing streak.
• Swiss Franc receives buying support due to its safe-haven status amid the Middle-East conflict.
• The probability of policy rate hikes fades due to the dovish remarks made by Fed officials.

USD/CHF extends its losing streak for the fifth successive day, trading lower around 0.9070 during the Asian session on Tuesday. However, the pair rebounds from the three-week low as the US Dollar (USD) attempts to halt the losing streak.

Moreover, the USD/CHF pair is facing downward pressure due to the Palestine-Israel military conflict as the Swiss Franc (CHF) receives buying support due to its safe-haven status.

Early on Saturday, Hamas initiated an assault on Israel using land, air, and sea forces. In retaliation, the Israeli army has commenced a forceful response in Gaza, marking the region's most intense military conflict to date.

The US Dollar Index (DXY) trades higher around 106.17 at the time of writing. However, the US Dollar (USD) didn’t appreciate the robust US Nonfarm Payrolls data released on Friday.

Additionally, the Greenback’s depreciation can be attributed to a decline in US Treasury yields on Monday, with the 10-year US Treasury bond yield standing at 4.66% as of the current press time.

Moreover, the remarks made by Federal Reserve (Fed) officials overnight prompted investors to downplay the probability of additional rate hikes, resulting in a further drop in US bond yields. Consequently, this development is perceived as eroding the strength of the Greenback.

Dallas Fed president Lori Logan suggested that there might be less necessity to raise the Fed funds rate, and Fed Vice Chair Philip Jefferson acknowledged the importance of the central bank proceeding cautiously with any additional increases in the policy rate.

The impending release of the FOMC meeting minutes on Wednesday is anticipated to influence expectations regarding the Federal Reserve's next policy move, potentially impacting demand for the Greenback.

In the absence of any major data in the Swiss calendar this week, the US Core Producer Price Index (PPI) on Wednesday will be eyed, followed by the Consumer Price Index (CPI) on Thursday, as these events play a crucial role in evaluating inflationary trends and economic conditions in the United States.

USD/JPY is still seen navigating the 147.00-150.50 range in the next few weeks, suggest UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

Considering advanced prints from CME Group for natural gas futures markets, open interest shrank for the second consecutive session on Monday, this time by around 17.6K contracts. In the same direction, volume dropped by nearly 150K contracts after five straight daily builds.

Natural Gas: Initial resistance emerges around $3.50

Natural gas prices advanced to new nine-month peaks near the $3.50 region per MMBtu on Monday. This move was on the back of diminishing open interest and volume and exposes a potential corrective move in the very near term, with the immediate contention area around the $3.00 neighbourhood.

NZD/USD needs to clear the 0.6045 region to allow for a potential advance to the 0.6100 zone, note UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

CME Group’s flash data for crude oil futures markets noted traders reduced their open interest positions for the second session in a row on Monday, this time by around 18.8K contracts. In the same line, volume added to the previous daily drop and went down by around 60.7K contracts.

WTI: Another visit to $82.00 should not be ruled out

Prices of WTI rose sharply at the beginning of the week. The strong uptick, however, was amidst diminishing open interest and volume and hints at the likelihood that further gains could run out of steam in the very near term. In the meantime, the resumption of the selling bias could drag prices back to the $82.00 region per barrel.

Bank of Japan (BoJ) is considering raising the fiscal year (FY) 2023/24 core Consumer Price Index (CPI).0 target to near 3% from the 2.5% forecast in July, Kyodo news agency reported on Tuesday, citing some sources with knowledge of the matter.

Nothing further is reported about the same.

Market reaction

At the press time, USD/JPY is off the highs, still trading 0.16% higher on the day at 148.72.

European Central Bank (ECB) Governing Council member and Bank of France President, Francois Villeroy de Galhau, said on Tuesday that “at this stage further rate hikes not right thing to do.”

Additional takeaways

Market reaction

The ECB commentary has little to no impact on the Euro, as EUR/USD hold steady at around 1.0565 so far this Tuesday.

Analysts at Danske Bank explain the implications of the Hamas-Israel military conflict on the financial markets.

Key quotes

“On Saturday morning, Hamas launched an attack against Israel by land, air and sea. In response, the Israelian army has started heavy retaliation in Gaza, marking the most severe military conflict in the region since the Yom Kippur War in 1973. Israeli government has warned its citizens to prepare for a long war as their army seeks to destroy Hamas.”

“The key thing to watch is to what extent the Iran-affiliated Hezbollah becomes involved in the conflict since their involvement would raise the risk of a broader war in the Middle East.”

“For now, market impact has been limited. We see little room for oil prices to rise as stagflation concerns are high, and we are more concerned about the gas market.”

“A more severe war would raise market uncertainty, triggering safe haven flows supporting USD, while US real yields could rise on the back of defence spending.”

In the opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, GBP/USD is seen gathering further upside traction once it clears 1.2270.

Key Quotes

Open interest in gold futures markets shrank by just 495 contracts at the beginning of the week after three consecutive daily builds, according to preliminary readings from CME Group. Volume followed suit and dropped by more than 48K contracts following the previous daily build.

Gold: Next target emerges at $1900

Gold prices started the week with a strong advance. The uptick, however, was midst shrinking open interest and volume, and is indicative that the continuation of the recovery seems not favoured in the very near term. On the upside, the immediate resistance emerges around the key $1900 region per troy ounce.

EUR/USD is still expected to attempt an advance to the 1.0630 region in the next few weeks, according to UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

• EUR/USD moves lower near 1.0550 due to recovery in the US Dollar.
• MACD indicates a change in momentum and a possible shift towards a bullish trend.
• The major level at 1.0500 could act as the support, following the previous week’s low at 1.0448.

EUR/USD extends losses on the second day, trading lower around 1.0560 aligned with the immediate support at 1.0550 psychological level during the Asian session on Tuesday. However, the pair received upward support due to the continued correction in the US Dollar (USD).

A decisive break below the level could contribute to pressure on the pair to navigate the area around the major level at 1.0500, following the next level at 1.0450 lined with the previous week’s low at 1.0448.

On the upside, the EUR/USD pair could face resistance near the major level at 1.0600 lined up with the 21-day Exponential Moving Average (EMA) at 1.0605.

A firm break above the latter could open the doors for the pair to explore the region around 23.6% Fibonacci retracement at 1.0643, aligned with the psychological level at 1.0650.

The Moving Average Convergence Divergence (MACD) line lies below the centerline, which suggests that the short-term average is below the long-term average. Yet, the line is diverging above the signal line, it implies a change in momentum and a possible shift towards a bullish trend.

However, the prevailing bullish momentum in the EUR/USD pair indicates a bearish bias, as the 14-day Relative Strength Index (RSI) remains below the 50 level.

EUR/USD: Daily Chart

Economists at Australia and New Zealand Banking Group (ANZ) offer key highlights of their Roy Morgan Australian Consumer Confidence data release.

Key quotes

• Australian Dollar gains upward momentum due to higher commodity prices.
• Australia’s RBA is expected to increase interest rates by 25 basis points through the end of the year.
• The dovish remarks by Fed officials contribute to pressure on the US Dollar.

The Australian Dollar (AUD) continues to move on an upward trajectory for the fifth successive day. The Aussie pair is gaining upward support, driven by strong underlying commodity prices and the ongoing conflict in the Middle East. Moreover, Westpac Consumer Confidence showed that individual confidence improved in October.

Australia experienced a rebound in inflation in August, primarily attributed to higher oil prices. This development increases the likelihood of another interest rate hike by the Reserve Bank of Australia (RBA).

If the tension in the Middle East persists, it could contribute to further increases in oil prices, thereby potentially elevating inflationary pressures in the Australian economy. This scenario could prompt the RBA to implement a 25 basis points (bps) interest rate hike, bringing it to 4.35% by the end of the year.

After engaging in discussions with US Senators on Tuesday, China's Commerce Minister, Wang Wentao, expressed that "both sides had rational and pragmatic discussions", emphasizing the significance of the US-China economic and trade relationship.

Minister Wang conveyed that China is committed to fair competition based on international rules. He expressed the hope that the US would accurately define security boundaries, urging the avoidance of politicizing and generalizing security issues.

The US Dollar (USD) failed to register significant gains despite the robust US Nonfarm Payroll data released on Friday. This lack of appreciation can be attributed to a decline in US Treasury yields on Monday.

Additionally, the statements from Federal Reserve (Fed) officials overnight led investors to diminish the likelihood of additional rate hikes, causing a further decline in US bond yields. This development is perceived as weakening the strength of the Greenback and providing a tailwind for the Aussie pair.

Daily Digest Market Movers: Australian Dollar extends gains on surging commodity prices

• Australia’s Westpac Consumer Confidence showed that current buying conditions improved in October. The index rose 2.9% from the previous 1.5% decline in September.
• Middle East tension could contribute to further increases in oil prices, thereby potentially elevating inflationary pressures in the Australian economy.
• The heightened geopolitical tensions in the Middle East, are contributing to increased demand for commodities like energy and gold, positively influencing the performance of the AUD/USD pair.
• Australia has committed to ensuring a stable supply of energy resources to Japan in the fifth Japan-Australia Ministerial Economic Dialogue. This agreement reflects a strategic partnership between the two countries, emphasizing the importance of a reliable and consistent flow of energy resources, likely encompassing areas such as coal, and liquified natural gas (LNG).
• Australia’s central bank could go for a rate hike, with expectations pointing toward a peak of 4.35% by the end of the year. This projection aligns with the persistent elevation of inflation above the target.
• The US Nonfarm Payrolls report for September revealed a notable increase of 336,000 jobs, surpassing the market expectation of 170,000. The revised figure for August stood at 227,000.
• US Average Hourly Earnings (MoM) remained steady at 0.2% in September, falling short of the expected 0.3%. On an annual basis, the report indicated a rise of 4.2%, below the anticipated consistent figure of 4.3%.
• The yields on US Treasury bonds declined on Monday, with the 10-year US Treasury bond yield standing at 4.64%.
• Dallas Fed president Lori Logan suggested that there might be less necessity to raise the Fed funds rate, and Fed Vice Chair Philip Jefferson acknowledged the importance of the central bank proceeding cautiously with any additional increases in the policy rate.
• Investors will likely monitor the upcoming International Monetary Fund (IMF) meeting, which is set to deliberate on strategies for stabilizing international exchange rates and fostering development.
• Traders will keenly focus on the US Core Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday along with Australia’s Consumer Inflation Expectations, as these events hold a pivotal role in assessing inflationary trends and economic conditions in both nations.

Technical Analysis: Australian Dollar hovers above 0.6400, 23.6% Fibonacci retracement acts as resistance

The Australian Dollar trades higher around 0.6410 against the US Dollar (USD) on Tuesday. The 23.6% Fibonacci retracement at 0.6429 acts to be a significant hurdle. A decisive break above this level could pave the way for the pair to explore higher levels, with the psychological level of 0.6450, lined up with the 21-day Exponential Moving Average (EMA) at 0.6456 as a potential target. On the downside, the key support is seen at 0.6300, followed by the November low at 0.6272. These levels serve as crucial markers for potential shifts in the AUD/USD pair’s trajectory.

AUD/USD: Daily Chart

• USD/MXN lacks any firm intraday direction on Tuesday and remains confined in a narrow range.
• The technical setup favours bulls and supports prospects for an extension of a one-month-old uptrend.
• A convincing break below the 23.6% Fibo. level is needed to negate the near-term positive outlook.

The USD/MXN pair struggles to gain any meaningful traction on Tuesday and oscillates in a narrow trading range, around the 18.20 region through the Asian session.

From a technical perspective, spot prices have been struggling to find acceptance above the 38.2% Fibonacci retracement level of the steep fall witnessed in July. This, along with the fact that the Relative Strength Index (RSI) on the daily chart is still holding in the overbought territory, warrants caution for bullish traders. That said, the recent breakout through the 17.80-17.85 confluence, comprising a technically significant 200-day Simple Moving Average (SMA) and a multi-month-old descending trend-line, suggests that the path of least resistance for the USD/MXN pair is to the upside.

In the meantime, any corrective decline is more likely to attract fresh buyers near the 18.0000 mark and remain limited near the aforementioned resistance breakpoint, now turned support. The next relevant support is pegged near the 23.6% Fibo. level, around the 17.6635 area, which if broken decisively will negate the positive outlook and shift the near-term bias back in favour of bearish traders. The USD/MXN pair might then accelerate the slide further towards the 17.40-17.35 horizontal support en route to the 17.15-17.10 region before eventually dropping to test sub-17.00 levels.

On the flip side, bulls need to wait for a sustained strength beyond the 38.2% Fibo. level before placing fresh bets. Some follow-through buying above Friday's swing high, around the mid-18.00s will reaffirm the positive bias and lift the USD/MXN pair further to the 18.80-18.85 area, representing 50% Fibo. level. Some follow-through buying should pave the way for an extension of the recent appreciating move witnessed over the past month or so.

USD/MXN daily chart

Technical levels to watch

• Crude oil prices received upward support due to the Palestine-Israel conflict.
• The escalation of the Mid-East tension could involve Iran and Saudi Arabia.
• US oil giant Chevron is instructed to cease production at its Tamar natural gas field.
• The sentiment around rate hikes fades due to the dovish remarks made by Fed officials.

Western Texas Intermediate (WTI) oil price experienced its most significant increase in six months, reaching $86.01 per barrel on Monday. However, it has since pulled back to $84.70 at the time of writing on Tuesday. The recent surge could be attributed to the Middle East conflict.

The continued tension between Hamas and Israel is causing apprehensions about the destabilization of the Crude Oil supply, which could result in upward support for Crude oil prices. The escalation of this conflict has the potential to extend into additional geopolitical tensions in the Middle East and involve neighboring countries such as Iran and Saudi Arabia.

Moreover, the US oil giant Chevron is instructed by the Israeli government, to temporarily cease production at its Tamar natural gas field located just off the northern coast of Israel.

The US Dollar Index (DXY) extends its losses on the fifth successive day, trading around 106.00 at the time of writing. The US Dollar (USD) failed to register significant gains despite the robust US Nonfarm Payroll data released on Friday.

This lack of appreciation can be attributed to a decline in US Treasury yields on Monday, with the 10-year US Treasury bond yield standing at 4.64% as of the current press time.

Moreover, the remarks made by Federal Reserve (Fed) officials overnight prompted investors to downplay the probability of additional rate hikes, resulting in a further drop in US bond yields. Consequently, this development is perceived as eroding the strength of the Greenback.

Dallas Fed president Lori Logan suggested that there might be less necessity to raise the Fed funds rate, and Fed Vice Chair Philip Jefferson acknowledged the importance of the central bank proceeding cautiously with any additional increases in the policy rate.

The upcoming FOMC meeting minutes scheduled for Wednesday are expected to impact the likelihood regarding the Federal Reserve's next policy move, which could potentially influence demand for the Greenback.

Market participants await the US Core Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday, as these events hold a pivotal role in assessing inflationary trends and economic conditions within the United States.

• USD/JPY stages a modest intraday recovery from a one-week trough touched earlier this Tuesday.
• The uptick lacks follow-through in the wake of retreating US bond yields and subdued USD demand.
• The mixed technical setup warrants some caution before positioning for a firm near-term direction.

The USD/JPY pair attracts some buyers near the 148.15 region, or a one-week low touched during the Asian session on Tuesday and climbs to a fresh daily peak in the last hour. Spot prices, however, remain confined in a familiar range held over the past week or so and currently trade around the 148.60-148.65 area, up less than 0.10% for the day.

A generally positive risk tone is seen undermining the safe-haven Japanese Yen (JPY) and turning out to be a key factor lending some support to the USD/JPY pair. The intraday uptick, however, lacks bullish conviction in the wake of subdued US Dollar (USD) demand. Reduced bets for further interest rate hikes by the Federal Reserve (Fed) lead to a further decline in the US Treasury bond yields, which, in turn, keep the USD bulls on the defensive and act as a headwind for the major.

From a technical perspective, the USD/JPY pair now seems to have found acceptance below the 100-period Simple Moving Average (SMA) on the 4-hour chart. Moreover, oscillators on hourly charts are holding in the negative territory, though are yet to confirm a bearish bias on the daily chart. Hence, any subsequent slide is more likely to find decent support near the 148.00 mark and remain limited near the 200-period SMA on the 4-hour chart, currently pegged near the 147.70-147.65 region.

The latter should act as a key pivotal point, below which the USD/JPY pair is likely to accelerate the fall towards the 147.30 area, or the lowest level since September 14 touched last Tuesday. This is followed by the 147.00 round figure, which if broken will suggest that spot prices have topped out in the near term and pave the way for some meaningful depreciating move.

On the flip side, any subsequent move up might now confront a stiff barrier near the 149.00 mark ahead of the 149.30-149.35 supply zone. A sustained strength beyond could allow the USD/JPY pair to aim back to conquer the 150.00 psychological mark or the potential intervention level. Some follow-through buying will confirm a fresh breakout and lift spot prices towards the 151.00 round figure en route to the 152.00 neighbourhood, or a multi-decade high touched in October 2022.

USD/JPY 4-hour chart

Technical levels to watch

• Gold price advances to over a one-week high during the Asian session on Tuesday.
• Geopolitical tensions in the Middle East and retreating US bond yields lend support.
• A positive risk tone caps gains as traders look to the FOMC minutes and the US CPI.

Gold price (XAU/USD) registered strong gains of over 1% on Monday and settled above the mid-$1,800 in the wake of concerns about the geopolitical tensions in the Middle East. The safe-haven precious metal, which tends to benefit from political and economic turmoil, draws additional support from the ongoing retracement slide in the US Treasury bond yields, led by reduced bets for further rate hikes by the Federal Reserve (Fed). This, along with subdued US Dollar (USD) price action, pushes the commodity higher for the third successive day on Tuesday.

Gold price climbed to over a one-week high during the Asian session and has now recovered over $50 from a seven-month low touched last Friday. That said, a generally positive tone around the equity markets is holding back bullish traders from placing fresh bets around the XAU/USD and capping gains. Investors also seem reluctant and prefer to wait on the sidelines ahead of this week's key releases from the United States (US) – the FOMC monetary policy meeting minutes on Wednesday, followed by the latest consumer inflation figures on Thursday.

Daily Digest Market Movers: Gold price benefits from geopolitical risks, reduced Fed rate hike bets

• Military conflict between Israeli forces and Palestinian Islamist group Hamas continues to drive some haven flows, lifting the Gold price to over a one-week high on Tuesday.
• Fed officials struck a cautious tone about the need for further rate hikes and said that the recent rise in the long-term US Treasury bond yields would help the Fed in its battle against inflation.
• Fed Vice Chair Philip Jefferson also sounded less hawkish and suggested the central bank proceed carefully with any further increases in the benchmark federal funds rate.
• Dallas Fed President Lorie Logan noted that the progress on inflation is encouraging, while output and spending have been surprisingly strong, forcing investors to trim their bets for further rate increases.
• The repricing of the Fed's rate-hike path led to a further decline in the US Treasury bond yields, which kept the US Dollar bulls on the defensive and further benefitted the XAU/USD.
• The markets, however, are still pricing in the possibility of at least one more Fed rate hike by the end of this year, which should limit the downside for the US bond yields and the USD.
• Investors now look to the FOMC meeting minutes and the US consumer inflation figures, due on Wednesday and Thursday, respectively, for cues about the Fed's next policy move.

Technical Analysis: Gold price could extend the vulnerable recovery move

From a technical perspective, some follow-through buying beyond the $1,865 level should pave the way for additional gains, towards the next relevant hurdle near the $1,885 area. This is closely followed by the $1,900 round figure, which nears the 50-day Simple Moving Average (SMA) and should now act as a key pivotal point. A sustained strength beyond will suggest that the Gold price has formed a near-term bottom and pave the way for additional gains towards testing the 200-day SMA, currently pegged near the $1,928-1,930 region.

On the flip side, any meaningful decline might now find some support near the $1,855-$1,850 zone ahead of the $1,835-1,834 region. A convincing break below the latter will suggest that the corrective bounce has run its course and drag the Gold price to the $1,820 support en route to the multi-month low, around the $1,810 zone. Furthermore, the occurrence of a death cross on the daily chart, wherein the 50-day SMA is holding well below the 200-day SMA, warrants caution for bullish traders and before positioning for further gains.

Japanese Finance Minister Shunichi Suzuki said on Tuesday that the “current Yen weakening caused in part by interest rate differentials.”

Suzuki said, “Japan would chair a meeting of finance ministers and central bank governors from the Group of Seven (G7) advanced nations on Oct. 12 to discuss a war in Ukraine and the world economy.”

Market reaction

The above comments are helping put a bid under the USD/JPY pair, as it edges 0.06% higher to 148.58, at the time of writing.

The Bank of Japan (BoJ) offered to buy JPY1.40 trillion worth of Japanese Government Bonds (JGB) in its regular daily operation on Tuesday.

Key details

Market reaction

At the time of writing, USD/JPY is holding steady at around 148.50.

Early Tuesday, Charles Q. Brown, a top US military officer, urged Iran not to get involved in a crisis in Israel.

Brown said that he does not want the conflict to broaden.

US National Security spokesperson John Kirby said late Monday that there is “no intelligence suggesting direct Iranian participation.”

Meanwhile, there have been unconfirmed reports suggesting that an airstrike hit an Iranian weapons convoy crossing from Iraq into Syria at al-Qaim/Bukamal. The air strike is  "presumed to be by Israel".

Related reads

• Saudi Arabia stands by Palestinians, Prince Mohammed bin Salman says – FT
• Middle east turmoil could mean more market volatility ahead

• USD/CAD continues the losing streak due to the improved Crude oil prices
• The Mid-East tension persists; and contributes support for the oil prices.
• Investors downplay the likelihood of additional rate hikes following the dovish remarks made by Fed officials.

USD/CAD continues the losing streak on the fourth successive session, trading lower around 1.3570 during the early Asian session on Tuesday. The pair is encountering challenges stemming from a significant surge in oil prices, a trend that could be linked to the military conflict unfolding around the Gaza Strip.

While Canada observed Monday as part of the Thanksgiving national holiday, geopolitical tensions persist, contributing to elevated Crude Oil prices due to concerns about stability in the Middle East. This, in turn, is providing support to the Canadian Dollar (CAD), which is closely tied to oil prices.

Western Texas Intermediate (WTI) oil experienced its most significant increase in six months, reaching $86.01 per barrel on Monday. However, it has since pulled back to $84.70 at the time of writing on Tuesday.

The US Dollar (USD) failed to register significant gains despite the robust US Nonfarm payroll data released on Friday. This lack of appreciation can be attributed to a decline in US Treasury yields on Monday, with the 10-year US Treasury bond yield standing at 4.64% as of the current press time.

Moreover, the remarks made by Federal Reserve (Fed) officials overnight prompted investors to downplay the probability of additional rate hikes, resulting in a further drop in US bond yields. Consequently, this development is perceived as eroding the strength of the Greenback and acting as a headwind for the Loonie pair.

Dallas Fed president Lori Logan suggested that there might be less necessity to raise the Fed funds rate, and Fed Vice Chair Philip Jefferson acknowledged the importance of the central bank proceeding cautiously with any additional increases in the policy rate.

The US Dollar Index (DXY) extends its losses on the fifth successive day, trading around 106.00 at the time of writing.

Despite the ongoing tension between Hamas and Israel, the capital markets have turned positive. This shift has diminished the safe-haven appeal of the USD, leading to downward pressure on the USD/CAD pair.

Investors will likely monitor the forthcoming FOMC meeting minutes scheduled for Wednesday. Anticipation surrounds the impact of this release on expectations regarding the Federal Reserve's next policy move, which could potentially influence demand for the Greenback.

Traders will keenly focus on the US Core Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday, as these events hold a pivotal role in assessing inflationary trends and economic conditions within the United States.

Following talks with US Senators on Tuesday, China's Commerce Minister, Wang Wentao, said that “both sides had rational and pragmatic discussions.”

Additional quotes

Market reaction

On the above comments, AUD/USD is keeping its upside momentum intact near 0.6425, adding 0.23% on the day.

• GBP/USD ticks higher during the Asian session on Tuesday, albeit lacks follow-through.
• Retreating US bond yields, a positive risk tone undermines the USD and lends support.
• Expectations that the BoE is done hiking rates keep a lid on further gains for the major.

The GBP/USD pair builds on the previous day's goodish rebound of over 80 pips from the 1.2165-1.2160 area and extends its steady ascent through the Asian session on Tuesday. Spot prices, however, lack bullish conviction, warranting some caution before positioning for an extension of the recent recovery move from the lowest level since mid-March, around the 1.2035 area touched last week.

A combination of factors drags the US Dollar (USD) to a one-and-half-week low, which, in turn, is seen acting as a tailwind for the GBP/USD pair. Relatively subdued US wage growth data released on Friday eased inflationary concerns and could allow the Federal Reserve (Fed) to soften its hawkish stance. Furthermore, Fed officials struck a cautious tone on the need for further rate hikes and led to a further decline in the US Treasury bond yields.

Meanwhile, the initial reaction to military clashes between Israel and the Palestinian Islamist group Hamas turns out to be short-lived in the wake of a slight dovish shift in Fed officials' view. This is evident from a generally positive tone around the equity markets and further undermines the safe-haven buck. That said, expectations that the Bank of England (BoE) will maintain the status quo in November should cap the upside for the GBP/USD pair.

In fact, the UK central bank surprisingly paused its rate-hiking cycle earlier in September and provided little hints of its intention to raise rates. This, in turn, makes it prudent to wait for strong follow-through buying before confirming that the GBP/USD pair has formed a near-term bottom and positioning for any meaningful appreciating move. Moving ahead, there isn't any relevant market-moving economic data due for release from the UK or the US on Tuesday.

Later during the North American session, traders will take cues from speeches by influential FOMC members. Apart from this, the US bond yields and the broader risk sentiment might influence the USD price dynamics, which should allow traders to grab short-term opportunities around the GBP/USD pair. The focus, however, will remain on the FOMC minutes and the US consumer inflation figures, due for release on Wednesday and Thursday, respectively.

Technical levels to watch

Financial Times, citing the Saudi Press Agency (SPA), reported that Saudi Arabia’s Crown Prince Mohammed bin Salman told Palestinian President Mahmoud Abbas that his country stands by Palestinians and was working to stop the conflict.

Prince Mohammed “affirmed the necessity of observing international law and not targeting civilians”, the report added.

• NZD/USD trades higher due to the pullback in the US Dollar.
• The Mid-East tension seems to be short-lived; diminishing the safe haven appeal of Greenback.
• Fed’s remarks prompted investors to downplay the probability of additional rate hikes.

NZD/USD continues the winning streak that began on Wednesday, trading in the positive territory near 0.6030 during the Early Asian session on Tuesday. The pair is receiving upward support as the US Dollar (USD) continues to move on a downward path.

Despite the robust US Nonfarm Payrolls data released on Friday, the US Dollar (USD) did not see a significant appreciation, as US Treasury yields experienced a decline on Monday. The 10-year US Treasury bond yield stands at 4.64%, by the press time.

Moreover, the remarks made by Federal Reserve (Fed) officials overnight prompted investors to downplay the probability of additional rate hikes, resulting in a further drop in US bond yields. Consequently, this development is perceived as eroding the strength of the Greenback and providing support for the NZD/USD pair.

The US Dollar Index (DXY) extends its losses on the fifth successive day, trading around 106.00 at the time of writing.

The conflict between Hamas and Israel has turned out to be short-lived, which is reflected in a positive turnaround in the capital markets. This, in turn, diminishes the safe-haven appeal of the USD and offers additional support to the NZD/USD pair.

Investors will likely monitor the forthcoming FOMC meeting minutes scheduled for Wednesday. Anticipation surrounds the impact of this release on expectations regarding the Federal Reserve's next policy move, which could potentially influence demand for the Greenback. This event has the potential to act as a fresh catalyst, guiding the direction of the Kiwi pair.

On the other side, the Reserve Bank of New Zealand (RBNZ) opted to maintain the Official Cash Rate (OCR) at 5.5% in its monetary policy meeting on Wednesday, in line with widely anticipated predictions.

The central bank expressed agreement that interest rates might need to be maintained at a restrictive level for an extended period, as highlighted in the RBNZ statement. This stance likely played a role in influencing the performance of the Kiwi pair.

The economic calendar for the Kiwi is relatively light this week, featuring Visitor Arrivals on Wednesday, final Food Price Index figures on Thursday, and Business NZ's Purchasing Manager Index (PMI) scheduled for Friday.

Traders will keenly focus on the US Core Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday, as these events hold a pivotal role in assessing inflationary trends and economic conditions within the United States.

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Tuesday at 7.1781 as compared with the previous day's fix of 7.1789 and 7.2758 Reuters estimate.

World Bank Chief Economist Indermit Gill, speaking with Reuters on Monday, said that rising debt levels among seemingly healthy countries in Asia could drag growth in the region below currently forecast levels.

Additional quotes:

Increased government borrowing from domestic markets would limit the level of credit available to private firms, resulting in faltering investment.
There's a lot of government consumption and private consumption being financed through debt. There is not a lot of investment being financed through credit, and that's not great.
We have simultaneous problems of too much debt and too little investment.
The result could be much lower growth than we were forecasting.
The world's focus on the poorest countries that were covered by the Common Framework could lead to surprises in other countries that were seemingly healthy.

• EUR/USD attracts some buyers on Tuesday and draws support from a modest USD downtick.
• Retreating US bond yields and a positive risk tone seem to undermine the safe-haven buck.
• Traders might prefer to wait for this week’s key releases – the FOMC minutes and the US CPI.

The EUR/USD pair gains some positive traction during the Asian session on Tuesday and remains well within the striking distance of last week's swing high. Spot prices currently trade around the 1.0575-1.05780 region, up just over 0.15% for the day, and draw support from a softer tone surrounding the US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, touches a one-and-half-week low in the wake of the ongoing retracement slide in the US Treasury bond yields. Despite Friday's upbeat headline NFP print, relatively subdued wage growth eased inflationary concerns and might force the Federal Reserve (Fed) to soften its hawkish stance. Adding to this, the overnight comments by Fed officials caused investors to undercut the likelihood of further rate hikes and led to a further decline in the US bond yields. This, in turn, is seen undermining the USD and acting as a tailwind for the EUR/USD pair.

Meanwhile, the initial reaction to military clashes between Israel and the Palestinian Islamist group Hamas turned out to be short-lived, which is evident from a positive turnaround in the equity markets. This turns out to be another factor denting the Greenback's relative safe-haven status and lends additional support to the EUR/USD pair. The uptick, however, lacks bullish conviction on the back of speculations that additional rate hikes by the European Central Bank (ECB) may be off the table for now. This, in turn, warrants some caution for aggressive bullish traders and positioning for any further appreciating move.

Even from a technical perspective, the recent downfall witnessed over the past three months or so, from a 17-month top touched in July, has been along a downward-sloping channel. This points to a well-established short-term bearish trend and makes it prudent to wait for a strong follow-through buying before confirming that the EUR/USD pair has formed a near-term bottom around the 1.0450-1.0445 area, or the YTD trough set last week. Traders might also prefer to wait on the sidelines ahead of the release of the FOMC meeting minutes and the latest US consumer inflation figures on Wednesday and Thursday, respectively.

In the meantime, market participants will take cues from scheduled speeches by ECB President Christine Lagarde and influential FOMC members. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and contribute to producing short-term trading opportunities around the EUR/USD pair in the absence of any relevant economic data.

Technical levels to watch

• The USD/JPY fell back into familiar lows for Monday, declining through the 149.00 handle to trade into 148.40.
• After the weekend's Gaza escalation, risk appetite remains twitchy.
• Markets head into another round of US inflation data due in the back half of the trading week.

The USD/JPY traded down on Monday, slipping 0.67% as market flows tussled with risk aversion following a Hamas rocket attack over the weekend that left 700 Israelis and at least 12 Americans dead over the weekend. The Israeli counteroffensive claimed another 700 Palestinian lives, and broader markets are facing fears that the worst escalation of the long-running Gaza conflict could see the region embroiled in a geopolitical storm, which could threaten trade, supply, and production in the Middle East.

Forex Today: US Dollar weakens despite Middle East concerns

The Japanese Current Account (non-seasonally adjusted) for August came in at , versus the forecast     ¥3,090.9B and the previous reading of ¥2,771.7B.

Japan Trade Balance misses the mark, prints a miss at ¥2,279.7B versus the forecast ¥3,090.9B

The week ahead sees a decent collection of US data over the horizon: Wednesday sees US Producer Price Index (PPI) figures, Thursday has another round of Consumer Price Index (CPI) inflation measures, and Friday will cap off the trading week with the Michigan Consumer Sentiment Index.

The Japanese economic calendar data docket is notably thin for the remainder of the week, with strictly low-impact numbers on the offering.

USD/JPY Technical Outlook

Despite the USD/JPY's Monday declines, the pair remains overall incredibly well-bid, peaking at yearly highs at the 150.00 major handle and trading incredibly far above the 200-day Simple Moving Average (SMA), currently turning bullish into 139.00.

Short interest will need to make a decisive break of the 50-day SMA near 147.00 before they can continue on making a run at the last meaningful swing low from all the way back in July into 138.00, while an upside continuation runs the risk of policy intervention from the Bank of Japan (BoJ) on behalf of the Yen moving forward.

USD/JPY Daily Chart

USD/JPY Technical Levels