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• NZD/USD retreats further, dropping below 0.6000.
• Oversold RSI points to possible corrective bounce, but bearish momentum remains strong.
• The pair stands in lows since early August.

The NZD/USD currency pair has extended its downtrend, with bears maintaining a firm grip as selling momentum builds. During Friday's session, the pair fell by 0.60% to 0.5980, hitting lows not witnessed since August. In addition, the 20-day Simple Moving Average (SMA) is about to complete a bearish crossover with the 100-day SMA which could add selling pressure.

The Relative Strength Index (RSI) remains in oversold territory, currently at 30, indicating intense selling pressure. The RSI's downwards trajectory suggests that bearish momentum is likely to persist, matching the rising red bars on the Moving Average Convergence Divergence (MACD) histogram. That being said, the RSI in oversold terrain might trigger a corrective bounce as sellers might start to run out of steam.

NZD/USD daily chart

Technically, the NZD/USD pair continues to trade below its key moving averages, with the 100-day Simple Moving Average (SMA) at 0.6100 and the 200-day SMA around 0.6150 creating significant resistance. These hurdles are capping the pair's potential for an upward rebound.

Support levels: 0.5950, 0.5930, 0.5900.

Resistance levels: 0.6000,0.6050, 0.6100.

• The NZD/JPY has been trading sideways recently, showing no clear trend.
• Technical indicators suggest a growing bearish momentum, with the RSI and MACD starting to turn in favor of the sellers.
• The 100 and 200-day SMA completed a bearish crossover at 92.00.

The NZD/JPY pair has traded within a tight range recently, demonstrating a lack of clear directional momentum. However, Friday's session saw a modest decline of 0.32% to 91.00, hinting at a potential shift in sentiment.

Technical indicators align with this observation. The Relative Strength Index (RSI) of 52 suggests that buying pressure is on the wane. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram is red and rising, indicating growing bearish momentum. This divergence between the price action and technical indicators suggests that selling forces may be gaining the upper hand.

It is important to note that the 100 and 200-day Simple Moving Averages (SMAs) have converged and crossed at 92.00, forming a strong resistance level. A break below this confluence could intensify selling pressure and add further downward momentum to the pair. Conversely, a break above this key level could indicate a reversal of the current trend.

NZD/JPY daily chart

• Gold remains elevated amid renewed Middle East hostilities.
• US election uncertainty adds to gold’s appeal, with polls showing a tight race between Trump and Biden in key swing states.
• Rising US Treasury yields and a rebounding Dollar cap gains, with DXY up 0.29% and limiting further upside for the yellow metal.

Gold price remains firm ahead of the weekend late in the North American session, up 0.18% after hitting a record high on Wednesday at $2,758. Elevated tensions in the Middle East and uncertainty around US elections keep traders flocking to the safe-haven metal. The XAU/USD trades at $2,740 at the time of writing.

Geopolitics pushed aside US economic data as the main driver for price action. Hostilities continued Friday between Israel and Hezbollah at around the border of Israel and Lebanon. Israeli officials said that around 45 missiles were launched by the terrorist organization.

Meanwhile, Israel attacked eastern Lebanon, leading to the closure of the Al-Qaa and the Masnaa border crossings via Lebanese officials and the United Nations. Israel stated they targeted Hezbollah’s infrastructure.

According to CNN, the US Secretary of State Anthony Blinken met with Middle East leaders in London, trying to end the war in Gaza.

Aside from this, traders are also eyeing US elections. Deutsche Bank Analyst Jim Reid wrote, “An Emerson poll of several swing states yesterday had Trump very marginally ahead, including a 1pt lead in Pennsylvania and Wisconsin, and a 2pt lead in North Carolina. But given the margin of error is just over three points for those polls, this remains a very tight race, as reflected in various prediction markets and forecast models.”

Recently, US Treasury yields recovered after diving to daily lows and turned positive, capping Bullion prices. Also, Greenback is staging a recovery as the US Dollar Index (DXY), which tracks the Dollar's value against a basket of six currencies, is up 0.29% at 104.32.

Data-wise, the US economic docket revealed that US Durable Goods Orders dropped in September. At the same time, the University of Michigan (UoM) revealed that Consumer Sentiment amongst Americans improved in October.

Daily digest market movers: Gold price remains firm despite higher US yields

• The US 10-year Treasury note yield rises two basis points to 4.23%.
• US Durable Goods Orders in September fell by 0.8% month-over-month (MoM), which was better than the estimated -1% decline and unchanged from the previous month.
• US Consumer Sentiment in October came in better than expected, rising to 70.5, compared to the forecast of 69.
• The same survey revealed that inflation expectations for one year dropped from 2.9% to 2.7%, while expectations for five years remained unchanged at 3%.
• Data from the Chicago Board of Trade, based on the December fed funds rate futures contract, indicates that investors estimate 49 basis points (bps) of Fed easing by the end of the year.

XAU/USD technical outlook: Gold price rises above $2,740

Gold price remains upward biased, though it has consolidated at around $2,708-$2,758 during the last four days, unable to crack the bottom-top of the range.

Momentum indicators suggest that buyers are gaining strength, with the Relative Strength Index (RSI) reversing its decline and moving upwards in bullish territory.

If XAU/USD clears $2,750, the next resistance level will be the year-to-date (YTD) high at $2,758. Once surpassed, the next target would be $2,800.

On the downside, if bullion prices fall below the October 23 low of $2,708, the next support lies at the 38.2% Fibonacci Retracement level at $2,699, followed by the 50% and 61.8% Fibonacci Retracement levels at $2,681 and $2,662, respectively.

• AUD/USD continues trading close to dangerous levels near 0.6600.
• Aussie Dollar could benefit from the hawkish tone surrounding the RBA.
• The USD saw some gains due to strong sentiment data from the University of Michigan.

The AUD/USD declined by 0.21% to 0.6620 in Friday's session despite the Reserve Bank of Australia's (RBA) hawkish policy outlook. The decline was primarily attributed to the appreciation of the US Dollar amid less-dovish sentiment surrounding the Federal Reserve (Fed) and strong University of Michigan (UoM) sentiment data, which overshadowed soft Durable Goods figures.

However, the Aussie Dollar could benefit from the RBA's hawkish tone in the coming days.

Daily digest market movers: Australian Dollar declines on US data

• AUD weakened versus USD primarily due to the release of strong UoM data and Durable Goods lower than expected decline.
• In that sense, Durable Goods Orders in the US declined by 0.8% in September, slightly better than market expectations of a 1% decline.
• UoM’s Consumer Sentiment index rose to 70.5 in October, beating expectations.
• The strong US data might prompt the Fed to take a more hawkish stance and table the two consensus cuts for November and December.
• In the meantime, the RBA isn’t showing signs of being completely open to start cutting with markets only betting on 50% chances of a cut in 2024 which could eventually benefit the AUD.

AUD/USD technical outlook: AUD/USD bearish momentum dominates, support at 0.6600

The AUD/USD pair extended its losses on Friday. The Relative Strength Index (RSI) fell into the oversold area, with a value of 34, and is exhibiting a mildly declining slope, suggesting that selling pressure is rising. The Moving Average Convergence Divergence (MACD) histogram is red and rising, indicating that bearish momentum is increasing.

Overall, the technical outlook for the AUD/USD pair is bearish. The decline in the RSI and the rising MACD histogram suggest that selling pressure is dominating the market. However, it is important to note that the pair is trading near support at 0.6600 and may experience a bounce if it manages to hold above this level.

• The Dow Jones shed seven-tenths of a percent on Friday.
• A tech stock rally left the Dow in the dust as the blue-chip index waffles.
• Despite holding on the high end, the Dow Jones found its first down week since August.

The Dow Jones Industrial Average (DJIA) declined 300 points on Friday, easing back 0.7% as a broad tech rally left the Dow to fend for itself. The major index shed 2.7% over the week as key stocks ease back into the midrange following a bumper earnings season.

Stocks are struggling overall under the weight of marginally higher bond yields, which have taken a step up recently. Despite cooling off on Friday, with the 10-year Treasury yield easing back toward 4.2% after breaking north of 4.25% during the midweek market sessions, stocks are grappling with buoyed bond yields as the two markets tend to move in opposite directions.

Tesla (TSLA) has extended a rally after quarterly revenue came in higher than expected, helping to bolster a broad-market rally in the tech sector. Major digital darlings including Meta (META) and Netflix (NFLX) also rose on Friday, gaining more than 1% each.

Dow Jones news

Two-thirds of securities listed on the Dow Jones are testing into the low end on Friday, though a knock-on tech rally helped to bolster Intel (INTC) over 2.5% to $23 per share. The tech and AI bubble also found room for Salesforce (CRM), which rose 1.2% and crossed over $290 per share. On the low end, McDonald’s (MCD) shed nearly 3%, falling below $293 per share, with Goldman Sachs (GS) close behind, backsliding around 2.25% and easing below $513 per share. Both companies posted above-forecast revenue reporting recently, prompting an earnings season splurge, but markets are now pulling back their revenue bids.

Dow Jones price forecast

The Dow Jones spent most of the trading week grinding lower toward the 42,000 handle as the major stock index takes a break from 2024’s overall stellar performance. The equity board has snapped a six-week win streak, but is still firmly planted in bull country as markets take a breather and pull back from 43,000.

Oscillating technical indicators remain hopelessly broken as the Dow Jones sets record highs weekly more often than not. Price action has entirely outrun long-term moving averages, with bids testing chart paper well above the 200-day Exponential Moving Average (EMA), struggling to rise to 35,000.

Dow Jones daily chart

• Mexican Peso weakens amid political uncertainty after judicial reforms limit judiciary’s ability to challenge constitutional changes.
• President Sheinbaum’s defiance of a federal judge's suspension order adds to concerns about rule of law and economic stability.
• Fears of potential US tariffs under a Trump presidency weigh on the Peso, compounding pressure from Mexico’s internal political shifts.

The Mexican Peso depreciated against the US Dollar on Friday due to political turmoil linked to the recently approved judicial reform. Investors remain uncertain about recently approved reforms, which could threaten the state of law, and affect Mexico’s creditworthiness. At the time of writing, the USD/MXN trades at 19.98, up 0.96%.

Market sentiment remains upbeat, which would usually underpin the Mexican currency. Politics are capping the Peso’s advances after the Senate passed a proposal to make constitutional reforms “unchallengeable.” Its approval would curtail the judiciary's powers to impede reforms made by lawmakers in Congress.

According to Joaquin Monfort, Senior Analyst at FX Street, “Critics argue this would upset the balance of power in Mexico, whilst proponents argue the judiciary is biased and vulnerable to corruption.”

In September, the Mexican Congress passed a judiciary reform allowing judges and magistrates to be elected by popular vote. Regarding these reforms, two federal judges granted suspensions after citizens appealed the changes to the Mexican Constitution.

One of the judges ordered Mexican President Claudia Sheinbaum and the director of the official gazette, Alejandro Lopez Gonzalez, to lower the publication and remove the decree validating the judicial reform from the gazette. However, Sheinbaum said, “We are not going to lower the publication,” incurring in contempt of a federal judge's order.

In the meantime, fears of Donald Trump’s victory in the US election could weigh on the Mexican Peso, as he repeatedly stated that he would impose tariffs of over 200% on cars manufactured and imported from Mexico.

Data-wise, US Durable Goods Orders slumped in September for a second consecutive month, while core shipments remained down in four of the last five months reported.

Recently, the University of Michigan (UoM) Consumer Sentiment for October, on its final reading, improved above estimates and the previous month's reading. Inflation expectations for one year were revised downward and, for five years, remained unchanged.

Daily digest market movers: Mexican Peso dwindles on political instability

• A mixed inflation report in Mexico for the first 15 days of October might prevent the Bank of Mexico (Banxico) from lowering borrowing costs by 50 basis points (bps), according to Monex. Banxico’s next meeting is on November 14.
• US Durable Goods Orders in September slumped 0.8% MoM, below estimates of -1% and unchanged compared to last month.
• US Consumer Sentiment in October was better than expected, rising to 70.5, up from 69 expected.
• The same poll revealed expectations for one year dropped from 2.9% to 2.7% and for five years remained unchanged at 3%.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 49 bps of Fed easing by the end of the year.

USD/MXN technical outlook: Mexican Peso tumbles as USD/MXN buyers eye 20.00

The USD/MXN is upwardly biased and approaches the psychological 20.00 figure. Momentum suggests that buyers are in charge as the Relative Strength Index (RSI) resumed its advance. Hence, the path of least resistance is tilted to the upside.

If buyers clear the 20.00 figure, they could test the weekly peak at 20.09. On further strength, the USD/MXN could aim toward the year-to-date (YTD) high at 20.22, ahead of key psychological levels of 20.50 and 21.00.

On the other hand, if sellers reclaim the October 18 low at 19.64, this could pave the way for a challenge to 19.50. The next move would be toward the October 4 swing low of 19.10 before testing 19.00.

• Silver trades at $33.64, bouncing back from a weekly low of $33.09 as RSI approaches overbought territory, signaling bullish momentum.
• Key resistance levels include the October 24 high at $34.29, YTD high at $34.86, and October 2012 peak at $35.40.
• A bearish daily close could shift bias to the downside, with first support at $33.24, followed by $33.00 and October 17 low of $31.32.

Silver prices staged a comeback after dipping to a weekly low of $33.09, though it remains below its opening price by 0.10% late during Friday’s North American session. At the time of writing, XAG/USD trades at $33.64.

XAG/USD Price Forecast: Technical outlook

The grey metal remains upwardly biased, even though it has posted back-to-back days recording new weekly lows. Momentum backs buyers as depicted by the Relative Strength Index (RSI), reaccelerating toward overbought territory. Therefore, the path of least resistance is tilted to the upside.

XAG/USD first resistance would be the October 24 high at $34.29, followed by the year-to-date (YTD) high at $34.86. On further strength, buyers could challenge October 2012 high at $35.40.

Conversely, if XAG/USD prints a bearish daily close, it could pave the way for further downside. the first support would be the October 24 daily low of $33.24, followed by $33.00. A breach of the latter, Silver could tumble as low as $31.32, to the October 17 swing low.

XAG/USD Daily Chart

• US Dollar holds its ground at the end of the week, remains in consolidation mode.
• Fed officials remain cautious on inflation, as Durable Goods Orders miss market expectations.
• Markets continue to see two cuts by year-end.

The US economy remains robust with GDPNow tracking third-quarter growth at 3.4%. The strong economic outlook might push the Federal Reserve (Fed) to adopt a more cautious stance. Investors, meanwhile, are confident of two cuts by the end of 2024.

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

Daily digest market movers: US Dollar with gains, while Goods Orders fall below estimates

• Durable Goods Orders in the US declined by 0.8% MoM in September, slightly better than market expectations of a 1% decline.
• Excluding Transportation, New Orders increased by 0.4%. Excluding Defense, New Orders decreased by 1.1%.
• Transportation equipment, which has been declining for three of the last four months, contributed to the overall decrease in Durable Goods Orders.
• On the positive side, the Michigan Consumer Sentiment index rose to 70.5, beating expectations and helping the USD avoid losses.

DXY technical outlook: DXY breached 200-day SMA, now consolidating

The DXY index breached the 200-day SMA this week, but over-extension forced a retreat. The index is now expected to consolidate, correcting overbought conditions.

Despite gains by the end of the week, the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators remain dangerously close to the overbought territory, so traders should consider eventual losses for the index. Supports lie at 104.50, 104.30 and 104.00, while resistances stand at 104.70, 104.90 and 105.00.

• Pair trades sideways within a narrow range, indicating indecisive market sentiment.
• RSI suggests increasing selling pressure, while MACD signals weakening bullish momentum.
• The pair remains below the 20-day SMA, indicating a bearish bias in the short term

EUR/GBP continues to trade within a constricted range, with limited price movements in recent sessions. The pair currently trades near 0.8340 having faced resistance at the 20-day SMA, maintaining a neutral bias. 

Analyzing the technical indicators, the Relative Strength Index (RSI) has declined to 45, suggesting increasing selling pressure. The MACD, while still in positive territory, is decreasing, indicating weakening buying momentum. This confluence of signals points to a neutral to slightly bearish bias in the short term.

Support levels are seen at 0.8330, 0.8315, and 0.8300, while resistance levels stand at 0.8350, 0.8370, and 0.8400. In the near term, the pair is likely to continue trading within this range unless buyers manage to break above the 20-day SMA, thereby shifting the technical outlook more favorably.

EUR/GBP daily chart

UK Chancellor Reeves is walking a thin line as she seeks to find a balance between finding the funds to invest for growth while also maintaining the air of budgetary prudence, Rabobank’s FX analyst Jane Foley notes.

GBP is holding up well so far

“To avoid shocking gilt investors too much by the October 30 budget announcements, Reeves has already leaked various parts of her agenda. GBP is holding up well so far, in part because the BoE is less dovish than some other G10 central banks.”

“Meanwhile, a more dovish ECB is undermining the resilience of the EUR. Ÿ Despite the risks to GBP posed by a change in fiscal policy settings, our central view remains that EUR/GBP will continue to edge lower to the 0.8150 area on a 12-month view.”

“We will revise our USD forecasts in early November and see downside risk to our cable view.”

• EUR/CAD trades plum in the middle of a multi-week range as both constituent currencies face similar negative fundamentals. 
• The central banks of Canada and the Eurozone are expected to slash rates at the end of 2024 – a negative for both EUR and CAD.  
• CAD also faces downside pressure from US election risk and the lower Crude Oil prices.

EUR/CAD lengthens its range-bound price action on Friday, trading at 1.5000 after edging higher on the day. The pair is plum in the center of an 11-week range and unable to gain directionality due to the similar monetary policy outlook of the two currencies’ central banks. 

Both the European Central Bank (ECB) and Bank of Canada (BoC) are in the process of cutting interest rates as inflation pressures from the Covid-19 crisis ease. 

The relative level of interest rates set by central banks is a major driver of the exchange rate because it impacts the flow of money. Capital tends to flow to where it can earn more and so favors currencies with higher interest rates, all other things being equal. As such neither the CAD nor EUR are particularly outperforming since both their central banks are expected to lower rates aggressively. 

EUR/CAD 4-hour Chart 

In its recent October meeting the BoC surprised markets by slashing its official interest rate (that which sets the interest rates of commercial banks) by 50 basis points (bps) (0.50%), bringing the official overnight rate down to 3.75%, from 4.25% previously. 

Many analysts had expected a more cautious 25 bps (0.25%) reduction. The decision had negative repercussions for the Canadian Dollar (CAD) which weakened in most of its pairs although the effect was muted against the Euro, with EUR/CAD actually closing marginally higher on the day.

The reason CAD did not fall against the Euro on the day (Wednesday) was partly because of the publication of a story by Reuters which reported that the ECB was considering cutting interest rates to below the “neutral” rate. The neutral rate, also known as the “equilibrium level” of interest rates, is a theoretical level at which inflation should remain unchanged. For the ECB the neutral rate is said to be between 1.5% and 2.0%. Given the ECB’s key interest rate is 3.40% this would imply a radical reduction on the horizon. 

The story intensified speculation the ECB might be preparing to cut interest rates more aggressively at its last meeting of the year in December 2024, with swap rates, which are used to predict central bank decisions, pricing a healthy chance of a 50 bps reduction. 

“Rates are falling significantly as markets are pricing a higher probability of the ECB going for a 50 bps rate cut in December,” said Andres Larsson, Senior FX Analyst at Nordea Bank, adding,  “..and a higher probability of the ECB eventually cutting rates to below neutral,”

According to Larsson, the market is pricing in “-35.6bp for the December ECB meeting and -32.4bp for the ECB meeting on 25 January.” This is substantially higher than a few weeks ago. 

Eurozone data out on Thursday failed to quell speculation after October Purchasing Manager Indexes – surveys that indicate economic activity for leading sectors of the economy – revealed Manufacturing activity in the region rose but was still in contraction territory (below 50) at 45.9 and Services PMI dipped to 51.2 from 51.4 in September. 

“Today’s PMIs were more or less in line with expectations, although the employment component dropped below 50, pointing to the risk of rising unemployment ahead,” said Larsson. 

Employment and wages could be a key determining factor for whether the ECB decides to go for a “Christmas slasher” or not. 

The ECB’s Chief Economist Martin Lane has said that wage inflation is likely to stay elevated in the second half of 2024 which is likely to prevent the ECB from making big cuts to interest rates before 2025. If true, this could inject some caution into ECB at the December meeting and suggest the bank might opt for a softer 25 bps cut instead. Such a move would provide upside for EUR/CAD.

According to official Wage Growth data, Eurozone wages rose 4.5% in the second quarter which, though lower than the 5.2% in the previous quarter, remained high. There is still no data for Q3, however, but the Eurozone Average Monthly Wage continues to rise quite strongly, reaching EUR 2,180 in September. 

On Friday, the German IFO Business Climate Index showed a higher than expected reading, providing some reassurance regarding the outlook for the German economy, which has been seen as a weak link in the Eurozone despite historically being its engine house. This may have helped EUR/CAD nudge higher into the end of the week. 

“The headline German IFO Business Climate Index rebounded to 86.5 in October from 85.4 in September. The data came in above the estimated 85.6 print,” said Dhwani Mehta, Senior Analyst at FXStreet. 

From Canada, meanwhile, data on Friday showed shoppers reigning in their spending after data showed it rose by only 0.4% MoM in August, from 0.9% in July and below estimates of 0.5%. 

EUR/CAD might also be biased to rise due to other factors weighing on the Canadian Dollar, which include the increased chance of Republican nominee Donald Trump winning the US presidential elections, and lower Crude Oil prices, since Oil is Canada’s largest export. 

Former President Trump has vowed to impose tariffs on foreign imports in order to kickstart a recovery in US manufacturing, and if he targets Canadian imports this would reduce demand for CAD, weakening it. At the moment Canada, the US and Mexico enjoy a free trade deal, however, a Trump presidency might result in the US’s withdrawal. The deal is up for renegotiation in 2026. 

According to the model of leading election website FiveThirtyEight, Trump now has a slightly higher 51% chance of winning. That said, the website’s master poll, which aggregates, averages, and weights polls according to recency, shows Vice-President Kamala Harris still in the lead with 48.1% versus Trump’s 46.4%. 

Most betting websites offer better odds of Trump winning than Harris. The former President is also nudging ahead in key marginal seats that could decide the outcome of a too-close-to-call vote.

“Polls in the battleground states have remained very tight and within the margin of error,” says Jim Reid, Global Head of Macro Research at Deutsche Bank on Friday. “For instance, an Emerson poll of several swing states yesterday had Trump very marginally ahead, including a 1pt lead in Pennsylvania and Wisconsin, and a 2pt lead in North Carolina," said Jim Reid, Global Head of Macro Research at Deutsche Bank in a note on Friday.

• GBP/USD remains above the 100-day SMA at 1.2967, with a break above 1.3000 potentially targeting 1.3015 and weekly high of 1.3057.
• RSI signals mild bullish momentum, but bias remains bearish below the neutral line, adding to resistance at the 1.3000 mark.
• Sellers need to break below 1.2967, with further support at the bottom trendline near 1.2925/35 for a bearish shift.

The Pound Sterling recovered some ground and traded at around three-day highs of 1.2998 yet remained unable to crack the 1.3000 figure at the time of writing. Market mood has improved slightly, a headwind for Greenback, which, despite that, is headed to sustain weekly gains of more than 0.50%.

GBP/USD Price Forecast: Technical outlook

The GBP/USD trades above the 100-day Simple Moving Average (SMA) at 1.2967, with buyers pressing to clear the 1.3000 figure. The Relative Strength Index (RSI) is bearish below its neutral line but slightly tilted to the upside in the short term.

If buyers lift GBP/USD above 1.3000, they could push prices to October 22 high at 1.3015, followed by the weekly peak at 1.3057. Conversely, sellers need to drive the GBP/USD below the 100-day SMA, followed by the bottom trendline of an ascending channel at around 1.2925/35.

GBP/USD Price Chart – Daily

• Silver price rebounds after the release of the US Durable Goods Orders data for September.
• Fresh demand for US core goods contracted steadily by 0.8%.
• Improving market sentiment could dampen the appeal of safe-haven assets.

Silver price (XAG/USD) recovers its intraday losses after discovering buying interest near the key support of $33.00 in Friday’s New York session. The white metal rebounds after the release of the United States (US) Durable Goods Orders for September, which showed that fresh demand for long-lasting goods declined steadily by 0.8%. However, the pace at which Durable Goods Orders contracted was slower than estimates of 1.0%.

The US Dollar (USD) edged lower after the release of the Durable Goods Orders data, with the US Dollar Index (DXY) struggling to hold 104.00. 10-year US Treasury yields fall to near 4.19%. Lower yields on interest-bearing assets reduce the opportunity cost of holding an investment in non-yielding assets, such as Silver.

The Silver price faced pressure in the last two trading sessions amid profit-booking after it posted a fresh high close to $35 on Tuesday, the highest level seen in over 12 years.

Meanwhile, an improvement in investors’ risk appetite could weigh on the Silver price. The market sentiment has improved as investors start digesting expectations that former US President Donald Trump will win over current Vice President Kamala Harris in national elections on November 5. The S&P 500 has opened on a positive note on Friday.

Also, the visit of US Secretary of State Antony Blinken to Saudi Arabia has slightly renewed hopes of a ceasefire in the war between Iran and Israel in southern cities of Lebanon.

Silver technical analysis

Silver price bounces back from 33.00 in North American trading hours on Friday. The white metal aims to revisit a fresh over 12-year high near $35.00. The asset strengthened after breaking above the horizontal resistance plotted from May 21 high of $32.50 on a daily timeframe, which will act as a support for now. Upward-sloping 20- and 50-day Exponential Moving Averages (EMAs) near $32.30 and $31.10, respectively, signal more upside ahead.

The 14-day Relative Strength Index (RSI) oscillates above 60.00, points to an active bullish momentum.

Silver daily chart

The Pound Sterling (GBP) is a mild outperformer on the session, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP outperforms moderately

“Markets were showing some signs of concern yesterday over an adjustment in how UK debt is measured for setting UK fiscal rules.”

“This will allow the government to borrow a lot more in next week’s budget potentially. The announcement by Chancellor Reeves Thursday pressured UK Gilts. Markets appear less perturbed this morning, however, with UK bonds outperforming European debt slightly.”

“GBP was showing some positive signs on the intraday chart yesterday and while progress has been limited, short-term technicals still offers some tantalizing signs of potential gains this morning. Spot is testing minor trend resistance at 1.2980 and a clear push above here should prompt additional gains to the 1.3050 zone over the next 1-2 days.”

“Support is 1.2945/50 and 1.2910.”

A slight improvement in business sentiment in China would probably lend support to oil prices. After all, weak demand in the world's second-largest oil consumer is one of the major disappointments this year, weighing on prices, Commerzbank’s commodity analyst Barbara Lambrecht notes.

Rapid advance of electric mobility curbs oil consumption in China

“The IEA currently expects Chinese daily oil demand to increase by only 100,000 barrels this year, compared with last year. At the beginning of the year, it had still assumed demand growth of 700,000 barrels. In addition to the weak economy, the rapid advance of electric mobility is also curbing oil consumption in China. Sales of electric cars are also rising sharply in the most important consumer country, the US, but their market share is so low that they are not yet significantly reducing oil consumption.”

“If the purchasing managers' index there also improves slightly, as analysts expect, this could also dampen demand concerns in the oil market. In addition, the first survey-based estimates of OPEC production in October will be published at the end of next week, which are likely to show a significant increase in Libyan oil production following the agreement between the parties to the conflict. The latest developments in production in Iraq are more uncertain.”

“Although the country has committed to offsetting overproduction in the first half of the year, this is not yet reflected in current production estimates. The lack of discipline among some OPEC+ members is putting particular strain on the patience of swing-producer Saudi Arabia. According to Bloomberg, the country's oil export revenues fell to their lowest level in more than three years in August. The high deviations of some from their production targets are a burden on prices.”

ECB policymakers have perhaps said all that can possibly be said about the outlook for rates this week. The upshot of the range of comments from key officials is that rates will fall a bit more—and will quite likely drop again in December—but the case for a 50bps cut has not been made and more measured moves are (for the moment) preferable, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Euro steadies on the day

“Swaps continue to reflect 35bps of easing priced in for the December 12th meeting. Repricing ECB risks may give the EUR a bit more of a foothold around 1.08 in the short run.”

“The EUR closed on a relatively solid footing yesterday. The gain was relatively mild but it was the biggest one-day rise in a month. Bearish technical momentum looks neutral on the intraday chart and the daily RSI oscillator is starting to correct from oversold—a positive.”

“Spot is trading above minor trend resistance on the 6-hour chart this morning and that should provide sone underpinning for the EUR at 1.0800/10 intraday. A push above 1.0875, to set a fresh, short-term high, is needed to generate more lift, however.”

• Durable Goods Orders in the US declined in September.
• US Dollar Index stays in daily range near 104.00 after the data.

Durable Goods Orders in the US decreased $2.2 billion, or 0.8%, to $284.8 billion in September, the US Census Bureau reported on Friday. This reading followed the 0.8% decrease (revised from 0%) recorded in August and came in slightly better than the market expectation for a decline of 1%.

"Excluding transportation, new orders increased 0.4%," the publication read. "Excluding defense, new orders decreased 1.1%. Transportation equipment, also down three of the last four months, drove the decrease, $3.1 billion or 3.1% to $95.4 billion."

Market reaction

The US Dollar Index showed no immediate reaction to these figures and was last seen trading virtually unchanged on the day near 104.00.

The price of Palladium jumped by more than 9% at times yesterday, reaching its highest level since December last year at just under $1,170 an ounce, Commerzbank’s commodity analyst Barbara Lambrecht notes.

Palladium price rallies after fear sanctions kicks in

“According to informed sources, the US government is set to call on the rest of the G7 to impose sanctions on Russian Palladium (and Titanium). Russia has a dominant position in the Palladium market, with one company supplying 40% of the world's mine supply. The EU, which imports about half of its Palladium, obtained about a third of its imports from Russia in 2021.”

“The share is likely to have declined, but is likely to remain significant. The US also continues to buy Russian Palladium. This is not the first time that fears of sanctions have driven up the price of Palladium. The most massive price increase occurred shortly after the start of the war in Ukraine.” “Last December, Palladium also jumped after the US and UK imposed new sanctions on Russian Aluminium, Copper and Nickel, fuelling fears that Palladium would be the next metal to be targeted. A month ago, Palladium also rallied significantly when Russian President Putin threatened to impose export restrictions on certain metals, without specifically mentioning Palladium.

• GBP/JPY has broken out of the top of a Right-Angle Triangle and moved some of the distance towards its target. 
• The pair will probably go higher, subject to confirmation.  

GBP/JPY has broken out of a Right-Angle Triangle pattern and rallied higher. 

The pair completed a decisive move above the upper boundary of a Triangle pattern (see chart) and peaked on Wednesday at 198.44. 

The first upside target for the pattern lies at 199.59 (blue shaded rectangle), the 61.8% Fibonacci extrapolation of the height of the triangle (at its widest point) higher. 

GBP/JPY Daily Chart 

The pair has pulled back since peaking but the odds favor it eventually rallying back up to the aforementioned target. A break above Wednesday’s 198.44 high would provide bullish confirmation. 

The Relative Strength Index (RSI) momentum indicator is not yet in the overbought zone (above 70) suggesting the pair has room to go higher.

• EUR/JPY has broken above the ceiling of its multi-month range indicating it could be poised to move even higher. 
• Resistance from the 100 and 200-day SMA remains the last hurdle before bulls can run free. 

EUR/JPY pierced cleanly through the ceiling of its multi-month range and appears to have established a foothold in the territory above. 

Thursday’s mild withdrawal soon found support at the top of the range in the 163.80s suggesting resistance has metamorphosed into support. On Friday price has so far also remained above the range ceiling. 

Lying immediately above price however is stiff resistance from a cluster of the (blue) 100 and (green) 200-day Simple Moving Averages (SMA).  

EUR/JPY Daily Chart 

The short and medium-term trends are bullish suggesting the odds favor more upside to come, however, the two SMAs are major obstacles that need to be traversed before bulls can be confident of following through higher. 

A break above 164.90 would probably confirm a decisive break above these two SMAs and result in a move up to the minimum target for the breakout from the range at 169.68. This is the 61.8% Fibonacci extrapolation of the height of the range to the upside. 

Alternatively, it is still also possible EUR/JPY could capitulate back inside the range. However, for this to be confirmed, price would have to break below 161.85 (October 17 swing low). This seems less likely given the decisive way in which price broke out of the ceiling of the range on Wednesday. 

The Relative Strength Index (RSI) momentum indicator is not yet in the overbought zone (above 70) suggesting the pair has room to go higher.

On the gold market, the rally could at least lose momentum. This is because the quarterly report on gold demand will probably show that, while investment demand is strong, physical demand is weakening due to high demand, Commerzbank’s Commodity analyst Barbara Lambrecht notes.

Weakening physical demand to dampen the bull market

“The quarterly report of the World Gold Council, to be published on Wednesday, is likely to confirm that long-term investors are showing increased interest in gold – inflows of almost 100 tons were recorded in gold ETFs in the third quarter – but high prices are likely to have an adverse effect on physical demand, especially in Asia.”

“This is at least suggested by the significant drop in China's gold imports. Data for gold shipments in September will be published by the Hong Kong Statistics Authority on Monday. In India, the reduction of the import tax in August had led to a significant increase in imports, but in September, gold imports had already fallen again.”

“We think that a weakening of physical demand will dampen the bull market in the long term.”

The price of Brent crude has stabilised at around USD 75 per barrel, at least for the time being, Commerzbank’s commodity analyst Barbara Lambrecht notes.

US inventory report comes out without much impact on prices

“Market participants remain fundamentally torn between supply risks due to the tense situation in the Middle East and demand concerns. This week's weekly inventory report from the US Department of Energy did not provide much clarity either. US crude oil inventories rose by 5.5 million barrels week-on-week, more than expected.”

“However, this was also due to a rebound in crude imports (after a weak hurricane-related week), so it should not be over-interpreted, especially as the increase was accompanied by a significant rise in refinery runs. The latter rose earlier than usual after the maintenance period and may also have led to a rise in gasoline stocks, which is unusual for this time of year.”

“That the latter is not a cause for concern is also shown by the continued robust demand for gasoline in the US. All in all, despite the rise in stocks, this was a report without much impact on prices.”

The Canadian Dollar (CAD) is little changed on the session. CAD remains soft against the USD but it has held up a little better than most of G10 peers on the week despite the Bank of Canada’s aggressive rate cut Wednesday, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD little changed on the session

“Only the CHF has lost less ground against a generally stronger USD since this time last Friday and losses for the AUD and NZD exceed 1%. Context is important. There is a marginal improvement in underlying CAD drivers into the end of the week, pointing to a mild improvement in the CAD’s fair value estimate (1.3857).”

“Canadian Retail Sales are expected to rise 0.5% in August (0.4% in ex-autos terms). On consensus data may give the CAD a small nudge up (providing the release is not overshadowed by US data). The Canadian government’s announcement of meaningful curbs on immigration yesterday has potentially significant implications for growth and productivity etc., but it’s not clear that the plan is entirely feasible.”

“Spot has stabilized from a technical point of view and intraday oscillator signals are showing tentative signs of correcting from overbought. But the USD remains well-supported on minor dips to support at 1.3800/10. A break below the figure may see USD losses extend but only to 1.3750 or so in the short run. Resistance is 1.3850/60.”

The S&P Global Flash manufacturing and services PMIs for October rebounded after slipping in September. The manufacturing PMI rose to 57.4 from an eight-month low of 56.5 in September, while the services PMI edged up to 57.9 from 57.7 in September. The PMIs give a relatively narrow picture of the overall economy, but they still carry some value, Commerzbank’s FX analyst Charlie Lay notes.

RBI to stay prudent

“The bottom line is that they remain well above the 50-level and still point to strong economic momentum. Encouragingly, there were ongoing signs of firm domestic demand and strong new export orders, suggesting India continues to benefit from the global expansion. This is translating to positive employment growth, which should in turn help support domestic consumption.”

“In terms of implications for monetary policy, it will reinforce the Reserve Bank of India’s (RBI) cautious and judicious approach to policy easing. RBI recently shifted to a neutral tone, but there are no signs of an imminent easing. The recent uptick in inflation for September, back above RBI’s mid-point target of 4%, will cement their view to stay prudent.”

“This will also provide some support for INR. We saw this dynamic play out in the past month. INR held up the best among Asian currencies amid the USD rebound. For example, since the end of September, Asian currencies ex-Japan retreated by around 3% vs USD but INR is down only by 0.3%.”

The US Dollar (USD) rally may be coming off the boil. A lower close for the Dollar Index (DXY) yesterday signals some—potential—technical headwinds for the index for starters and markets may be getting a little concerned about one of the essential drivers of the October rebound, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD stabilizes as rally shows signs of maturing

“Rising Treasury yields have provided strong tailwinds for the USD amid still resilient economic data. But there is evidence that some of the firming trend in yields is the result investors demanding a greater premium for holding long term US Treasury debt. The NY Fed’s estimated term premium has nudged up to around 20bps, likely reflecting concerns about tariff risks and US fiscal sustainability as the US presidential election race tightens.”

“Stocks are up slightly while bonds are mixed—European debt is (mostly) a little softer while US Treasurys are outperforming modestly. Positive US data surprises have been running at their strongest since the spring, reflecting both the resilience of the US economy and market observers underestimating the durability of growth momentum. Durable goods are expected to fall 1.0% in September, with the ex-transport figure expected to fall just 0.1%.”

“Better than expected data might give the USD a small lift today but an overbought DXY looks increasingly prone to some, minor at least, corrective losses. Weakness in the index below 104 may prompt a further decline towards 103.40/50. Note Japan goes to the polls this weekend, with the ruling LDP at risk of losing its lower house majority.”

• USD/CHF is charting a sideways course just beneath its September high and the 100-day SMA. 
• The pair is in a short-term uptrend, favoring a extension higher subject to a clear break above the SMA. 

USD/CHF flatlines in the 0.8660s after pausing in its run up from the late September lows. The pair is close to the (blue) 100-day Simple Moving Average (SMA), currently situated at 0.8691. 

USD/CHF Daily Chart 

The short and medium-term trends are bullish and given the principle that “the trend is your friend” the odds favor an extension higher. 

That said, USD/CHF has now reached the target generated by the breakout from the late August and September range at 0.8680. This suggests bullish pressure might wane. 

A break above the 100-day SMA and the 0.8700 level would confirm a further extension to the 0.8750 resistance level (August 15 high). 

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

The Bank of Japan is once again in an unenviable position. It would like to continue raising interest rates, which are still stuck at 0.25%, and would like to take advantage of rising inflation to finally move away from its long-standing zero interest rate policy. But the timing is always difficult to get right. When it raised rates in the summer, a very weak US employment report followed a few days later, which, together with the rate hike, triggered sharp swings in the JPY and the stock market. And next week's timing does not seem ideal either, Commerzbank’s FX analyst Volkmar Baur notes.

BoJ can confidently leave rates unchanged next week

“First of all, the Japanese themselves go to the polls on Sunday. After Prime Minister Ishiba Shigeru won an internal party election last month to take over the premiership from Kishida Fumio, he called a snap election to secure his mandate. According to opinion polls, however, this appears to have backfired. The current ruling coalition of the LDP and Komei is in danger of losing its parliamentary majority.”

“As a result, when the BoJ meets next Thursday, it may still be unclear what the government will look like in the coming years and what its fiscal plans are for the near future. In addition, less than a week after the BoJ meeting, another somewhat important election will take place in the US, which could also cause significant market volatility.”

“Perhaps the timing is not so bad after all. Given the political uncertainties, the BoJ can confidently leave rates unchanged next week. This will allow it to avoid any uncomfortable questions about what has happened to its plans for further rate hikes. And will give the BoJ another six weeks until its next meeting.”

• Crude Oil dips back to $70.00 as markets price in a fresh string of events in Israel.
• US Secretary of State Blinken’s diplomatic efforts could result in ceasefire talks. 
• The US Dollar Index finds support at 104.00 ahead of US Durable Goods. 

Crude Oil price consolidates on Friday on headlines that US Secretary of State Antony Blinken might be able to get both Israel and Iran at the table for ceasefire talks. The Biden administration is stepping up efforts to broker a ceasefire deal in light of the US presidential election on November 5. A breakthrough would be a win for the Biden administration, for the Democrats, and for Kamala Harris’s chances of becoming President. 

The US Dollar Index (DXY), which tracks the performance of the Greenback against six other currencies, is consolidating on Friday after profit taking on Thursday and ahead of the US Durable Goods data for September and the University of Michigan final October reading. It is important where the DXY closes this Friday, as it will determine if the DXY can rally further next week on the back of uncertainty on the US presidential election outcome. 

At the time of writing, Crude Oil (WTI) trades at $70.48 and Brent Crude at $74.42

Oil news and market movers: Growth outlook bearish

• The International Energy Agency (IEA) has warned that global demand growth would continue to weaken due to China’s slowdown and uptake of electric vehicles, Bloomberg reports.
• Next week, all eyes will be on the OIl companies like BP, Shell, Chevron, and ExxonMobil. They will report Q3 earnings during the week. Other big firms due to report include PetroChina, Sinopec, and TotalEnergies, Reuters reports.
• Eni sold a shipment of CPC Blend to ExxonMobil on the Platts window. This year has been tough for Oil refining, according to Neste’s Chief Executive Officer, Reuters reports. 

Oil Technical Analysis: Stepping up efforts

Crude Oil price has been unable to keep trading above the pivotal levels of $71.46 and $71.68. With falling back below those two important pivotal levels, the risk of more downside could be at hand. Should US Secretary of State Antony Blinken be able to get a ceasefire deal or get the parties at least around the table, more downsides could arise in the Crude Oil price. 

On the upside, the  55-day Simple Moving Average (SMA) at $71.68 remains the first level to reclaim. Next up, the hefty technical level at $75.01, with the 100-day Simple Moving Average (SMA) and a few pivotal lines, is possibly the next big hurdle ahead. 

On the downside, traders need to look much lower, at $67.12, a level that supported the price in May and June 2023. In case that level breaks, the 2024 year-to-date low emerges at $64.75 followed by $64.38, the low from 2023.

US WTI Crude Oil: Daily Chart

The US Dollar (USD) is expected to trade in a range between 7.1180 and 7.1440. Momentum is slowing; a breach of 7.0900 would indicate that USD is more likely to trade in a range instead of strengthening further, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann notes.

USD/CNH can reach 7.1440 short term

24-HOUR VIEW: “Our view for USD to ‘rise to 7.1500’ did not materialise, as it pulled back from a high of 7.1462, closing largely unchanged at 7.1350 (- 0.02%). The current price movements are likely part of a range trading phase. Today, we expect USD to trade between 7.1180 and 7.1440.”

1-3 WEEKS VIEW: “Our update from Monday (21 Oct, spot at 7.1170) remains valid. As highlighted, the recent buildup in momentum is slowing, and a breach of 7.0900 would indicate that USD is more likely to trade in a range instead of strengthening further. Looking ahead, USD has to break and remain above 7.1500 before an advance to 7.1600 can be expected.”

Most recently, our Fed expectations were largely in line with those of the market. Just like the market, we expect the Fed to lower its key rate to around 3½%. Therefore, there is little to be said for idiosyncratic USD strength. However, we had previously expected the ECB to cut its key rate by far less than the market expects. This is no longer the case, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

EUR/USD target us lowered from 1.15 to 1.11

“Part of the current USD strength is certainly due to the fact that Donald Trump's chances of returning to the White House have increased in view of recent polls. Since Trump's tariff and tax policies are widely expected to have an inflationary effect, the new polls are likely to have contributed to the recent dollar strength. In the event of Kamala Harris's election victory, there is thus potential for a setback for the dollar. From today's perspective, weighing up the risks, a slight weakening of the dollar appears to be the more likely scenario for the coming months.”

“In the US, GDP in Q4 2025 will be 1.9% higher than in the same quarter of the previous year – after 2.3% in Q4 2024. This means that the US would continue to grow significantly faster, but not quite as much faster as at present. However, because the US growth advantage is likely to have been responsible for a good part of the USD strength so far, even a small reduction in this US advantage is a rather good signal for the Euro.”

“We are lowering our EUR/USD target from 1.15 to 1.11. The greatest risk for our forecast would be a markedly inflationary US economic policy combined with a Fed that can continue to fight inflationary pressure decisively.”

• AUD/USD stays above 0.6000, with the US Dollar striving to gain ground after Thursday’s correction.
• The Fed is expected to pursue a gradual policy-easing path.
• Investors await Australian Q3 CPI data for fresh cues about the RBA’s interest rate outlook.

The AUD/USD pair consolidates above the psychological support of 0.6000 in Friday’s European session. The Aussie pair turns sideways as the US Dollar (USD) steadies after Thursday’s corrective move. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, hovers near 104.00.

The downside in the US Dollar appears to be limited due to growing expectations that the Federal Reserve’s (Fed) policy-easing approach would be more gradual than what was previously anticipated for the remaining year and that former US President Donald Trump will win national elections on November 5.

According to the CME FedWatch tool, traders are confident that the Fed will cut interest rates at a usual pace of 25 basis points (bps) in the November and December policy meetings. The Fed started the policy-easing cycle in September with a larger-than-usual size of 50 bps, pushing interest rates lower to 4.75%-5.00%.

On the political front, investors expect higher tariffs and lower taxes if Trump returns to the White House, which will force the Federal Reserve (Fed) to keep interest rates higher.

Meanwhile, the Australian Dollar (AUD) has underperformed against its major peers this month despite investors expecting the Reserve Bank of Australia (RBA) to leave its Official Cash Rate (OCR) at its current levels by the year-end. The latest upbeat employment data reinforced expectations that the RBA will not cut interest rates for the remainder of the year.

Going forward, investors will focus on the Australian Q3 Consumer Price Index (CPI) data, which will be published on Wednesday. Australian inflation grew by 1% in the second quarter of this year.

The US Dollar (USD) is likely to trade in a range between 152.00 and 153.20. In the longer run, upward momentum remains strong; the next level to monitor is 153.40, followed by 154.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

To trade in a range between 152.00 and 153.20

24-HOUR VIEW: “When USD was trading at 151.05 yesterday, we highlighted that ‘provided that 150.50 is not breached, USD is likely to rise to 151.50.’ We indicated that ‘the major resistance at 151.90 is not expected to come into view.’ However, USD broke above 151.50 and 151.90, as it surged to a high of 153.18. USD pulled back from the high to close at 152.75 (+1.12%). The pullback in severely overbought conditions suggests USD is unlikely to rise much further. Today, it is more likely to trade in a range between 152.00 and 153.20.”

1-3 WEEKS VIEW: “Two days ago (22 Oct), when USD was at 150.90, we indicated that ‘there has been a clear increase in momentum.’ We also indicated that ‘if USD breaks above 151.00, the focus will then shift to 151.90.’ After USD broke above 151.00, we stated yesterday (23 Oct, spot at 151.05) that “The focus now is at 151.90.” Our view of a stronger USD was correct, but we did expect it to jump above 151.90 (high has been 153.18). Not surprisingly, momentum remains strong. From here, the next level to monitor is 153.40, followed by 154.00. Overall, only a breach of 151.00 (‘strong support’ level was at 150.00 yesterday) would mean that the advance that started early this month has come to an end.”

USD/JPY fell, in line with our call to sell rallies. Pair was last seen at 151.99, OCBC’s FX analysts Frances Cheung and Christopher Wong notes.

Elections outcome may have implication on USD/JPY

“Bullish momentum on daily chart intact while RSI is in overbought conditions. Bias to sell rallies Support at 150.70/80 levels (50% fibo retracement of Jul high to Sep low, 100 DMA), 148.10/30 levels (21 DMA, 38.2% fibo). Resistance at 153.30 (61.8% fibo retracement of Jul high to Sep low).”

“This morning, Tokyo CPI came in softer at 1.8% y/y (vs. 2.2% prior), somewhat reinforcing BoJ’s rhetoric of not rushing to normalise policy. Our house view does not look for BoJ to hike at upcoming MPC (31 October) though we are still of the view that BoJ is likely to tighten in Dec-2024, amid higher services inflation and wage pressures in Japan. But before that, the key event risk is Japan elections on Sunday (27 October).”

“Poll by Asahi newspaper showed that the LDP will likely lose majority in coalition with Komeito party while Kyodo news poll saw LDP constitutional democratic party spread narrowed. An LDP victory is likely to see policy continuity and should lead to USD/JPY trading lower. However, in the event LDP fails to win mandate, USD/JPY may risk rising further in the near term over monetary policy uncertainty that may be associated with the incoming administration.”

• The US Dollar consolidates following a pause in this week’s rally. 
• Traders gear up for the release of Durable Goods orders data amidst US presidential election uncertainty. 
• The US Dollar index hovers around 104.00, looking for support. 

The US Dollar (USD) consolidates on Friday after a small retreat a day earlier, but looks set to post a fourth consecutive week of gains ahead of the release of the US Durable Goods data. In what otherwise was a steep rally this week, Thursday was a bit of a profit-taking day for King Dollar. Uncertainty surrounding the US presidential election re-emerges after taking a step back on Thursday, with polls highlighting a very tight presidential race. 

The US economic calendar is facing two main events this Friday. The first will be the US Durable Goods Orders release for September. The second, and to close off the week,, the University of Michigan will release its final reading for October’s Consumer Sentiment data. 

Daily digest market movers: Final straw for this week

• This Friday’s data calendar kicks off at 12:30 GMT with the Durable Goods release for September:
  • Durable Goods Orders are expected to contract by 1% after remaining broadlu unchanged a month earlier.
  • Durable Goods without Transportation should contract by 0.1% against the increase of 0.5% previously.
  •  Any revisions from the previous month might be more market-moving than the fresh number. 
• Closing off this Friday at 14:00 GMT, The University of Michigan will release its final reading for October. Consumer Sentiment is expected to tick up marginally to 69.0 from the preliminary reading of 68.9. The 5-year inflation expectations are expected to remain unchanged at 3%.
• At 15:00 GMT, Federal Reserve Bank of Boston President Susan Collins participates in a conversation about the Fed’s efforts to create an economy that works for everyone at the Mass Black Expo in Boston.
• Equities are opening a touch softer this Friday, with European indices under pressure from disappointing earnings. US Futures are still looking for direction.  
• The CME FedWatch Tool is backing a 25 basis point (bps) rate cut with a 97% probability against a 3% chance of no rate cut for the upcoming Fed meeting on November 7.  
• The US 10-year benchmark rate trades at 4.18%, down from the high of 4.24% seen Wednesday. 

US Dollar Index Technical Analysis: Looking for support

The rally in the US Dollar Index (DXY) is facing a crucial moment to confirm if it has more room to go. Support at 104.00 is being tested, and the close at the end of the US trading session will be vital. A close above 104.00 could see the DXY rally further towards 105.00 with US presidential election uncertainties picking up steam next week. 

The DXY has broken above 104.00 and it is in an empty area that could quickly see 105.00 emerge as the first cap on the upside. Once above that level, watch out for the pivotal 105.53 (April 11 high) and 105.89 (May 2 high). Ultimately, 106.52 (double top from April) or even 107.35 (October 3, 2023, high) could show sharp resistance and selling pressure due to profit taking. 

On the downside, the 200-day SMA at 103.81 emerges as a very strong support. Look out for false breaks, and consider waiting for a daily close below that level when reassessing if there will be more downside for the DXY. The next big support is double, with the 100-day SMA at 103.19 and the pivotal 103.18 level (March 12 high). If that level breaks, a big gap lower would open toward the 101.90 support zone, with the 55-day SMA at 101.93.

US Dollar Index: Daily Chart

Oversold decline could extend to 0.5985 before stabilisation can be expected. In the longer run, potential for further declines could be limited; the levels to watch are 0.5985 and 0.5970, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann notes.

Oversold decline can extend to 0.5985

24-HOUR VIEW: “Our view for NZD to trade in a range yesterday was incorrect. Instead of trading in a range, it fell sharply to 0.5993. Although oversold, the decline could extend to 0.5985 before stabilisation can be expected. Today, a sustained break below this level seems unlikely. Resistance is at 0.6020; a breach of 0.6040 would mean that the weakness in NZD has stabilised.”

1-3 WEEKS VIEW: “On Tuesday (22 Oct, spot at 0.6030), we indicated that ‘the recent price action indicates that 0.6005 is within reach.’ We added, ‘Looking ahead, the next level to watch below 0.6005 is 0.5985.’ Yesterday, NZD dropped below 0.6005, reaching a low of 0.5993. While we continue to expect NZD to decline, the weakness that started early this month (see annotations in the chart below) appears to be overextended, both time- and price-wise. In other words, the potential for further decline could be limited. The levels to watch are 0.5985 and 0.5970. Should NZD break above 0.6060 (‘strong resistance’ level previously at 0.6085), it would mean that NZD is not declining further.”

• Gold trades in a $50 range, below the recent $2,758 record high, as it remains underpinned by haven flows. 
• Relentless bombing by Israel and increased uncertainty over who will win the US presidential election are driving the flows.
• XAU/USD forms a mini range within a broader uptrend, but higher highs are still possible. 

Gold (XAU/USD) stays stuck in this week’s mini range, exchanging hands in the $2,720s on Friday, as the precious metal is still supported by safe-haven flows due to a high level of geopolitical risk. The ongoing conflict in the Middle East and increasing uncertainty over who will win in the US election are both key factors driving investors to safe-play assets such as Gold.

Gold still supported as geopolitical risk premia ratchet up

Gold is likely to continue to find support from safe-haven flows as the war in the Middle East intensifies. Reuters reported on Friday that three Lebanese journalists had been killed in the bombing of a guesthouse used by members of the international press including Al Jazeera, Sky and Reuters. 

This comes at the end of a week that has seen the Israelis up their bombing campaign, wiping out entire residential blocks of neighborhoods in Beirut, including a bomb that landed close to a hospital and ended the life of a child, as well as an attack that killed three Lebanese army soldiers organizing an evacuation.  

In Doha, US Secretary of State Anthony Blinken is meeting with representatives from Israel and Qatar to try to negotiate an end to the conflict. This follows a separate meeting in Cairo between Egyptian diplomats and members of Hamas tasked with the same objective. 

However, Hamas senior official Osama Hamdan told Lebanese pro-Hezbollah news agency Al-Mayadeen there was no change in the group's position. "The hostages held by the resistance will only return with a stop to the aggression and complete withdrawal," Hamdan said, according to Reuters.

Adding to the cocktail of geopolitical risk is the news that Republican nominee Donald Trump is edging forward in many polls, especially in key states like Wisconsin and North Carolina. This suggests he has a good chance of winning the US presidential election. 

“An Emerson poll of several swing states yesterday had Trump very marginally ahead, including a 1pt lead in Pennsylvania and Wisconsin, and a 2pt lead in North Carolina," says Jim Reid, Global Head of Macro Research at Deutsche Bank on Friday. 

According to the model of leading US election website FiveThirtyEight, Trump now has a slightly higher 51% chance of winning. 

Nevertheless, the website’s master poll, which aggregates, averages, and weights polls according to recency, shows Vice President Kamala Harris still in the lead with 48.1% versus Trump’s 46.4%. Most betting websites offer better odds of Trump winning over Harris. 

A Trump win would upset the existing geopolitical order and potentially increase safe-haven flows despite his claims to end conflicts worldwide in a matter of days. 

Technical Analysis: Gold consolidates in a sideways band

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

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

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

XAU/USD Daily Chart

The Moving Average Convergence Divergence (MACD) is showing a bearish divergence between the September 26 high and the current price level. Although the price has risen since the September peak, the MACD is lower. This indicates waning bullish momentum and could be a sign presaging a pullback.  

Gold’s overall strong uptrend, however, suggests that any corrections will probably be short-lived, with the broader bull trend resuming thereafter.  

Unlike her ECB colleagues, Bank of England hawk Catherine Mann stuck to her usual tone yesterday, staying relatively pessimistic on disinflation and pointing to risks the BoE may cut too much too early. Three speeches by Governor Andrew Bailey this week have instead yielded little to no headlines. There is one last chance for Bailey to talk monetary policy at a Saturday event, so beware of some early Monday reaction in the Pound Sterling (GBP), ING’s FX analyst Francesco Pesole notes.

1.28 can be reached in the near term

“Yesterday’s PMIs in the UK were softer than expected, and while still looking decent compared to the eurozone, they are probably adding a bit of extra pressure to the BoE. Still, the gilt market and the GBP are now laser-focused on next Wednesday’s UK budget announcement. Yesterday, Chancellor Rachel Reeves confirmed that she will change the fiscal rule to increase investments, which will pave the way to a potential increase in borrowing in the order of tens of billions.”

“We discuss all this and the market sensitivity to the theme in our detailed UK budget preview. Gilts underperformed other developed market bonds after the fiscal rule announcement, and there seems to be a consensus view that UK yields have extra room to rise on budget news. From an FX market perspective, what matters is whether any gilt underperformance turns into uncontrolled volatility.”

“Given the GBP is pricing in no risk premium, the downside risks for the currency would be very large. For now, we reiterate a bearish bias on GBP/USD, which can suffer from defensive positioning ahead of the combined UK budget and US election risks. Our view remains that 1.28 can be reached in the near term.”

Strong momentum indicates further the Australian Dollar (AUD) weakness; the significant support at 0.6585 is likely out of reach for now. In the longer run, AUD is expected to continue to decline; the level to watch is a significant support at 0.6585, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann notes.

AUD is expected to continue to decline

24-HOUR VIEW: “The sharp drop in AUD that reached a low of 0.6614 was surprising (we were expecting sideways trading). Strong momentum indicates further AUD weakness is likely. However, the significant support at 0.6585 is likely out of reach for now. There is another support level at 0.6605. To keep the momentum going, AUD must remain below 0.6665 with minor resistance at 0.6650.”

1-3 WEEKS VIEW: “We have held a negative view in AUD since early this month. As we tracked the decline, we highlighted two days ago (22 Oct, spot at 0.6715) that ‘the rejuvenated momentum suggests that the AUD weakness from early this month remains intact.’ We added, ‘the level to monitor is 0.6620.’ AUD subsequently rebounded, but did not break our ‘strong resistance’ level at 0.6705. Yesterday, in a sudden move, it plummeted to 0.6614. Downward momentum remains strong and we continue to expect AUD to decline. The level to watch is a rather significant support at 0.6585. On the upside, the ‘strong resistance’ level has moved lower to 0.6685.”

• USD/CAD holds onto gains near 1.3850 as the BoC is expected to cut interest rates again by 50 bps in December.
• Economists expect the Canadian monthly Retail Sales to have grown by 0.5% in August, slower than 0.9% in July.
• The US Dollar remains supported as Fed large rate cut expectations have been tempered.

The USD/CAD pair turns sideways in Friday’s European session after posting a fresh 11-week high at 1.3870 on Thursday. The Loonie pair clings to gains as the Canadian Dollar (CAD) remains on the backfoot on expectations that the Bank of Canada (BoC) would continue an aggressive policy-easing stance in the next policy meeting in December.

The BoC reduced its key borrowing rates by a larger-than-usual size of 50 basis points (bps) to 3.75% on Wednesday, as expected. This was the fourth straight interest rate cut in a row, however, prior three rate reductions were of 25 bps.

Investors expect the BoC to cut again by 50 bps amid growing downside risks to Canadian economic growth. "We continue to expect one more 50-bps rate cut from the BoC this December," Claire Fan, an economist at RBC, wrote in a report. Fan cautioned against the real GDP growth remaining subdued for longer as interest rates remain restrictive until 2025.

Meanwhile, investors await the Canadian monthly Retail Sales data for August, which will be published on Friday. The Retail Sales data, a key measure of consumer spending, is estimated to have grown by 0.5%, slower than 0.9% in July.

In the United States (US) region, tempered expectations for the Federal Reserve (Fed) to pursue an aggressive interest rate cut cycle continue to limit the downside in the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds the key support of 104.00. Investors expect the Fed to cut interest rates by 25 bps in November and December.

Bundesbank president Joachim Nagel was asked on two separate occasions during his stay in Washington whether he would consider a 50bp cut in December, and both times, he refrained from explicitly pushing back, ING’s FX analyst Francesco Pesole notes.

EUR/USD is back above 1.0800

“This is a perfect case in point in the latest (substantial) shift in the ECB’s communication: Nagel is one of the most hawkish members of the Governing Council and would have probably answered with a clearer ‘no’ only a month ago. The ECB has shifted from a data-based to a ‘gut feeling’ approach, with much greater emphasis on growth sentiment.”

“Yesterday’s PMIs weren’t as bad as expected in Germany but were below consensus in France and still in contraction territory for the eurozone as a whole. One aspect of this shift to a ‘gut feeling’ approach is that the US election can now have a greater bearing on the ECB’s December decision. A Trump win and associated tariff risks could tilt the balance to a 50bp cut unless data firmly suggests otherwise.”

“Today, we will hear from Governing Council member Villeroy and take a look at the September inflation expectations figures published by the ECB. EUR/USD is back above 1.0800, but we doubt there is much more room for a rebound. A wide short-term rate gap and the imminent US election risk still point to a short-term move to the 1.0750 area.”

• EUR/USD trades above 1.0800, but the downside bias remains firm due to multiple headwinds.
• Traders expect the ECB to announce a sizeable interest rate cut in December.
• The Fed is expected to pursue a gradual rate-cut cycle.

EUR/USD strives to extend Thursday’s recovery above 1.0800 in Friday’s European session. The major currency pair bounced back on Thursday after the release of the flash Hamburg Commercial Bank (HCOB) Eurozone Purchasing Managers Index (PMI) report for October. 

The Euro’s recovery could be short-lived as the preliminary PMI report showed that the Eurozone’s economic activity continued to contract, with the flash Composite PMI declining to 49.7 in October. Preliminary readings showed that activities in the manufacturing sector continued to contract, with manufacturing PMI below the 50 threshold that separates expansion from contraction for 28 months, and the service sector output expanded surprisingly at a slower pace. A continuous decline in the Eurozone business activity points to uncertainty over economic growth. 

Meanwhile, growing speculation for a larger-than-usual interest rate cut by the European Central Bank (ECB) in its next policy meeting in December is also expected to push back the shared currency pair inside the woods. This year, the ECB has already reduced its Deposit Facility Rate three times by 25 basis points (bps) to 3.25%. 

Market expectations for the ECB to reduce its key borrowing rates by 50 bps in December have been boosted by dovish commentaries from a few policymakers who have highlighted risks of inflationary pressures remaining below the bank’s target of 2% due to fears of a downturn.

This week, Governor of the Bank of Portugal and ECB policymaker Mario Centeno said that the option of a 50 bps rate cut in December is on the table. Centeno warned that downside risks to growth are accumulating.

On the economic front, data released on Friday showed that the German IFO Business Climate, Current Assessment, and Expectations for October have come in better than expectations and prior releases. Historically, improving market sentiment points to a revival in economic conditions but the case appears to be unlikely due to weak business activity.

Daily digest market movers: EUR/USD bounces back at US Dollar’s expense

• A recovery in the EUR/USD pair is also driven by a retracement move in the US Dollar (USD) in European trading hours. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, hovers near 104.00 after correcting from a fresh 12-week high of 104.55.
• The near-term appeal of the US Dollar remains firm on multiple tailwinds, such as growing bets for the Federal Reserve (Fed) to follow a more gradual rate-cut cycle and rising expectations of former US President Donald Trump to win the presidential election against current Vice President Kamala Harris.
• Investors' confidence in the Fed’s gradual policy-easing cycle is backed by upbeat Nonfarm Payrolls (NFP) and Retail Sales data for September and better-than-expected flash S&P Global PMI data for October, which pointed to sustainable economic growth.
• On Friday, investors will focus on US Durable Goods Orders data for September, which will be published at 12:30 GMT. The economic data is estimated to have declined by 1% after remaining flat in August.

Technical Analysis: EUR/USD remains below 200-day EMA

EUR/USD holds recovery above 1.0800 in European trading hours. However, the outlook of the major currency pair remains downbeat as it stays below the 200-day Exponential Moving Average (EMA), which trades around 1.0900.

The downside move in the shared currency pair started after a breakdown of a Double Top formation on the daily time frame near the September 11 low at around 1.1000, which resulted in a bearish reversal.

The 14-day Relative Strength Index (RSI) remains inside the 20.00-40.00 range, indicating a strong bearish momentum. However, a recovery move remains on the cards as conditions turn oversold.

On the downside, the major could see more weakness towards the round-level support of 1.0700 if it slips below the upward-sloping trendline (plotted from the October 3 low around 1.0450) at 1.0750. Meanwhile, the 200-day EMA near 1.0900, and the psychological figure of 1.1000 will be the key resistances for the pair.
 

EUR saw modest rebound amid USD pullback, and European PMIs surprised to the upside. Pair was last at 1.0825, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Bearish momentum on daily chart shows signs of fading

“EUR saw modest rebound amid USD pullback while prelim PMIs surprised slightly to the upside. In particular, German manufacturing, services PMIs surprised.”

“Bearish momentum on daily chart shows signs of fading while RSI rose from near oversold conditions. We still call for rebound risks.”

“Resistance at 1.0830 (61.8% fibo retracement of 2024 low to high), 1.0870 (200 DMA), 1.0930/50 levels (21, 100 DMAs). Support 1.0780, 1.0740 (76.4% fibo).”

The Pound Sterling (GBP) is expected to trade in a range between 1.2930 and 1.3000. In the longer run, price action suggests GBP could decline further to 1.2860, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

GBP to trade between 1.2930 and 1.3000

24-HOUR VIEW: “Our view for GBP to ‘continue to weaken’ yesterday was incorrect. Instead of weakening, GBP rose to a high of 1.2985. Despite the relatively strong advance, upward momentum has not increased much. Today, we expect GBP to trade in a range, probably between 1.2930 and 1.3000. GBP is unlikely to break clearly below 1.2930 or above 1.3000.”

1-3 WEEKS VIEW: “On Tuesday (22 Oct, spot at 1.2980), we indicated that GBP ‘must break and remain 1.2940 before a resumption of weakness can be expected.’ After GBP plummeted below 1.2940, we indicated yesterday (24 Oct, spot at 1.2915) that ‘The price action indicates GBP could decline further to 1.2860.’ We did not anticipate the rebound that reached 1.2985. However, as our ‘strong resistance’ level at 1.3000 has not been breached yet, we will continue to hold the same view for now.”

The loss of momentum in the US Dollar (USD) rally we saw yesterday doesn’t seem to be the beginning of a broader trend. US yields were probably due an adjustment lower after the recent Treasury selloff, and that was mainly behind the slight dollar softening. Looking at both the US macro and political dynamics, the greenback can continue to find good support for the next few days, ING’s FX analysts Francesco Pesole note.

Greenback to find good support for the next few days

“Latest US data releases sent some contrasting signals on the jobs market, as jobless claims surprisingly fell while continuing claims rose. Remember that these figures are still being affected by the recent severe weather events and should probably be taken with a pinch of salt. On the activity side, high-frequency indicators have remained strong, and yesterday’s S&P Global composite PMI printed a surprise acceleration.”

“Today, the US calendar includes durable goods orders for September and a speech by FOMC’s Susan Collins. Fed officials have not given away much during the IMF week in Washington, suggesting they are – like the market – in a wait-and-see mode ahead of labour and inflation data that will determine whether to cut once or twice before year-end.”

"The polls are clearly telling us the election is too close to call, but markets and betting odds are leaning increasingly in favour of Trump. This may be due to the experience of the past two elections, where Trump was underestimated by polls, but also by greater hedging demand for a Trump presidency, which is seen as a more impactful macro/market event due to protectionism, tax cuts, strict migration policies and risks to the Fed independence.”

Silver prices (XAG/USD) fell on Friday, according to FXStreet data. Silver trades at $33.22 per troy ounce, down 1.34% from the $33.67 it cost on Thursday.

Silver prices have increased by 39.61% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 81.83 on Friday, up from 81.26 on Thursday.

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

The US Dollar (USD) retreated overnight, likely due to profit-taking on MTD gains. The Dollar Index (DXY) was last at 104 levels, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Bullish momentum remains intact

“Daily momentum remains bullish while RSI shows signs of easing from near overbought conditions. Bearish engulfing observed for yesterday session – may hint at bearish pressure intra-day. Support at 103.80 (200 DMA), 103.20 (100 DMA), 102.90 (21 DMA). Resistance at 104.60 (61.8% fibo retracement of 2023 high to 2024 low). Between now and then, we should see 2- way trades in USD.”

“Data focus today on durable goods report and university of Michigan sentiment index. Next week shall mark the start of a busy, eventful 2 weeks with JOLTS job openings, consumer sentiment (29 October); ADP employment (30 October); core PCE (31 October) and NFP (1 November) before US elections (5 November) and FOMC (7 November).”

“Top side looks stretched technically while any pullback may also be shallow as interests to buy USD (proxy for Trump hedges) may return ahead of US elections. Defensive positioning/ trump hedges may still gather traction in the near term given the fluidity of election developments and geopolitical uncertainties. Traditional polls remain too close to call while prediction market pointed to Trump lead. The high degree of uncertainty (also seen in 2w vols, which covers US elections) basically means that markets will largely be driven by election-related headlines.”

The Euro (EUR) is likely to trade in a 1.0790/1.0840 range. In the longer run, should EUR break above 1.0840, it would signal the end of the decline that started early this month, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR is likely to trade in a 1.0790/1.0840 range

24-HOUR VIEW: “Two days ago, EUR broke below the support at 1.0770 and reached a low of 1.0760. Yesterday, when EUR was at 1.0780, we pointed out ‘Oversold conditions combined with tentative signs of slowing momentum suggest EUR is unlikely to weaken much further.’ We expected EUR to ‘trade in a range between 1.0760 and 1.0810.’ However, instead of trading in a range, EUR rebounded strongly to 1.0829, closing at 1.0827 (+0.43%). The rebound appears to be running ahead of itself, and instead of continuing to rise, EUR is more likely to trade in a 1.0790/1.0840 range.”

1-3 WEEKS VIEW: “We highlighted yesterday (24 Oct, spot at 1.0780) that for EUR to continue to decline, it ‘must break clearly below the significant support at 1.0740.’ We also highlighted that ‘The likelihood of EUR breaking below 1.0740 will remain intact, provided that 1.0840 (‘strong resistance’ level) is not breached.’ EUR subsequently rebounded to a high of 1.0829. Downward momentum is beginning to slow. Should EUR break above 1.0840, it would signal the end of the decline that started early this month.”

• The Mexican Peso pauses in its recovery amid rising chances of Donald Trump winning the US presidential election. 
• Further attempts by deputies to limit the power of the Mexican judiciary also weigh on the Peso.
• USD/MXN pauses in its recent pullback and looks technically poised to begin a new leg higher, piercing the 20.00 level. 

The Mexican Peso’s (MXN) recovery grinds to a halt on Friday as political risk in the form of US presidential election uncertainty and a new development in Mexico’s judicial-reform saga takes the wind out of bulls’ sails. 

This adds to any weakness already caused by recent below-par macroeconomic data and any positive effects from a potential revival of the carry trade due to the depreciating Japanese Yen (JPY).  

Mexican Peso falls foul to rise in political risk premia

The Mexican Peso is feeling the heat from the increasing chances that Republican nominee Donald Trump could win the US presidential election on November 5. 

“Polls in the battleground states have remained very tight and within the margin of error,” says Jim Reid, Global Head of Macro Research at Deutsche Bank on Friday. “For instance, an Emerson poll of several swing states yesterday had Trump very marginally ahead, including a 1pt lead in Pennsylvania and Wisconsin, and a 2pt lead in North Carolina," adds Reid.

Further, according to the model of leading US election website FiveThirtyEight, Trump now has a slightly higher 51% chance of winning. That said, the website’s master poll, which aggregates, averages, and weights polls according to recency, shows Harris still in the lead with 48.1% versus Trump’s 46.4%. Most betting websites also offer better odds of Trump succeeding.  

A Trump win would spell trouble for the Mexican Peso. Trump has repeatedly said he will put higher tariffs on foreign imports and singled out the many cars manufactured and imported from Mexico for special treatment. Trump once said, in one interview with Bloomberg News, that he would slap tariffs of 100%, 200% or even 300% on Mexican autos. 

Such a move, if Trump were to win, would cause a body blow to the Mexican economy, which has become heavily reliant on nearshoring manufacturing goods, especially autos, for the North American market. This is largely due to its free trade agreement with the US and Canada (up for renegotiation in 2026). It would also directly hit demand for the Mexican Peso from US importers. 

Mexican Senate debates law to limit power of judiciary to block reforms

Investors in the West will probably also take a dim view of events taking place in the Mexican parliament, which could add further bearish pressure on the Mexican Peso. On Thursday, Mexican senators debated a possible ruling that would curtail the powers of the judiciary to impede reforms made by lawmakers in parliament. 

“The Mexican Senate began the discussion of a ruling that seeks to establish the inadmissibility of appeals and controversies against reforms to the Constitution,” said Mexican financial news website El Financiero. 

After a heated debate, in which opposition senators held up placards saying “NO A LA DICTADORA EN MEXICO,” the Senate voted by a majority of 85 for and 41 against to approve “in general and particular the opinion”.  

“Although the opinion has the majority support of Morena and its allies the Labor Party (PT) and the Green Ecologist Party of Mexico (PVEM), the debate promises to be extended due to the resistance of the opposition parties, which insist that the measure puts at risk the balance of powers in the country,” said El Financiero. 

If the ruling is approved, it would curtail the power of the judiciary to block laws made by parliament. Critics argue this would upset the balance of power in Mexico, whilst proponents argue the judiciary is biased and vulnerable to corruption. 

Such a move would crystallize Western investors’ negative views regarding the reforms proposed by the left-leaning Morena government. This could risk stymying investment in the country, leading to softer growth and lower capital inflows into the Peso.  

Technical Analysis: USD/MXN looks poised to begin new up leg 

USD/MXN has stalled in its most recent pullback from the 20.00 barrier and looks poised to begin a fresh leg higher. 

USD/MXN Daily Chart 

Further supporting the bullish view is the strong evidence that USD/MXN is in an uptrend on a short, medium and long-term basis and is trading in a rising channel. Given the technical dictum “the trend is your friend,” the odds favor a continuation higher.

The pair may also be tracing out a bullish “abc” pattern since the October 14 swing low, with the “c wave” about to extend higher (see chart).  If so, wave c would be expected to reach a length of a Fibonacci 61.8% of wave a, giving an upside target of 20.29. Such a move would gain confirmation from a break above the high of wave b at 20.09.

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

• German IFO Business Climate Index beats estimates within October.
• The IFO Current Economic Assessment Index rose to 85.7 in the reported month.

The headline German IFO Business Climate Index rebounded to 86.5 in October from 85.4 in September. The data came in above the estimated 85.6 print.

Meanwhile, the Current Economic Assessment Index rose to 85.7 in the same period from 84.4 registered in September, beating the market forecast of 84.4.

The IFO Expectations Index – indicating firms’ projections for the next six months, climbed to 87.3 in October vs. 86.3 in September and 86.8 anticipated.

Market reaction to the German IFO Survey

EUR/USD ignores the upbeat German IFO survey. At the time of writing, the pair is trading 0.04% lower on the day at 1.0820.

About German IFO

The headline IFO business climate index was rebased and recalibrated in October after the IFO Research Institute changed the series from the base year of 2000 to the base year of 2005 as of October 2011 and then changed series to include services as of October 2018. The survey now includes 9,000 monthly survey responses from firms in the manufacturing, service sector, trade and construction.

• The Pound Sterling consolidates after recovering slightly on Thursday as BoE’s Mann said services inflation needs to decline further for more rate cuts.
• The UK flash PMI report shows that business activity continued to expand in October but at a slower pace.
• Traders seem to be increasingly betting that Donald Trump will win the US presidential election.

The Pound Sterling (GBP) holds onto Thursday’s recovery against its major peers on Friday, although it looks set to post its fourth consecutive week of losses against the US Dollar. Still, the near-term outlook of the British currency appears to have improved on multiple tailwinds: hawkish remarks from Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann, and a continuous expansion in economic activity signaled by the flash United Kingdom (UK) S&P Global/CIPS Purchasing Managers Index (PMI) data for October.

In a panel discussion at the sidelines of International Monetary Fund (IMF) meetings, Catherine Mann – an outspoken hawk – welcomed the soft inflation figures for September but emphasized the need for more slowdown. Despite a decline in the service inflation below 5%, Mann said that inflation in the services sector still has a long way to go in order to be aligned with the bank’s target of 2%.

When asked about her current stance on interest rates, Mann said: "It would be premature to cut rates if you have structural persistence in the relationship between wages and price formation."

Despite Mann’s hawkish comments, traders continue to bet that the BoE will reduce interest rates further in November. 

Meanwhile, Thursday’s preliminary PMI report showed that the UK’s business activity expanded in both the manufacturing and the service sectors, albeit at a slower pace compared with September. Even though the overall growth was slower than projected, it was still better than that reported in the United States (US) and the Eurozone, where output in the manufacturing sector continues to contract.

Daily digest market movers: Pound Sterling holds onto recent gains against US Dollar

• The Pound Sterling clings to gains near 1.2970 against the US Dollar (USD) in Friday’s London session. The GBP/USD pair holds onto Thursday’s bounce as the US Dollar remains on the defensive after a corrective move, with the US Dollar Index (DXY) trading near 104.10.
• The outlook of the US Dollar remains positive as traders price in former President US Donald Trump’s victory ahead of the presidential election on November 5, a scenario that traders think is a positive for the US Dollar. Market participants are expected to see higher tariffs and lower taxes in case of a Trump administration, which could negatively impact currencies from trading partners. 
• However, the US Dollar could witness a sharp repricing if current Vice President Kamala Harris wins the presidential elections, said Standard Chartered.
• Meanwhile, firm speculation that the Federal Reserve (Fed) will pursue a gradual interest rate cut path could keep any correction in the US Dollar limited. According to the CME FedWatch tool, the Fed is expected to cut interest rates again in November and December but at a usual pace of 25 basis points (bps). In September, the Fed started its policy-easing cycle with a 50-bps interest rate cut.
• On the economic front, investors will pay close attention to the United States (US) Durable Goods Orders data for September, which will be published at 12:30 GMT. Economists expect new orders for durable goods to have declined by 1% after remaining flat in August.

Technical Analysis: Pound Sterling hovers near 1.2970

The Pound Sterling trades near 1.2970 against the US Dollar, holding onto Thursday’s rebound after discovering buying interest near the lower boundary of a Rising Channel chart formation around 1.2900 on the daily time frame. 

The near-term trend of the Cable is still uncertain as it trades below the 50-day Exponential Moving Average (EMA) at around 1.3070.

The 14-day Relative Strength Index (RSI) remains below 40.00, signals an active bearish momentum.

Looking down, the 200-day EMA near 1.2845 will be a major support zone for Pound Sterling bulls. On the upside, the Cable will face resistance near the psychological figure of 1.3000 and the 20-day EMA around 1.3060.

• The NZD/USD pair reaches the 10-week low of 0.5987 on Friday.
• Michigan Consumer Sentiment Index is expected to come in at 69.0 in October, against its previous 68.9 reading.
• ANZ-Roy Morgan Consumer Confidence index fell to 91.2 in October, breaking a three-month upward trend.

The NZD/USD pair has given up recent gains from the previous session, trading around 0.6000 during early European hours on Friday. The pair reaches a 10-week low of 0.5987 earlier in the Asian session.

On Thursday, data indicated that US unemployment claims dropped significantly in late October, underscoring the strength of the labor market. Additionally, a rise in the S&P PMI further highlights robust momentum in the private sector.

The recent positive US data supported the growing expectations that the Federal Reserve (Fed) will adopt a less aggressive approach to rate cuts than previously anticipated. Traders will be watching US Durable Goods Orders and the Michigan Consumer Sentiment Index data, due later in the North American session.

Additionally, the USD is also strengthened by uncertainties surrounding the upcoming US presidential election. According to a recent Reuters/Ipsos poll, Vice President Kamala Harris holds a narrow lead of 46% to 43% over former President Donald Trump in a six-day poll that concluded on Monday.

Republican nominee Donald Trump expressed his intent on Thursday to build an economy that supports all American communities. Meanwhile, Vice President Kamala Harris received support from rock legend Bruce Springsteen, entertainer Tyler Perry, and former President Barack Obama at a rally in Georgia.

In New Zealand, the ANZ-Roy Morgan Consumer Confidence index declined to 91.2 in October from 95.1 in September, breaking a three-month upward trend.

Traders remain cautious as labor market challenges continue to weigh on market sentiment despite anticipated interest rate cuts from the Reserve Bank of New Zealand (RBNZ). However, rising house prices are helping to bolster overall confidence, inflation has begun to stabilize within the RBNZ's target range.

Here is what you need to know on Friday, October 25:

The US Dollar (USD) stays resilient against its major rivals early Friday after struggling to find demand on Thursday. During the European trading hours, investors will pay close attention to the outcome of the IFO business sentiment surveys from Germany. Later in the day, September Durable Goods Orders and the final revision of the University of Michigan's Consumer Sentiment Index for October will be featured in the US economic calendar. Additionally, Statistics Canada will publish Retail Sales figures for September.

The improving risk mood made it difficult for the USD to extend its weekly rally on Thursday. As Wall Street's main indexes ended the day in positive territory, the USD Index lost 0.4%, registering its largest one-day drop in a month. In the European morning on Friday, the USD Index holds steady above 104.00, while US stock index futures trade marginally higher on the day.

After touching its lowest level since early July at 1.0760 on Wednesday, EUR/USD recovered on Thursday and closed above 1.0800. The pair struggles to build on Thursday's gains and trades in a narrow channel at around 1.0820 to begin the European session.

GBP/USD gained more than 0.4% on Thursday and erased Wednesday's losses. The pair, however, went into a consolidation phase before testing 1.3000 and was last seen moving sideways near 1.2970.

Despite the broad-based USD weakness, USD/CAD managed to post small gains on Thursday as the Canadian Dollar failed to attract buyers following the Bank of Canada's (BoC) decision to lower the policy rate by 50 basis points earlier in the week. The pair moves up and down in a very narrow band at around 1.3850 early Friday. 

Following a three-day rally, USD/JPY corrected lower on Thursday. Commenting on the action in foreign exchange markets, "the recent Yen falls are driven partly by optimism over the US economic outlook," Bank of Japan (BoJ) Governor Kazuo Ueda said late Thursday. Japan's Economy Minister Ryosei Akazawa said on Friday that a weak Yen has various impacts on the economy, repeating that it's important for currencies to move in a stable manner reflecting fundamentals. Meanwhile, the data from Japan showed that the Tokyo Consumer Price Index (CPI) rose 1.8% on a yearly basis in October, at a softer pace than the 2.1% increase recorded in September.

Gold regained its traction on Thursday and rose 0.75% on a daily basis, supported by the pullback seen in US Treasury bond yields. XAU/USD stays relatively quiet and trades below $2,750 in the European morning on Friday.

• USD/CHF may appreciate further due to fading odds of bumper rate cuts by the Fed in 2024.
• The US Dollar receives support from market caution ahead of the US presidential election.
• The recent lower Swiss inflation rate increased the dovish sentiment surrounding the SNB.

USD/CHF remains steady after registering losses in the previous session, maintaining its position above 0.8650 during Asian trading hours on Friday. This level is near its two-month peak of 0.8686, reached on Wednesday.

The strength of the USD/CHF pair could be linked to the robust performance of the US Dollar (USD), driven by rising expectations that the Federal Reserve (Fed) will take a less aggressive approach to interest rate cuts than previously thought.

Additionally, the Greenback is bolstered due to uncertainties regarding the upcoming US presidential election. Vice President Kamala Harris leads in the six-day poll, which closed on Monday, held a marginal 46% to 43% lead over former President Donald Trump, a new Reuters/Ipsos poll found.

On Thursday, Republican nominee Donald Trump stated that the Trump administration will build an economy that lifts up all communities in the United States (US). Meanwhile, Vice President Kamala Harris enjoyed the backing of rock legend Bruce Springsteen, entertainer Tyler Perry, and former President Barack Obama at a rally in Georgia.

The Swiss Franc (CHF) could face challenges due to heightened expectations of another interest rate cut by the Swiss National Bank (SNB) at its upcoming December meeting. This could be attributed to the recent inflation rate, which stood at 0.8% in September, marking a three-year low and down from 1.1% the previous month.

The Swiss Franc may restrain its downside due to safe-haven flows amid uncertainties regarding Middle East situation. Traders watch for Israel's response to Iran's missile attack on October 1. In parallel, US and Israeli officials are preparing to resume talks on a potential ceasefire and the release of hostages in Gaza in the coming days.

US Secretary of State Antony Blinken stated Thursday that the United States does not support a prolonged Israeli campaign in Lebanon, while France has advocated for an immediate ceasefire and diplomatic efforts.

European Central Bank (ECB) policymaker Martins Kazaks said on Friday that he doesn't see a case for rates to fall below neutral.

He further noted that there is “no need for the ECB to contemplate such a scenario,” and “that would require weaker baseline and substantial undershooting of inflation target.”

Market reaction

The above comments fail to inspire the Euro buyers, as EUR/USD loses 0.09% on the day to trade near 1.0815, at the press time.

• Silver price loses ground due to the robust performance of the US Dollar (USD) and higher Treasury yields.
• The US Dollar gains ground as recent data bolster the chances of the Fed adopting a less-dovish rates policy.
• The Silver may appreciate due to market caution amid uncertainties regarding the upcoming US presidential election.

Silver price (XAG/USD) extends its losses for the third successive session, trading around $33.50 during Friday’s Asian hours. The downside of the precious metal Silver price could be attributed to the robust performance of the US Dollar (USD) and higher Treasury yields.

On Thursday, data indicated that US unemployment claims dropped significantly in late October, underscoring the strength of the labor market. Additionally, a rise in the S&P PMI further highlights robust momentum in the private sector.

The strong US economic data bolster the likelihood that the Federal Reserve (Fed) will take a less aggressive approach to interest rate cuts than previously thought. According to the CME FedWatch Tool, there is a 97% probability of a 25-basis-point rate cut by the Fed in November, with no expectation of a larger 50-basis-point cut.

Despite the challenges, safe-haven Silver may find upward support due to uncertainties surrounding the upcoming US presidential election. A recent Reuters/Ipsos poll showed that Vice President Kamala Harris holds a slight lead of 46% to 43% over former President Donald Trump in a six-day poll that closed on Monday.

Silver price may gain support from safe-haven flows amid uncertainties regarding the Middle East situation. Traders watch for Israel's response to Iran's missile attack on October 1. In parallel, US and Israeli officials are preparing to resume talks on a potential ceasefire and the release of hostages in Gaza in the coming days.

US Secretary of State Antony Blinken stated Thursday that the United States does not support a prolonged Israeli campaign in Lebanon, while France has advocated for an immediate ceasefire and diplomatic efforts.

FX option expiries for Oct 25 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

• 1.0750 763m
• 1.0800 1.6b
• 1.0820 1.2b
• 1.0885 713m
• 1.0900 552m

GBP/USD: GBP amounts     

• 1.2775 510m
• 1.2975 597m

USD/JPY: USD amounts                     

• 150.00 831m
• 150.60 597m

AUD/USD: AUD amounts

• 0.6800 677m
• 0.6820 601m
• 0.6850 822m
• 0.6870 1.3b

USD/CAD: USD amounts       

• 1.3830 546m
• 1.3855 1.2b

NZD/USD: NZD amounts

• 0.5850 400m

• EUR/USD ticks lower on the last day of the week, albeit it lacks any follow-through selling. 
• A softer tone around the US bond yields undermines USD and lends support to the major.
• Expectations for a less aggressive Fed easing and more ECB rate cuts should cap the upside.

The EUR/USD pair struggles to capitalize on the previous day's strong move-up of around 60 pips and trades with a mild negative bias during the Asian session on Friday. Spot prices, however, manage to hold comfortably above the 1.0800 mark and a nearly four-month low touched on Wednesday amid subdued US Dollar (USD) price action.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, consolidates after the overnight pullback from its highest level since July 30 amid a softer tone surrounding the US Treasury bond yields. Apart from this, signs of stability in the equity markets turn out to be another factor undermining the safe-haven buck, which, in turn, helps limit losses for the EUR/USD pair.

That said, growing acceptance that the Federal Reserve (Fed) will proceed with smaller rate cuts amid a still resilient economy, along with deficit-spending concerns after the US presidential election, act as a tailwind for the US bond yields. Apart from this, persistent geopolitical risks stemming from the ongoing conflicts in the Middle East favors the USD bulls and should cap the EUR/USD pair. 

Meanwhile, the flash Eurozone PMIs released on Thursday showed that the economy stalled for the second successive month in October and slowing inflation. This, in turn, validates the European Central Bank's (ECB) view that the disinflationary process is well on track and supports prospects for further policy easing, which might undermine the Euro and contribute to keeping a lid on the EUR/USD pair. 

Market participants now look to the release of the German Ifo Business Climate Index for some impetus ahead of the US macro data – Durable Goods Orders and the revised Michigan Consumer Sentiment Index. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and assist traders in grabbing short-term opportunities around the EUR/USD pair.

• USD/CAD holds ground near its two-month high of 1.3868, reached on Thursday.
• The US Dollar receives support due to rising bets of a potential second term for former President Donald Trump.
• The weakening of the commodity-linked CAD is bolstered by lower Oil prices.

The USD/CAD pair maintains its position on two consecutive days of gains, trading around 1.3850 during the Asian session on Friday. This level is near its two-month peak of 1.3868, reached on Thursday. The pair's strength can be linked to the robust performance of the US Dollar (USD), driven by rising expectations that the Federal Reserve will take a less aggressive approach to interest rate cuts than previously thought.

Additionally, the Greenback is bolstered by increasing speculation regarding a potential second term for former President Donald Trump in the upcoming US presidential election in November, particularly due to inflationary policies that include higher tariffs and lower taxes.

On Thursday, Republican nominee Donald Trump returned to his familiar reality show catchphrase during an event in Las Vegas, Nevada. Trump stated, "Under the Trump administration, we're going to build an economy that lifts up all Americans, including African Americans, Hispanic Americans, and also members of our great Asian American and Pacific Islander community, many of whom are here today," as reported by Reuters.

Meanwhile, Vice President Kamala Harris enjoyed the backing of rock legend Bruce Springsteen, entertainer Tyler Perry, and former President Barack Obama at a rally in Georgia, which attracted thousands of supporters in this key battleground state.

The commodity-linked Canadian Dollar (CAD) may continue to weaken amid declining crude Oil prices, as Canada is the largest oil exporter to the United States (US). As of now, West Texas Intermediate (WTI) Oil price is experiencing its third consecutive day of losses, trading around $70.20 per barrel.

Traders are likely to focus on Canada’s Retail Sales data set to be released later in the North American session. Additionally, Bank of Canada (BoC) Governor Tiff Macklem is scheduled to speak with journalists both in-person and virtually during the IMF meeting.

• Gold price attracts fresh sellers on Friday and is pressured by a modest USD uptick.
• Bets for smaller Fed rate cuts benefit the USD and exert pressure on the XAU/USD.
• Geopolitical risks and the US political uncertainty might lend support to the metal.

Gold price (XAU/USD) drifts lower during the Asian session on Friday and reverses a part of the previous day's positive move, though it remains confined in the weekly range. With less than two weeks before the November 5 US presidential election, opinion polls point to a tight race to the White House. This adds to a layer of political uncertainty, which, along with Middle East tensions, might continue to act as a tailwind for the safe-haven precious metal.

The supporting factor, to a larger extent, is offset by the emergence of some US Dollar (USD) dip-buying, bolstered by firming expectations for a less aggressive policy easing by the Federal Reserve (Fed). In fact, traders have fully priced out the possibility of another jumbo rate cut in November as the recent US macro data suggested that the economy remains on strong footing. This, in turn, is seen underpinning the buck and weighing on the non-yielding Gold price. 

Daily Digest Market Movers: Gold price drifts lower despite Middle East tensions, US political uncertainty

• The US Dollar stalls the overnight retracement slide from a nearly three-month top amid bets for smaller rate cuts by the Federal Reserve and prompts fresh selling around the Gold price on Friday. 
• Traders no longer expect another oversized interest rate cut by the Fed at its November monetary policy meeting as the incoming US macro data suggested that the economy remains on strong footing. 
• This, along with deficit-spending concerns after the US presidential election, led to a sell-off in the US bond market and lifted the benchmark 10-year Treasury yield to a three-month top on Wednesday.
• The latest poll shows a tight race between Vice President Kamala Harris and the Republican nominee Donald Trump, which, along with geopolitical risks, could offer support to the safe-haven XAU/USD.
• Israel continued with its military assault on Iranian-backed Hezbollah in Lebanon and intensified a siege on northern parts of Gaza, raising the risk of a further escalation of tensions in the Middle East. 
• Traders now look to Friday's US economic docket – featuring the release of Durable Goods Orders and the revised Michigan Consumer Sentiment Index – for short-term impetus heading into the weekend.

Technical Outlook: Gold price seems to be forming a bearish head-and-shoulders pattern on the 4-hour chart

From a technical perspective, the recent price action over the past week or so constitutes the formation of a bearish head and shoulders pattern on short-term charts. The neckline support of the said pattern is pegged near the $2,705 region, which should now act as an immediate strong support. Some follow-through selling, leading to a subsequent fall below the $2,700 mark, should pave the way for deeper losses and drag the Gold price further towards the $2,675 support. The downfall could extend further towards the bearish pattern target near the $2,660 area.

On the flip side, the $2,640-2,645 region now seems to have emerged as an immediate strong barrier. Meanwhile, a sustained strength beyond will negate the head-and-shoulders pattern and allow the Gold price to aim towards challenging the all-time peak, around the $2,658-2,659 area touched earlier this week. The subsequent move up could lift the XAU/USD towards the $2,770 zone, representing a nearly four-month-old ascending trend-line resistance, en route to the $2,800 round-figure mark.

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

The price for Gold stood at 7,366.19 Indian Rupees (INR) per gram, down compared with the INR 7,396.36 it cost on Thursday.

The price for Gold decreased to INR 85,918.77 per tola from INR 86,269.67 per tola a day earlier.

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

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

• The Indian Rupee clings to its all-time lows.
• Foreign Institutional Investors (FIIs) reallocate funds to China in response to stimulus measures and more appealing valuations.
• The US Dollar gains support from growing bets of a second term for former President Donald Trump.

The Indian Rupee (INR) remains steady against the US Dollar (USD) on Friday, with the USD/INR pair trading in the 84.00-84.10 range. The Rupee faced challenges from sustained foreign outflows from Indian equities, but potential market interventions by the Reserve Bank of India (RBI) helped mitigate further declines.

The INR experienced downward pressure as Foreign Institutional Investors (FIIs) were net sellers of Indian stocks for the 19th consecutive session on Thursday, reallocating funds to China in response to stimulus measures and more appealing valuations. Both the Nifty 50 and BSE Sensex have depreciated this week, heading toward their fourth consecutive weekly loss.

The US Dollar gains support due to an increasing expectation that the Federal Reserve (Fed) will adopt a less aggressive stance on interest rate cuts than previously anticipated. Furthermore, the Greenback is bolstered by growing speculation about a possible second term for former President Donald Trump in the upcoming US presidential election in November, particularly in light of inflationary policies such as higher tariffs and lower taxes.

Daily Digest Market Movers: Indian Rupee receives downward pressure from foreign outflows

• According to the CME FedWatch Tool, there is a 97% probability of a 25-basis-point rate cut by the Fed in November, with no expectation of a larger 50-basis-point cut.
• The preliminary estimates of S&P Global US Composite PMI came in at 54.3, up from the previous 54.0. The Services PMI exceeded expectations at 55.3, compared to the forecasted 55.0, and saw a slight increase from the previous 55.2. Meanwhile, the Manufacturing PMI also came in stronger at 47.8, above the expected 47.5, and improving from the prior reading of 47.3.
• Indian Prime Minister Narendra Modi and Chinese President Xi Jinping held their first formal talks in five years on the sidelines of the BRICS summit in Russia. On Wednesday, the two leaders agreed to enhance communication and cooperation between India and China, aiming to resolve ongoing conflicts and improve relations that were strained following a deadly military clash in 2020, according to Reuters.
• The preliminary estimates reveal that India’s HSBC Composite Purchasing Managers Index (PMI) increased to 58.6 in October, up from 58.3 in the previous month. Manufacturing PMI rose to 57.4 in October, up from 56.5 in the previous month. Meanwhile, the Services PMI edged higher to 57.9 in October, recovering from a one-year low of 57.7 in September. This marks the 39th consecutive month of expansion in services activity.
• Jim O'Neill, the former Goldman Sachs economist who coined the term BRIC in 2001, told Reuters that the notion of the BRICS group challenging the US Dollar is unrealistic as long as China and India remain divided and unwilling to cooperate on trade.
• In the minutes from the October meeting, members of the rate-setting panel stated that the Monetary Policy Committee (MPC) must take a cautious approach to lowering interest rates, as India cannot afford to face another bout of inflation.
• In a speech at the New York Fed Central Banking Seminar, RBI Deputy Governor Michael Patra stated, "We believe that the best defense against global risks is to strengthen the macroeconomic fundamentals and build adequate buffers, supported by prudent macroeconomic policies." He highlighted that India’s central bank has been strategically increasing its foreign exchange reserves, which are now equivalent to or nearly equal to 12 months' worth of imports.
• On Wednesday, the Fed Beige Book indicated that economic activity was "little changed in nearly all Districts," in contrast to August's report, in which three Districts reported growth and nine showed flat activity.

Technical Analysis: USD/INR tests the lower boundary of the ascending channel near 84.00

The USD/INR pair remains steady above 84.00 on Friday. An analysis of the daily chart indicates that the pair is testing the lower boundary of an ascending channel pattern. A breakdown below this channel could signal a potential weakening of a bullish bias. The 14-day Relative Strength Index (RSI) is positioned below the 70 level, further supporting the current bullish trend.

Regarding resistance, the USD/INR pair may encounter challenges at its all-time high of 84.14, reached on August 5. A breakout above this level could allow the pair to test the upper boundary of the ascending channel, situated around 84.20.

On the support side, immediate support is found at the nine-day Exponential Moving Average (EMA) near the 84.03 level, which aligns with the lower boundary of the ascending channel near the psychological level of 84.00.

USD/INR: Daily Chart

• The Japanese Yen edges lower following the release of Tokyo consumer inflation figures. 
• The USD stalls the overnight slide from a multi-month top and lends support to USD/JPY.
• Traders remain on the sidelines amid the uncertainty ahead of Japan’s general election.

The Japanese Yen (JPY) struggles to capitalize on the previous day's recovery move against its American counterpart and attracts fresh sellers during the Asian session on Friday. Data released on Thursday showed business activity in Japan's manufacturing and services sectors contracted in October. Adding to this, a fall in Tokyo’s core inflation rate below the Bank of Japan’s (BoJ) 2% target tempers expectations about any further rate hike in 2024 and exerts some pressure on the JPY. 

Apart from this, a generally positive risk tone further undermines the JPY's safe-haven status, which, along with the emergence of some US Dollar (USD) buying, assists the USD/JPY pair to find some support ahead of mid-151.00s. That said, the recent verbal intervention by Japanese authorities helps limit any meaningful JPY downfall and cap the currency pair. Traders now look to the US macro data for short-term impetus amid the political uncertainty ahead of Japan's general election on Sunday. 

Daily Digest Market Movers: Japanese Yen lacks firm directional bias amid BoJ/election-related uncertainty

• The Statistics Bureau of Japan reported this Friday that the headline Tokyo Consumer Price Index (CPI) rose by the 1.8% YoY rate in October as compared to 2.2% in the previous month. 
• Further details revealed that Core CPI, which excludes volatile fresh food prices, grew 1.8% in October, down from 2% in the prior month but slightly above market expectations of 1.7%. 
• A core reading that excludes both fresh food and energy prices, rose from 1.6% in September to 1.8% during the reported month, still below the Bank of Japan's 2% target.
• This follows a private-sector survey on Thursday, which showed that business activity in Japan's manufacturing and services sectors contracted in October, and points to weak economic conditions. 
• This adds to the election-related uncertainty in Japan and raises doubts over the BoJ's ability to hike interest rates further this year, and is seen weighing on the Japanese Yen on Friday. 
• Japan's Economy Minister Ryosei Akazawa said that it is important for currencies to move in a stable manner reflecting fundamentals and that a weak yen has various impacts on the economy.
• The US Dollar stalls the previous day's pullback from a three-month high amid bets for a less aggressive policy easing by the Federal Reserve and offers support to the USD/JPY pair. 
• Friday's US macro data – Durable Goods Orders and the revised Michigan Consumer Sentiment Index – might provide some impetus as investors await Japan’s election on Sunday.

Technical Outlook: USD/JPY bulls have the upper hand while above 150.65 confluence hurdle breakpoint

From a technical perspective, weakness below the 151.60-151.55 area could drag the USD/JPY pair to the 151.00 mark. Any further decline is likely to find decent support around the 150.65 confluence resistance breakpoint, comprising the 200-day Simple Moving Average (SMA) and the 50% Fibonacci retracement level of the July-September downfall. The latter should act as a key pivotal point, which if broken decisively will suggest that the recent rally since the beginning of this month has run out of steam and shift the bias in favor of bearish traders. 

On the flip side, momentum beyond the 152.00 mark could extend further towards the 152.60-152.65 region. Some follow-through buying should allow the USD/JPY pair to reclaim the 153.00 round figure. The latter is closely followed by the 61.8% Fibo. level, around the 153.20 area, which if cleared should pave the way for additional gains towards the 154.00 mark and the 154.30 supply zone.

• WTI price gains traction as traders adopt caution amid escalating tensions in the Middle East and anticipated ceasefire discussions.
• Oil traders are keeping a close eye on Israel's response to Iran's missile attack on October 1.
• US Secretary of State Antony Blinken emphasized that the United States does not endorse a prolonged Israeli military campaign in Lebanon.

West Texas Intermediate (WTI) Oil price edges higher after two days of losses, trading around $70.40 per barrel during the Asian session on Friday. Crude Oil is set for a slight weekly gain as prevailing tensions in the Middle East and upcoming ceasefire discussions for Gaza keep traders cautious.

Oil market participants are closely watching for Israel's response to Iran's missile attack on October 1, which raised concerns about potential strikes on Tehran's Oil infrastructure that could disrupt supply chains. However, reports indicate that Israel may target Iranian military sites rather than nuclear or oil facilities, according to Reuters.

In parallel, US and Israeli officials are preparing to resume talks on a potential ceasefire and the release of hostages in Gaza in the coming days. US Secretary of State Antony Blinken stated Thursday that the United States does not support a prolonged Israeli campaign in Lebanon, while France has advocated for an immediate ceasefire and diplomatic efforts.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, retreated from its late-July high, hovering around 104.00. This pullback supported demand for dollar-priced Oil.

However, Oil prices faced downward pressure following a larger-than-anticipated rise in US stockpiles last week, driven by increased imports and an unexpected rise in gasoline inventories as refineries boosted output after seasonal maintenance.

Data from the US Energy Information Administration (EIA) on Wednesday showed a crude oil stock build of 5.474 million barrels, bringing total inventories to 426 million barrels for the week ending October 18, far surpassing the forecasted 0.7 million-barrel increase.

• The Australian Dollar loses ground despite the hawkish RBA’s policy outlook.
• The AUD inches lower as the US Dollar appreciates amid less-dovish sentiment surrounding the Fed.
• CME FedWatch Tool suggests a 97% chance of a 25-basis-point rate cut by the Fed in November.

The Australian Dollar (AUD) edged lower against the US Dollar (USD) on Thursday. However, the AUD/USD pair saw some gains as the US Dollar (USD) softened slightly due to a modest decline in US Treasury yields. Traders are also closely observing the Reserve Bank of Australia’s (RBA) annual report.

The Aussie Dollar could benefit from the hawkish tone surrounding the RBA. Earlier this week, RBA Deputy Governor Andrew Hauser highlighted the country's strong labor participation rate and stressed that, although the RBA relies on data, it is not overly fixated on it.

The US Dollar strengthens as traders closely monitor the Federal Reserve’s (Fed) interest rate path, with growing expectations that the central bank will not lower rates as aggressively as previously anticipated. This shift in sentiment follows the release of strong economic data, which suggests that the US economy remains resilient and may support a more cautious approach to rate cuts.

According to the CME FedWatch Tool, there is a 97% probability of a 25-basis-point rate cut by the Fed in November, with no expectation of a larger 50-basis-point cut.

Daily Digest Market Movers: Australian Dollar depreciates despite a hawkish RBA’s stance

• S&P Global has released its preliminary October US Purchasing Managers Index (PMI) readings, showing positive momentum across sectors. The Composite PMI rose to 54.3, up from the previous 54.0. The Services PMI exceeded expectations at 55.3, compared to the forecasted 55.0, and saw a slight increase from the previous 55.2. Meanwhile, the Manufacturing PMI also came in stronger at 47.8, above the expected 47.5, and improving from the prior reading of 47.3.
• Australia's Judo Bank Composite PMI slightly rose to 49.8 in October, up from 49.6 in September, signaling a second straight month of contraction in private sector output. The Services PMI inched up to 50.6 from 50.5, marking its ninth consecutive month of expansion, while the Manufacturing PMI dipped to 46.6 from 46.7, continuing its decline.
• On Wednesday, the Fed Beige Book indicated that economic activity was "little changed in nearly all Districts," in contrast to August's report, in which three Districts reported growth and nine showed flat activity.
• In a post on the social media platform X, Federal Reserve Bank of San Francisco President Mary Daly stated that the economy is clearly in a better position, with inflation having fallen significantly and the labor market returning to a more sustainable path.
• On Monday, Federal Reserve Bank of Minneapolis President Neel Kashkari highlighted that the Fed is closely monitoring the US labor market for signs of rapid destabilization. Kashkari cautioned investors to anticipate a gradual pace of rate cuts over the coming quarters, suggesting that any monetary easing will likely be moderate rather than aggressive.
• The People's Bank of China (PBoC) reduced the 1-year Loan Prime Rate (LPR) to 3.10% from 3.35% and the 5-year LPR to 3.60% from 3.85%, which is in line with expectations. Lower borrowing costs are anticipated to stimulate China's domestic economic activity, potentially increasing demand for Australian exports.
• National Australia Bank revised its projection for the Reserve Bank of Australia (RBA) in a note last week. "We have brought forward our expectations for the timing of rate cuts, now anticipating the first cut in February 2025, instead of May," the bank stated. They continue to foresee gradual cuts, with rates expected to decrease to 3.10% by early 2026.

Technical Analysis: Australian Dollar stays below 0.6650, close to two-month lows

The AUD/USD pair trades around 0.6640 on Thursday, with technical analysis of the daily chart indicating a short-term bearish trend. The pair remains below the nine-day Exponential Moving Average (EMA), and the 14-day Relative Strength Index (RSI) is below 50, further confirming bearish bias.

On the support side, the AUD/USD pair is testing its two-month low of 0.6614, reached on Wednesday. The next major support level lies at the psychological threshold of 0.6600.

Regarding the upside, resistance is anticipated at the nine-day EMA at 0.6672, followed by the 50-day EMA at 0.6724. A break above these resistance levels could pave the way for a potential move toward the psychological barrier of 0.6800.

AUD/USD: Daily Chart

The People’s Bank of China (PBOC), China's central bank, injected CNY6700 billion on Friday via the one-year Medium-term Lending Facility (MLF) rate of 2.0%.

Meanwhile, the PBOC drained CNY780 billion from the economy.

Market reaction

As of writing, AUD/USD is struggling below 0.6650, losing 0.05% on the day.

Japan's Economy Minister Ryosei Akazawa said on Friday that a “weak Yen has various impacts on the economy.”

Additional quotes

Market reaction

At the time of writing, USD/JPY is back below 152.00, trading at around 151.90, still adding 0.06% on the day.

• NZD/USD edges lower on Friday amid the emergence of some USD dip-buying.
• Bets for smaller Fed rate cuts and Middle East tensions underpin the Greenback.
• Expectations for aggressive rate cuts by RBNZ further exert pressure on the pair.

The NZD/USD pair attracts some sellers during the Asian session on Friday and currently trades around the 0.6000 mark, just above its lowest level since August 16 touched earlier this week. 

Expectations that the Federal Reserve (Fed) will proceed with modest rate cuts as the economy remains on a strong footing help the US Dollar (USD) to stall the previous day's retracement slide from a nearly three-month top. Apart from this, Middle East tensions, along with the US political uncertainty, benefit the Greenback's relative safe-haven status and turn out to be a key factor exerting some pressure on the NZD/USD pair. 

Adding to this, bets for a more aggressive interest rate cut by the Reserve Bank of New Zealand (RBNZ) undermine the New Zealand Dollar (NZD) and further contribute to the offered tone surrounding the currency pair. This, along with the recent breakdown below a technically significant 200-day Simple Moving Average (SMA), suggests that the path of least resistance for the NZD/USD pair remains to the downside. 

That said, the lack of follow-through selling makes it prudent to wait for acceptance below the 0.6000 psychological mark before positioning for an extension of the downfall witnessed since the beginning of this month. Traders now look to the US economic docket – featuring Durable Goods Orders and the Revised Michigan Consumer Sentiment Index – for some impetus and grab short-term opportunities around the NZD/USD pair.

On Friday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1090, as compared to the previous day's fix of 7.1286 and 7.1087 Reuters estimates.

The headline Tokyo Consumer Price Index (CPI) for October fell to the 1.8% YoY rate from 2.2% in the previous month, the Statistics Bureau of Japan showed on Friday. Meanwhile, the Tokyo CPI ex Fresh Food, Energy came in at 1.8% as compared to 1.7% and 2% in September. Additionally, Tokyo CPI ex Fresh Food climbed from 1.6% to 1.8% in October. 

Market Reaction

The data does little to influence the Japanese Yen (JPY) or provide any meaningful impetus to the USD/JPY pair, which is currently placed just below the 152.00 round-figure mark.