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• EUR/USD is down eight-tenths of a percent for the week.
• Fiber bids are getting crushed by waffling speech from ECB planners.
• EU and US PMI figures due on Thursday could spark fresh momentum.

EUR/USD shed another fifth of a percent on Wednesday as the Fiber crumples ahead of Thursday’s fresh round of Purchasing Managers Index (PMI) figures. ECB officials talked down economic concerns, reiterating the need for caution when weighing future rate cuts. FX markets promptly responded by pummeling the Euro further into the dirt, hitting a 16-week low.

Global PMI figures are due for a rolling release on Thursday. Markets have high expectations for pan-EU PMI survey results, with median market forecasts calling for a slight uptick in October’s EU Services PMI to 51.6 from September’s 51.4. On the US side, median market forecasts expect October’s US PMI figures to come in mixed, with the Manufacturing component expected to rise to 47.5 from 47.3, while the Services PMI component is expected to tick slightly lower to 55.0 from 55.2.

EUR/USD price forecast

EUR/USD continues to slide lower as the pair tests support near the 1.0780 level. The recent price action shows a significant breakdown below both the 50-day EMA, currently at 1.0975, and the 200-day EMA at 1.0908, signaling a shift in market sentiment to the downside. The sustained selling pressure has pushed the pair into a bearish phase, with sellers eyeing further downside towards the 1.0750 support zone. A break below this key psychological level could trigger a more aggressive selloff towards the 1.0700 handle.

The MACD indicator remains firmly in bearish territory, with the MACD line continuing to trend below the signal line and the histogram deepening in negative values. This suggests that downward momentum is still intact, and any attempts at a reversal may face stiff resistance. Traders should be cautious of oversold conditions, but as long as the price remains below the moving averages, the bearish bias will likely persist. Any bounce from current levels could face immediate resistance near the 1.0900 region, making it a key level to watch for potential shorting opportunities.

EUR/USD daily chart

• GBP/USD backslid half of a percent on Wednesday.
• Global PMIs including the UK and the US are due throughout Thursday.
• Central banker appearances to dominate headlines as the week winds down.

GBP/USD shed another half of a percent on Wednesday, tipping into a fresh ten-week low and grinding down toward the 1.2900 handle. Purchasing Managers Index (PMI) figures from both the UK and the US are due on a rolling schedule throughout Thursday, and investors will be keeping an eye out for a slew of central banker appearances from both the Bank of England (BoE) and the Federal Reserve (Fed).

The Pound Sterling swooned on Wednesday, declining further as GBP markets buckle under the weight of a broad-market Greenback recovery and investors brace for an overall decline in UK PMI prints for October.

Median market forecasts are expecting a slight downtick in UK activity numbers, with October’s Services PMI specifically expected to ease to 52.2 from 52.4 the previous month. On the US side, median market forecasts expect October’s US PMI figures to come in mixed, with the Manufacturing component expected to rise to 47.5 from 47.3, while the Services PMI component is expected to tick slightly lower to 55.0 from 55.2.

GBP/USD price forecast

GBP/USD has extended its bearish momentum, falling to the 1.2910 level, as downside pressure persists. The pair has recently broken below the 50-day EMA, which sits at 1.3079, indicating that the bears remain in control. The next key support level to watch is the 200-day EMA at 1.2847. A break below this level could signal further losses towards the 1.2800 psychological level. The recent price action shows a series of lower highs and lower lows, confirming the bearish trend that has been developing since the October highs.

The MACD is further confirming this bearish sentiment, with the MACD line crossing below the signal line and the histogram deepening in negative territory. This suggests that selling pressure could continue in the near term, with little sign of a bullish reversal. However, if the pair manages to hold the 200-day EMA, a bounce-back towards the 50-day EMA could offer short-term relief. Traders should remain cautious as the overall trend points to further downside risk unless key support levels hold.

GBP/USD daily chart

• NZD/USD extends losses, declining further in Wednesday's session.
• Oversold RSI reflects intensifying selling pressure but opens the possibility of an upwards correction.

The NZD/USD pair continued its downward trajectory on Wednesday, falling towards the 0.6000 psychological level as selling momentum resumed. Sellers remain in firm control, with the pair reaching lows not seen since August.

The Relative Strength Index (RSI) remains oversold, currently residing at 31. The indicator's downward slope signals increasing selling pressure, aligning with the red bars on the Moving Average Convergence Divergence (MACD) histogram, further confirming the growing bearish momentum.

NZD/USD daily chart

Technically, the NZD/USD remains below its key moving averages, with the 100-day Simple Moving Average (SMA) at 0.6100 and the 200-day SMA hovering around 0.6150 acting as formidable resistance levels. These barriers limit the pair's potential for upward momentum. However, the oversold nature of the RSI might be signaling that an upwards correction is on the horizon.

Support levels: 0.6000, 0.5950, 0.5930. Resistance levels: 0.6070, 0.6100, 0.6130

Bank of Japan (BoJ) Governor Kazuo Ueda noted late Wednesday that the BoJ continues to grapple with igniting inflation expectations in Japan. While most major central banks around the globe weight rate cuts in the face of declining inflation after a longer-than-expected period of price growth outpacing incomes, Japan has lapped the entire race from last to first, having never seen rate-lifting inflation fires to begin with and still struggling to kick off price increases after decades of stagnant inflation metrics.

Key highlights

• NZD/JPY sees a continuation of its uptrend with buying pressure dominating.
• Technical indicators, including the RSI and MACD, support the bullish outlook.
• The pair attempting to breach the 100 and 200-day SMA convergence.

Wednesday's trading session witnessed sustained buying pressure in NZD/JPY, leading to a 0.45% increase to 91.65. The pair extended its upward momentum from previous sessions, indicating a growing bullish sentiment.

Technical indicators reinforce the positive outlook for NZD/JPY. The RSI, which measures the strength of buying pressure, has risen to 60 and the upward sloping movement suggests that buying pressure is increasing. The MACD, which measures the relationship between the pair's short-term and long-term moving averages, also supports the bullish sentiment. The histogram is green and flat, indicating that buying pressure is dominant.

Key support and resistance levels remain relevant, with support at 91.50,91.30 and 91.00 and resistances are seen at 92.00 (100 and 200-day SMA convergence), 92.30 and 92.50. These levels are likely to influence the pair's price action in the near term. The 20-day SMA, a crucial support level, has successfully held off selling pressure, contributing to the pair's bullish bias.

NZD/JPY daily chart

• Silver price drops sharply, erasing Tuesday's gains, driven by profit-taking and a rise in US Treasury yields.
• A daily close below $33.78 could confirm a ‘bearish engulfing’ pattern, signaling potential for deeper pullback to $32.95 and $32.51.
• For a bullish continuation, buyers need to reclaim the $34.00 level and retest the year-to-date high at $34.86.

Silver price retreats after posting a multi-year high at $34.86, yet erases more than Tuesday’s gains, and is down over 3.30 percent. At the time of writing, the XAG/USD trades at $33.66, sponsored by higher US Treasury yields and a strong US Dollar.

XAG/USD Price Forecast: Technical outlook

Silver price reversed its course on Wednesday, after printing 12-year peak. The Relative Strength Index (RSI) tumbled after reaching overbought conditions, an indication that longs were booking profits. Sellers moved in and capitalized on that move due to a mean reversion play.

If XAG/USD records a daily close below October 22 low of $33.78 it would confirm a ‘bearish engulfing’ chart pattern and pave the way for a deeper pullback. In that outcome, Silver’s first support would be October 4 swing high at $32.95. A breach of the latter will reveal the May 20 peak at $32.51, followed by the October 17 low of $31.32.

For a bullish continuation, buyers must clear the $34.00 psychological figure, before challenging the YTD high at $34.86.

XAG/USD Price Chart – Daily

Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr flagged the potential that the New Zealand central bank may be more "circumspect" when it comes to further rate cuts looking ahead after the RBNZ kicked off a rate cutting cycle this year.

Key highlights

• AUD/USD plunges due to intensified US Dollar buying, reaching fresh lows near 0.6630.
• Renewed selling pressure pushes AUD/USD beneath the key 200-day SMA.
• Higher US Treasury yields and economic divergences favor the USD.

The AUD/USD pair declined by 0.97% to 0.6620 in Wednesday's session, driven by intensified US Dollar buying and concerns over China's stimulus measures. Renewed selling pressure pushed AUD/USD beneath the key 200-day SMA, highlighting the pair's vulnerability in the current market environment.

Financial markets now anticipate 50% odds of a mere 0.25% reduction in interest rates in 2024 by the RBA, which might benefit the Aussie and limit its downside.

Daily digest market movers: Australian Dollar dips amid robust US Dollar demand, lower Chinese stimulus hopes

• AUD/USD weakened amidst the robust US Dollar and waning hopes for Chinese stimulus measures.
• The International Monetary Fund (IMF) updated the growth forecast of the US economy, which benefited the USD.
• The Greenback also is gaining due to higher US Treasury yields.
• The US will report S&P PMIs data on Thursday, which might also shake the pair by the end of the week.

AUD/USD technical outlook: Bearish momentum intact despite ranging sessions

The Relative Strength Index (RSI), at 33, is near the oversold area with a sharply declining slope, suggesting that selling pressure is rising. The Moving Average Convergence Divergence (MACD) histogram is red and rising, further confirming the bearish outlook.Volume remains steady, but today's sharp 1% decline suggests increased selling interest. Support levels lie at 0.6650, 0.6600 and 0.6550, while resistance stands at 0.6700, 0.6750 and 0.6800. The overall bearish trend remains intact, indicating continued downward momentum in the short term.

Further gains saw the Greenback retest the area of three-month tops, helped by a decent bounce in US yields across the curve, persistent uncertainty around the US election and markets’ view of a more cautious Fed easing.

Here is what you need to know on Thursday, October 24:

The US Dollar Index (DXY) advanced to new multi-week highs, extending further its recent breakout of the 104.00 barrier. The Chicago Fed National Activity Index comes next seconded by the usual weekly Initial Jobless Claims, New Home Sales, the Kansas Fed Manufacturing Index and the flash S&P Global Manufacturing and Services PMIs. In addition, the Fed’s Hammack is due to speak.

EUR/USD retreated for the third straight day, maintaining its weekly leg lower well in place below the 1.0800 support. The release of advanced HCOB Manufacturing and Services PMIs in Germany and the euro area take centre stage in Europe. Additionally, the ECB’s McCaul, Lane and Buch are expected to speak.

GBP/USD weakened further and came close to the key support at 1.2900 the figure. In just four weeks, Cable lost more than five cents. Car Production is next on tap on the UK calendar seconded by the preliminary S&P Global Manufacturing and Services PMIs, and the CBI Industrial Trends Orders.

USD/JPY surpassed the 153.00 hurdle for the first time since late July following the stronger Dollar and rising yields in US and Japan. The weekly Foreign Bond Investment figures come next, followed by the flash Jibun Bank Manufacturing and Services Index.

AUD/USD reversed Tuesday’s advance and tumbled to two-month lows near 0.6620. The advanced Judo Bank Manufacturing and Services PMIs will be released in Oz.

An unexpectedly build in US crude oil inventories during last week kept WTI prices on the defensive just above the $70.00 mark per barrel.

Prices of Gold ended the day with marked losses despite reaching a record high near $2,760 per ounce troy earlier in the day. Silver prices came down heavily, correcting lower from recent peaks in levels just shy of the $35.00 mark per ounce.

• Gold retreats from all-time high of $2,758 as US 10-year Treasury yields rise, reflecting fears of higher deficit spending under a potential Trump presidency.
• The US Dollar Index (DXY) hits a two-month high at 104.50, further weighing on Gold as risk appetite shifts toward safe-haven currencies.
• Traders now price in a 92% chance of a 25 bps Fed rate cut in November with another cut expected by year-end.

Gold price plunges from all-time high of $2,758 on Wednesday as US Treasury yields climbed, while the Greenback refreshes a two-month high, according to the US Dollar Index (DXY). At the time of writing, the XAU/USD trades at $2,716, down more than 1%.

Risk appetite has deteriorated, sponsoring a flight to safe-haven currencies, but not assets like the golden metal. The US 10-year Treasury note yield has climbed over 65 basis points (bps) since the Federal Reserve (Fed) cut rates by 50 basis points (bps) on September 18, amid fears that Trump’s presidency could be inflationary.

“The yields rising are implying a pro-growth administration is potentially coming into power and there's some fear about deficit-spending,” said Thomas Hayes, chairman at Great Hill Capital in New York.

The US 10-year T-note yields 4.248%, gaining four basis points. The DXY, which measures the performance of the US currency against another six, edges up 0.42%, at 104.50.

Market participants are pricing a 92% chance that the Fed would lower rates by 25 bps at the next meeting in November and another one in December.

Investors seem convinced that former President Donald Trump could beat Vice-President Kamala Harris, as showed by most betting websites. As we get close to the US election  on November 5, investors are taking shelter in view of that possibility. Investors are somewhat worried that Trump’s deficit-spending, use of tariffs and major illegal migrant deportation scheme could cause a new bout of inflation.

In the meantime, Middle East woes have faded somewhat, a relief for commodities like Crude Oil, which is also down 0.77% to $70.69 per barrel.

Daily digest market movers: Gold price on the defensive as US yields soar

• On Thursday, US Initial Jobless Claims for the week ending October 19 are expected to rise slightly from 241K to 242K.
• The S&P Global Manufacturing PMI for October is projected to improve from 47.3 to 47.5, while the Services PMI is estimated to dip from 55.2 to 55.
• Data from the Chicago Board of Trade, based on the December fed funds rate futures contract, indicates that investors estimate 47 basis points (bps) of Fed easing by the end of the year, which is slightly lower compared to a week ago.

XAU/USD technical outlook: Gold price retreats below $2,720

Gold price retreats sharply, forming a Bullish Engulfing candle chart pattern or an “outside day.” If confirmed, the yellow metal could be headed for a pullback, following the 5.96% rally that started on October 10.

From a momentum standpoint, sellers are gathering some pace. The Relative Strength Index (RSI) fell sharply from overbought conditions, opening the door for further downside.

In the case of a daily close below $2,719, look for a retracement. The first support would be the 38% Fibonacci Retracement at $2,699, followed by the 50% and 61.8% Fib Retracements at $2,681 and $2,662, respectively.

On the other hand, if XAU/USD clears today’s high at $2,750 the next stop would be the all-time record high at $2,758, followed by $2,800.

• USD/JPY turns bullish after clearing the Ichimoku Cloud and 200-day SMA, with momentum suggesting further upside towards the 160.00 target.
• Key resistance levels include the October 23 high of 153.19, followed by 154.00 and the July 30 peak at 155.21.
• A bearish scenario would require a break below the 200-day SMA at 151.38, with further support at 150.79 inside the Kumo.

The USD/JPY extended its gains sharply during Wednesday in the North American session, sponsored by the close positive correlation with the US 10-year T-note yield, while traders remain concerned about US elections. At the time of writing, the pair exchanges hands at 152.60, up by more than 1%.

USD/JPY Price Forecast: Technical outlook

The USD/JPY rose above the Ichimoku Cloud (Kumo) and the 200-day Simple Moving Average (SMA), turning bullish for the first time since early August 2024.

Momentum clearly indicates that buyers are in charge, and targeting the 160.00 figure, once they cleared key technical levels. In addition, the Relative Strength Index (RSI) cleared the latest peak, meaning that further USD/JPY upside is seen.

The USD/JPY first resistance would be the 153.19 October 23 daily high, followed by the 154.00 mark. On further strength, the USD/JPY could challenge the July 30 peak at 155.21, before etending its gains to July 19 peak at 157.86.

For a bearish scenario, sellers must clear the 200-day SMA at 151.38, before pushing the exchange rate below the Tenkan-Sen at 150.79, and inside the Kumo at 150.70.

USD/JPY Price Chart – Daily

• The Canadian Dollar shed a further fifth of a percent against the Greenback.
• The Bank of Canada delivered a widely-expected 50 bps rate trim on Wednesday.
• Rate markets see a decent chance of a further 50 bps BoC rate cut in December.

The Canadian Dollar (CAD) receded on Wednesday, backsliding another 0.2% against the US Dollar after the Bank of Canada (BoC) delivered a widely expected 50 bps rate cut. Rate traders are already pricing in a further double rate cut in December as the BoC grapples with Canada’s rapidly deflating economic landscape.

Canada continues to see the downside opening up in economic data prints, spurring the BoC to step up the pace of rate cuts heading into the end of the year. Canadian Retail Sales figures from August are slated to print on Friday, and are expected to stick to the trend and moderate further. However, the long-dated data is unlikely to spark much movement.

Daily digest market movers

• BoC cuts interest rates by 50 bps, meeting broad-market expectations.
• Canada’s main interest rate peaked at 5.0% in July 2023.
• Crumbling economic data and inflation prints have spurred the BoC to slash rates down to 3.75% overall.
• Rate swap markets see 25% odds of a follow-up 50 bps rate cut from the BoC in December.
• According to the BoC’s latest Monetary Policy Report, the Canadian central bank expects headline inflation figures to remain close to target levels for the foreseeably future despite delivering a total of five rate cuts through 2024.

Canadian Dollar price forecast 

Momentum continues to drag the Canadian Dollar (CAD) lower, with the Loonie finding a fresh 11-week low against the Greenback on Wednesday. USD bulls are on pace to chalk in a fourth straight winning week against the CAD, and the USD/CAD chart is set to rechallenge the 1.3900 handle in the coming days.

It’s getting difficult for technical traders to ignore a long-run spiral baked into USD/CAD weekly candlesticks. The pair has ground out chart paper in a sideways channel since late 2022, with price action bouncing sharply between the 1.3900 and 1.3300 levels. Despite the Greenback’s recent hot streak against the Loonie, USD/CAD could be poised for a fresh tilt into the bearish side if bids can’t pierce into fresh multi-year highs above 1.4000 in the next few weeks.

USD/CAD daily chart

• Dollar and US Treasury yields continue to march higher.
• IMF raised its US economic growth projections to 2.8% (+0.2 ppt) for 2024.
• The recent Fed Beige Book indicated that inflation had continued to moderate.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, rose near a three-month high as traders flocked to the US Dollar on Wednesday.The rally was driven by persistent global economic divergence, a more hawkish Federal Reserve (Fed), and upbeat US growth projections by the International Monetary Fund (IMF). The Fed Beige Book hinted at moderating inflation and sustained economic activity.

The robust US economy and election uncertainties continue to bolster the US Dollar.The IMF upgraded its US growth forecasts, projecting 2.8% growth for this year and 2.2% for next year. The US outpaces its peers as IMF lowered eurozone growth forecasts to 0.8% for this year and 1.2% for next year. Economic divergence favors the US Dollar, contributing to monetary policy divergence that supports its strength. The Fed Beige Book indicates moderating inflation with selling prices increasing modestly across most districts. Economic activity remains mostly unchanged since early September with some districts reporting modest growth.

Daily digest market movers: US Dollar rises on election uncertainties, strong economy

• The robust US economy and election uncertainties continue to bolster the US Dollar.
• The IMF upgraded its US growth forecasts, projecting 2.8% growth for this year and 2.2% for next year.
• The US outpaces its peers as IMF lowered eurozone growth forecasts to 0.8% for this year and 1.2% for next year.
• Economic divergence favors the US Dollar, contributing to monetary policy divergence that supports its strength.
• The Fed Beige Book indicates moderating inflation with selling prices increasing modestly across most districts.
• Economic activity remains mostly unchanged since early September with some districts reporting modest growth.

DXY technical outlook: DXY sees more gains, will eventually correct

The DXY index has surged above its 200-day SMA, indicating a positive trend. The Relative Strength Index (RSI) is in overbought territory, suggesting a potential correction. Supports at 104.50, 104.30 and 104.00 may provide downside protection.

Resistance levels at 104.70, 104.90 and 105.00 could limit the index's upside momentum. The index's performance relative to its Simple Moving Average (SMA) and Moving Average Convergence Divergence (MACD) should be monitored for further confirmation.

• The Dow Jones shed 350 points, or over 0.8% on Wednesday.
• Markets have returned to worrying that interest rates will stick higher for longer.
• Sharp declines in key equities are exacerbating declines.

The Dow Jones Industrial Average (DJIA) is on pace to grapple with a losing week, something the major equity index hasn’t had to do since August. The Dow turned further bearish on Wednesday, dropping over 350 points and shedding nearly nine-tenths of one percent from the day’s opening bids.

Despite a jumbo 50 bps rate cut from the Federal Reserve (Fed) in September, markets have again returned to fretting about the possibility of higher-for-longer interest rates. Bond yields stepped higher on Wednesday, prompting an overall decline in equities in a self-fulfilling prophecy: investors worried about the dizzying heights reached by large-cap equities are beginning to pull back from record highs, trimming overbought equities.

Despite US economic data routinely beating expectations, markets remain concerned that the US economy will begin to feel the long-term effects of high interest rates that reached a 16-year peak of 5.5% in 2023. The Fed released some of the pressure in September by trimming rates by half of a percent, but now investors are turned skeptical that the Fed will be pressured into delivering a projected further 50 bps in rate cuts through the remainder of the year.

Dow Jones news

All but five of the Dow’s listed securities are testing into the red on Wednesday, with losses led by food giant McDonald’s (MCD). It is down over 5% and testing into $298 per share after an E. coli outbreak at one of its food suppliers was announced. 

Despite a solid earnings report for the third quarter, investors have decided that 3M’s (MMM) quarterly performance isn’t good enough. The Post-it Note producer’s share price declined around 4%, falling to $126.50 per share.

Dow Jones price forecast

The Dow Jones is experiencing a pullback after rallying since late September. Price action has fallen back below the 43,000 handle, though rising support from the 50-day Exponential Moving Average (EMA) remains well below current bids.

The Moving Average Convergence-Divergence (MCAD) indicator is poised for further declines with the histogram crossing back into negative territory. However, a long-run bull market in the Dow Jones leaves oscillating indicators at a notable disadvantage. Traders looking to go short on the Dow should wait for a bearish confirmation and a pullback to minimize upside risks.

Dow Jones daily chart

• Mexican Peso gains although Retail Sales declined for the fourth consecutive month.
• A gloomy economic outlook for Mexico pressures the Bank of Mexico to cut rates at the upcoming meeting.
• IMF revises Mexico’s 2024 growth forecast to 1.5%, widening the divergence with the US, projected to grow at 2.8%.
• Traders eye Mexican mid-month inflation data, Fed speakers later this week to sway the direction of USD/MXN.

The Mexican Peso stages a comeback against the US Dollar on Wednesday, after further data revealed the economy continues to underperform, which could push the Bank of Mexico (Banxico) to lower borrowing costs at the upcoming meeting. At the time of writing, the USD/MXN trades at 19.88. down 0.33%.

Mexico’s National Statistics Agency, known as INEGI, revealed that monthly August Retail Sales were lower than expected, while annual basis figures plunged for the fourth straight month. Wednesday’s data, along with the contraction of the Economic Activity Index, paint a gloomy scenario for the new administration of President Claudia Sheinbaum.

Ahead of the week, October mid-month inflation data is expected on Thursday. Estimates suggest that headline inflation would drop from 4.66% to 4.65%, while the underlying inflation is projected to fall from 3.95% to 3.82%.

Last week, the International Monetary Fund (IMF) projected the Mexican economy will grow 1.5% in 2024, lower than in its previous forecast. In its annual report, the IMF estimates a widening divergence between the economies of Mexico and the US, with the former expected to grow at a 2.8% pace, while the latter deepens its economic slowdown. For 2025, Mexico is projected to grow 1.3%, while the US economy is foreseen growing at a 2.2% pace.

On the US front, the economic schedule featured housing data for September, which missed projections. In the meantime, Federal Reserve (Fed) speakers will continue to cross the wires.

San Francisco Fed President Mary Daly favors further adjustments to the fed funds rate, saying the central bank will remain data-dependent and that she hasn’t seen anything that would suggest pausing the rate cutting.

Meanwhile, Kansas City Fed President Jeffrey Schmid adopted a more cautious stance, adding that he prefers to avoid outsized rate cuts, noting that they’re seeing a normalization of the labor market rather than a deterioration.

Ahead this week, Mexico’s economic schedule will be featuring the release of Mid-Month Inflation for October. In the US, Fed speakers, jobs data, and S&P Global Flash PMIs should influence the direction of USD/MXN.

Daily digest market movers: Mexican Peso climbs, shrugs off economic slowdown

• Mexico’s Retail Sales dipped to 0.1% MoM, below the 0.2% expansion foreseen by analysts and July’s 0.7% increase.
• On an annual basis, Retail Sales plummeted -0.8%, below estimates of -0.4% and the previous month of -0.6%.
• A Reuters poll showed most economists expect headline prices to rise while core prices decrease in the first half of October.
• If Mexico’s inflation dips further, the Bank of Mexico (Banxico) will likely lower rates at the upcoming November 14 meeting.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 48 bps of Fed easing by the end of the year.

USD/MXN technical outlook: Mexican Peso appreciates though remains tilted to the downside

The USD/MXN remains upwardly biased despite retreating below the 20.00 figure. Momentum shows that bulls remain in charge with the Relative Strength Index (RSI) above its 50 neutral line despite aiming lower.

If USD/MXN clears the 20.00 figure, the next resistance would be the September 5 high at 20.14 and the year-to-date (YTD) high at 20.22. On further strength, the next stop would be 20.50, ahead of 21.00.

Conversely, if the USD/MXN extends its losses below the October 18 low of 19.64, a test of the October 10 daily peak at 19.61 is on the cards. Next would be the October 4 swing low of 19.10 before testing 19.00.

• EUR/GBP remains range-bound, displaying a sideways trend since Monday.
• Buying pressure has shown signs of recovery, but momentum remains weak.
• With the pair below the 20-day SMA, the short-term outlook is negative.

The EUR/GBP pair continues to consolidate its position, experiencing a mild uptick in Wednesday's session to 0.8330. This movement, however, has not broken the pair's recent trading range, which remains between 0.8310 and 0.8340.

The Relative Strength Index (RSI) indicates some recovery in buying pressure, rising to 43, but it remains still far from 50. The Moving Average Convergence Divergence (MACD) exhibits flat conditions, with the histogram in the negative zone showing no significant selling pressure.

Despite the mixed signals from technical indicators, the outlook for EUR/GBP remains overall negative for the short term. Should buying pressure fail to materialize, the pair could return to support at 0.8300. A break below this level could trigger further declines. Conversely, a move above 0.8340 could indicate a shift towards recovery.

EUR/GBP daily chart

There may have been some headline uncertainty going into this decision, but markets and economists were clearly leaning towards this outcome. It’s the right move in our view as it would have been difficult to justify continuing with the gradual approach (i.e., 25 bp cuts) in light of a softer inflation and growth backdrop, National Bank of Canada analyst notes.

Neutral rate is between 2.25% and 3.25%

“Rather than the output gap starting to close in Q3 like the BoC had previously expected, slack absorption will have to wait at least until the fourth quarter. And while that is the baseline outlook for the Bank, we feel we’re in for a repeat of the past three months, where growth continues to undershoot the BoC’s optimistic expectations. And to be clear, their updated economic projections do look very optimistic to us.”

“Should our forecast for a continued sluggish economy materialize, a follow-on 50 basis point rate cut in December should be viewed as the overwhelmingly likely outcome. On the other hand, if the economy were to break out of its underperformance funk and GDP growth picked up in line with the Bank’s projections, a return to 25 bp cuts could be justified.”

“The Bank will continue to let the data do the deciding. Big picture, we still argue that restrictive monetary policy is no longer warranted in Canada and policymakers should quickly return to a more neutral policy stance. Note that official BoC estimates peg the neutral rate as being between 2.25% and 3.25%. A 50 bp cut in December would bring the overnight target to the upper end of that range.”

• GBP/USD falls for the third consecutive day, trading below the 100-day SMA at 1.2962, with downside risks growing.
• Bearish RSI indicates further weakness, with key support at 1.2910-1.2920 and the 200-day SMA at 1.2799.
• A rebound could see a retest of the 1.3000 level, with next resistance at 1.3070 and the 50-day SMA at 1.3138.

The Pound Sterling extended its losses for the third straight day against the Greenback amid a scarce economic docket in the UK that will feature remarks of Bank of England (BoE) Governor Andrew Bailey. At the time of writing, the GBP/USD trades at 1.2954, down 0.22%.

GBP/USD Price Forecast: Technical outlook

The GBP/USD has fallen below the 100-day simple moving average (SMA) at 1.2962, opening the door for further downside. Sellers are gathering some steam, as depicted by the Relative Strength Index (RSI).

The RSI is bearish and extending its downtrend yet shy of turning oversold. Hence, the GBP/USD could continue to edge lower.

If GBP/USD decisively breaks 1.2950, the next support would be the bottom trendline of an ascending channel at 1.2910-1.2920, followed by the 1.2900 mark. On further weakness, the next stop would be the 200-day SMA at 1.2799.

However, if GBP/USD rebounds at around the 100-day SMA, look for a retest of 1.3000. If buyers punch that level, the next resistance would be the October 18 peak at 1.3070, ahead of the 50-day SMA at 1.3138.

GBP/USD Price Chart – Daily

Platinum markets may just be offering the only sandbox in which your bread-and-butter playbook could be expressed, TDS’ Senior Commodity Strategist Daniel Ghali notes.

The set-up is now extremely skewed to the downside

“Speculative flows in Platinum have remained largely uncorrelated to the remainder of the complex for some time, mitigating the risk of a catch-up trade in the white metal despite plausible arguments surrounding the election's impact on demand outcomes.”

“Meanwhile, the set-up for CTA positioning has now reached extreme levels, with imminent and large-scale selling activity expected in any reasonable scenario for prices over the coming week. Macro funds have remained largely flat in Platinum for some time. If you don't believe Platinum trading will be distorted by this election season, the set-up is now extremely skewed to the downside.”

“Even a big uptape won't be enough to keep CTAs from shedding nearly -25% of their max size by this time next week, whereas a downtape could lead to massive selling activity in the imminent term.”

While speaking on the sidelines at the 2024 Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) on Wednesday, European Central Bank (ECB) President Christine Lagarde noted that they need to be cautious when asked about market expectations for further rate reductions.

"We need to be cautious because data will come up and will indicate to us what is the state of the economy, what is the state of inflation, of underlying inflation," she said, adding that there will be a judgmental aspect to their decisions and that they will have to be cautious in doing so.

Market reaction

The EUR/USD pair stays on the back foot following these comments and was last seen losing 0.25% on the day at 1.0773.

• USD/CAD clings to gains near 1.3850 as the BoC reduces its key borrowing rates by 50 bps to 3.75%, as expected.
• The BoC maintains its growth guidance for this year at 1.2%.
• The US Dollar gains on multiple tailwinds.

The USD/CAD pair remains firm near 1.3850 as the Bank of Canada (BoC) has reduced its key borrowing rates by 50 basis points (bps) to 3.75%. This is the fourth straight interest rate cut by the BoC in a row. However, the size by which the BoC has cut interest rates on Wednesday is larger-than-usual.

The BoC was widely anticipated to deliver an outsize interest rate cut as officials worry that inflationary pressures in Canada could remain lower below 2% amid growing risks of a downturn. Risks to BoC’s dual mandate have not shifted to employment. The Unemployment Rate remains above 6% since February, which should be under 5% theoretically.

The BoC may continue lowering interest rates further if the jobless rate remains elevated. The Canadian swaps market sees roughly a 25% chance of another 50-basis point rate cut in December. Meanwhile, the central bank has left its growth rate for this year unchanged at 1.2%. After the interest rate decision, BoC Governor Tiff Macklem said that their focus is to maintain stable, low inflation.

Meanwhile, higher US bond yields have strengthened the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, recaptures August’s high of 104.45. US Treasury yields gain amid growing speculation over United States (US) presidential elections and expectations of a more gradual Federal Reserve’s (Fed) policy-easing cycle.

In today’s session, investors will pay close attention to the Fed’s Beige Book, which summarizes economic conditions across 12 Fed districts and will be published at 18:00 GMT.

USD/JPY is rising as pre-election concerns the ruling LDP party could lose weakens the Yen. 

• A change in leadership could influence the BoJ’s policy trajectory, keep interest rates low, and weigh on JPY. 
• The US Dollar benefits from an improved economic outlook and less aggressive monetary easing projections.  

USD/JPY is trading over 1.2% higher on Wednesday as it exchanges hands in the 152.90s, an over ten-week high for the pair. USD/JPY is slightly off its highs of the day after the US Dollar (USD) edged lower following the release of US Mortgage Applications which sank by 6.7% in the third week of October. It was the metric’s fourth consecutive contraction and extended the 17% plunge registered in the previous week (ending October 11). 

More broadly, a combination of political instability in Japan and shifting economic forecasts, coupled with a revision of expectations about the future path of interest rates in the United States (US) is propelling the pair higher.

The Japanese Yen (JPY) has been experiencing considerable selling pressure due to domestic political uncertainty. Recent polls suggest that the ruling Liberal Democratic Party (LDP) may lose its majority in the upcoming general election. A potential leadership shift or the need for a coalition could complicate the government's policy-making, including the Bank of Japan’s (BoJ) approach to policy making – a major factor impacting the Yen. 

The International Monetary Fund's (IMF) downgrade of Japan's economic growth forecast to 0.3% for this year, down from a previous 0.7%, further exacerbates this pressure. A weaker economic outlook generally reduces demand for a currency, contributing to a decline in its value. 

In the near term the weak growth reflected in these revisions are contributing to downward momentum for the Yen, which can lead to an increase in the USD/JPY exchange rate.

In addition, recent Japanese inflation data has fallen below the BoJ’s forecast projections suggesting the bank may not be able to increase interest rates from their relatively low 0.25% level. Lower interest rates are negative for a currency as they can cause capital outflows. 

On the other hand, the US Dollar (USD) is enjoying a period of upside against the Yen, supported by a change in the outlook for monetary policy by the US Federal Reserve (Fed). Although the Fed decided to slash interest rates by 50 basis points (bps) (0.50%) at its September policy meeting due to concerns regarding the weakening of the US labor market, data since has calmed investor fears about employment in the US. 

As a result the Fed is now not expected to follow up with another double-dose rate cut in October, as had previously been suspected. This diluting down of the forecast trajectory for interest rates in the US has supported a rebound in the US Dollar, and a rise in USD/JPY. The less drastic fall in interest rates is supportive for the USD because it increases foreign capital inflows.

To summarize, the mixture of political uncertainty, weak projected growth and permanently low interest rates in Japan, versus the more buoyant economic outlook in the US and less dovish monetary policy stance of the Federal Reserve is leading to gains for USD/JPY that could very well extend. 

• Silver price faces selling pressure as US bond yields rise sharply.
• Middle East tensions and US political uncertainty will limit the downside in the Silver price.
• Trump’s victory could weigh on exports of US close trading partners.

Silver price (XAG/USD) corrects sharply below $34.50 in Wednesday’s New York session after registering a fresh more than 12-year high slightly below $35.00 on Tuesday. The rally in the white metal appears to have paused for a while as the US Treasury yields have extended its upside.

10-year US Treasury yields jump to near 4.24% as investors expect the Federal Reserve (Fed) to follow a gradual policy-easing cycle. Historically, higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Silver. The US Dollar (USD), which tracks the Greenback’s value against six major currencies, revisits the August high of 104.45.

However, the upside trend remains intact due to multiple catalysts. From growing United States (US) political uncertainty to escalating Middle East tensions, every catalyst is acting as a tailwind for the Silver price.

According to the Reuters/Ipsos polls, current Vice President Kamala Harris leads by a slight margin against former President Donald Trump. However, market participants worry that Trump’s victory could result in higher tariffs and lower taxes, which could force the Federal Reserve (Fed) to return to the restrictive policy stance for a period of time.

In the Middle East region, the launch of a rocket salvo by Iran-backed-Hezbollah on Israel’s military base near Tel Aviv exhibits signs that tensions between them will stay afloat. The appeal of precious metals, such as Silver, as a safe haven, given that investors consider them as a hedge against dismal market sentiment.

Silver technical analysis

Silver price slumps after failing to capture the key resistance of $35.00. The white metal strengthened after breaking above the horizontal resistance plotted from the May 21 high of $32.50 on a daily timeframe, which will act as a support for now. Upward-sloping 20-day Exponential Moving Averages (EMAs) near $32.15 signal more upside ahead.

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

Silver daily chart

• EUR/GBP has fallen to a key support level as it drills ever lower. 
• The pair is in an overall downtrend supporting more downside, however, bearish momentum remains tepid. 

EUR/GBP has fallen to a key support line at the level of the October 1 and 18 lows, in a zone between 0.8295 - 0.8310. It is currently bouncing although the trajectory of the short, medium and long-term trends is probably still bearish. Given the technical analysis principle that “the trend is your friend” this suggests the odds favor more downside. A break below the October support floor, therefore, remains a distinct possibility.  

EUR/GBP 4-hour Chart

If EUR/GBP manages to break below the 0.8295 level (October 18 low) it will probably confirm a decisive break below the aforementioned support. This, in turn, would likely see prices fall further, with the next potential downside target at the 0.8250 round number and then the lower channel line around 0.8220. 

The Relative Strength Index (RSI) momentum indicator is relatively elevated compared to the oversold levels it reached during the early-October lows. This suggests a lack of downside momentum which might be a sign further weakness will be limited. 

In addition, the pair is at historic lows, and further losses would be well below the pair’s long-term average. 

• USD/CHF is closing in on the key 100-day SMA, where it will probably encounter resistance. 
• The pair is in an established short and medium-term uptrend and the odds favor more upside to come. 

USD/CHF extends its uptrend from the late September lows and approaches resistance at the 100-day Simple Moving Average (SMA), currently situated at 0.8697. 

USD/CHF Daily Chart 

USD/CHF has now reached the target generated after it broke out of its September range, at 0.8680 – the 100% Fibonacci (Fib) extrapolation of the height of the range higher. This could signify that bullish pressure will lessen. 

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

USD/CHF’s short and medium-term trends are bullish but its longer-term trend is probably still bearish despite the recent strong recovery.

The Pound Sterling (GBP) is holding up relatively well against the stronger USD, trading little changed on the session, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP steadies near 100-day MA

“BoE officials are speaking again in Washington, with Governor Bailey and MPC member Breeden on tap. Markets continue to price in a 1/4 point cut in November from the Bank.”

“GBP’s technical condition is soft but there are some signs of demand emerging on dips to the 1.2950/60 area (100-day MA at 1.2965) which is checking the broader grind lower in the pound. Oscillators are flashing oversold on the intraday and daily charts here as well.”

“But the GBP needs a positive session (higher close) today to boost chances of even a minor rebound. Resistance is 1.3020/30. EUR/GBP retains a soft undertone near 0.8300.”

• GBP/JPY is rising as pre-election concerns the ruling LDP party could lose weakens the Yen. 
• A change of government or weaker ruling coalition could impact the BoJ’s decision making with consequences for the currency. 
• The Bank of England’s relatively more hawkish stance on interest rates is a further backwind for GBP/JPY. 

The GBP/JPY is trading over 1.0% higher on Wednesday in the 198.30s. A combination of political instability in Japan and shifting economic forecasts, coupled with differing monetary policy outlooks between the Bank of Japan (BoJ) and the Bank of England (BoE), are key elements shaping market sentiment and trading behavior.

The Japanese Yen (JPY) has been under considerable selling pressure due to domestic political uncertainty in Japan. Recent polls suggest that the ruling Liberal Democratic Party (LDP) may lose its majority in the upcoming general election. A potential leadership shift or the need for a coalition could complicate the government's policy-making, including monetary policy conducted by the Bank of Japan. Political instability often creates risk aversion, leading to a weakening of the affected currency, which, in this case, places downward pressure on the Yen. 

The International Monetary Fund's (IMF) downgrade of Japan's economic growth forecast to 0.3% for this year, down from a previous 0.7%, further exacerbates this pressure. A weaker economic outlook generally reduces demand for a currency, contributing to a decline in its value. In the near term the weak growth reflected in these revisions are contributing to downward momentum for the Yen, which can lead to an increase in the GBP/JPY exchange rate.

On the other hand, the Pound Sterling (GBP) is experiencing upward momentum against the Yen, supported by relatively more hawkish signals from the Bank of England (BoE). BoE Monetary Policy Committee (MPC) member Megan Greene’s remarks during the IMF meeting reinforced this sentiment. Despite recent data showing a drop in UK inflation to 1.7% in September, below the BoE's 2% target, Greene noted that the decrease was due to volatile components and would not sway her vote significantly. This suggests that the BoE may still prioritize tackling inflation, which supports expectations of tighter monetary policy. In contrast to Japan's more accommodative stance, this divergence can lead to an increase in the value of the Pound relative to the Yen.

Moreover, market participants are keenly awaiting BoE Governor Andrew Bailey’s upcoming speech, which could provide further insights into the bank’s future policy decisions, including potential rate cuts in November and December. While markets are speculating about the possibility of further rate reductions in the UK, the BoE’s relatively stronger position compared to the BoJ’s dovish policy stance is supporting the Pound, and the GBP/JPY.

Additionally, economic data releases such as the UK’s flash S&P Global/CIPS Purchasing Managers Index (PMI) for October are expected to show modest expansion in business activity. Positive data from the UK economy would further bolster the Pound, adding additional upward pressure to the GBP/JPY exchange rate.

In summary, the GBP/JPY exchange rate is being driven higher by a combination of the Yen's weakness, due to Japan's political and economic challenges, and the relative strength of the Pound, supported by the BoE’s more hawkish policy outlook. These factors collectively suggest an upward bias in the GBP/JPY pair in the near term.

The Euro (EUR) looks quite soft below 1.08, pressured by broader USD gains on the one hand and simmering speculation that the ECB could cut rates aggressively in December, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

EUR slips under 1.08

“Swaps are pricing in 35bps of easing risk currently. ECB President Lagarde is talking (10ET) again in the US this morning, as are some of her governing council colleagues. Yesterday’s comments from ECB policymakers stressed optionality on forthcoming policy decisions, leaving the door open to a pickup in the pace of easing, if required.”

“EUR/USD is trading at new lows for the move down this morning and pressuring the last remaining supports below 1.08 (retracement support at 1.0795 and the early August low at 1.0778). The EUR sell-off is overshooting, in my opinion, with intraday and daily oscillator signals highlighting an increasingly oversold situation.”

“Momentum is king, however. Unless the EUR can steady and recover in the next day or so, the move lower could extend towards 1.05/1.06.”

• Crude Oil struggles to hold onto $70.00, with more downside expected. 
• Traders expect sluggish demand in the long term as markets reprice Fed rate cut prospects. 
• The US Dollar Index looks set for more upside after breaking above 103.80 and tested 104.00.

Crude Oil sees its two-day surge halt on Wednesday after the American Petroleum Institute (API) reported a larger-than-expected increase in US stockpiles. In the Middle East, Secretary of State Antony Blinken urged Israel to avoid further escalating the conflict within Iran. Blinken said in Tel Aviv that there is an opportunity for a hostage agreement, according to Bloomberg. This takes the sting out a bit from the recent developments between Israel and Iran. 

The US Dollar Index (DXY), which tracks the performance of the Greenback against six other currencies, is picking up a nudge and has broken above 104.00. Markets are starting to position for the most eventful week of this financial year with the US presidential election on November 5 and the Federal Reserve’s (Fed) interest-rate decision on November 7. The King Dollar seems to be returning to the scene while traders and investors trim their exposure on bonds and equities, fleeing to the Greenback. 

At the time of writing, Crude Oil (WTI) trades at $70.28 and Brent Crude at $74.37

Oil news and market movers: Blinken soothes again

• The American Petroleum Institute (API) has reported overnight that the US stockpile change number came in at a build of 1.643 million barrels, more than the expected 0.7 million and the previous draw last week of 1.58 million barrels.
• The Energy Information Administration (EIA) will report its numbers at 14:30 GMT. The expectation is for a small build of 0.7 million barrels after the chunky drawdown of 2.191 million barrels a week earlier. 
• Secretary of State Antony Blinken held extensive conversations with Israeli Prime Minister Benjamin Netanyahu and senior Israeli leaders. Blinken urged Israel to get more humanitarian aid into Gaza, a senior State Department official confirmed to Reuters.

Oil Technical Analysis: Brief blips 

Crude Oil price might have had a brief rally, popping back above $70.00. However, the underlying fundamental driver is the oversupply of barrels of Oil per day that is being unleashed to markets. In case the stockpile numbers from the EIA point to a bigger-than-expected build, expect to see how the consolidation in Oil prices fades and Oil pulls back to $70.00 or lower. 

There is a challenging path to recovery for Crude Oil in the coming days. First, the pivotal level at $71.46, which was strong enough to catch the falling knife on October 14, must be regained again with a daily close above it. Once from there, the hefty technical level at $75.13, with the 100-day Simple Moving Average (SMA) and a few pivotal lines, is possibly the first big hurdle ahead. 

On the downside, traders need to look much lower, at $67.12, a level that supported the price in May andJune 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 stretches further up against most major G20 currencies.
• US equities are falling further while markets calibrate the new normal for the Fed interest-rate outlook. 
• The US Dollar index sets forth its October rally and enters a crucial technical area. 

The US Dollar (USD) strengthens further on Wednesday, fueled by uncertainty ahead of the US presidential election and safe-haven inflow after equities extend their downbeat performance. Meanwhile, US bonds are continuing to sell off, which means US rates are surging with the US 10-year benchmark having rallied from 4.07% on Monday to 4.23% on Wednesday. The King Dollar is back on the scene and might even accelerate further as uncertainty picks up ahead of the November 5 election. 

On the US economic front, a very light calendar is ahead for markets to digest on Wednesday. Besides the Existing Home Sales numbers, nothing really from an economic data view that could alter the current stance. Rather look at US earnings where heavyweights Tesla, IBM, Boeing and Coca cola are due to release earnings. 

Daily digest market movers: Focus shifts to equities and risk 

• At 11:00 GMT, the Mortgage Bankers Association (MBA) will release the weekly Mortgage Applications for the week ending October 18. The number has been contracting for three weeks in a row. No consensus view is available, with a contraction of 17% the prior week. 
• At 13:00 GMT, Federal Reserve Governor Michelle Bowman delivers opening remarks at the Eight Annual Fintech Conference Hosted by the Federal Reserve Bank of Philadelphia.
• At 14:00 GMT, the Existing Home Sales for September are due, with expectations for a surge to 3.9 million units against 3.86 million units in August. 
• At 16:00 GMT, Federal Reserve Bank of Richmond President Thomas Barkin speaks about community colleges at the 2024 Virginia Education and Workforce Conference.
• China’s indices are the last man standing in a pool of red in the equity markets. 
• The CME Fedwatch Tool is backing a 25 basis point (bps) rate cut with an 88.9% probability against an 11.1% chance of no rate cut for the upcoming Fed meeting on November 7.  
• The US 10-year benchmark rate trades at 4.22% and continues to rally for this week. 

US Dollar Index Technical Analysis: Buy the rumor

The US Dollar Index (DXY) rallies again, set to close out October on a very high note in what looks to be a very solid rally. King Dollar is returning to the scene with traders finally up and starting to position themselves for the US elections on November 5 and the US Federal Reserve rate decision on November 7. It is one of the heaviest weeks in this financial year, and the Greenback looks to be the place to be ahead of those two events. 

The DXY has broken above 104.00 and is now 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 and 105.89. Ultimately, 106.52 or even 107.35 could show sharp resistance and selling pressure with profit taking on the rally to materialize at these levels. 

On the downside, the 200-day SMA is very strong support due to a test at 103.81. 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 (the March 12 high). If that level breaks, a big gap lower would occur to the 101.90 support zone, with the 55-day SMA at 101.91.

US Dollar Index: Daily Chart

• AUD/USD breaks to new lower lows below 0.6650. 
• The pair’s medium and short-term downtrend is probably resuming. 

AUD/USD resumes its down move which began at the September 30 highs. On Wednesday the pair breaks below the former low of 0.6650. The establishment of a lower low indicates an extension of the short and medium-term downtrend, and given the technical analysis principle that “the trend is your friend” the odds favor more downside to come.

AUD/USD Daily Chart 

The next bearish target lies at the green 200-day Simple Moving Average (SMA) at 0.6628. Further weakness would be dependent on breaking below that level as well as the key September 11 swing low and support level, at 0.6622. 

However, if successful, price would probably fall to 0.6565, the August 15 swing low. 

Momentum as measured by the Relative Strength Index (RSI) is showing waning bearish pressure, however, which could indicate a lack of follow-through to the downside.

The Canadian Dollar (CAD) is holding relatively steady against the strong USD ahead of the Bank of Canada policy decision and MPR at 9.45ET. Governor Macklem and Senior DG Rogers hold their press conference at 10.30ET, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD holds little changed

“Markers are more or less fully priced for a 1/2 point cut in the target rate to 3.75% although pricing has shaded a little from near total conviction late last week to about 45bps of easing reflected in swaps as of late yesterday afternoon. The house call is 50bps, but without much enthusiasm or conviction. While markets are anticipating a more aggressive move, the Bank is not obligated to meet market expectations.”

“If it does so, the bolder move may be accompanied by more cautious language about the path forward. There certainly are grounds for caution regardless, with the CAD soft and the US election outcome a major risk in the very near future. An aggressive move and dovish language should see spot punch through 1.3850. A ‘hawkish’ cut may see the CAD steady and rebound somewhat but near-term gains may be limited to the mid/upper-1.37s.”

“USDCAD gains remain very stretched and spot is showing signs of steadying around the 1.3822/76.4% Fibonacci retracement of the August/September drop. But there is little sign of a turnaround in the USD at this point and—absent that—risks remain tilted towards USD strength persisting or extending through 1.3850 to retest the August peak at 1.3945/50. Support is 1.3750.”

The US Dollar (USD) is extending gains this morning, pressuring the EUR below 1.08 and driving USDPY above 152 as US yields rebound from yesterday’s dip, leaving the 10Y yield within a whisker of 4.25%, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD is supported by rising yields

“The tightening US election race is boosting short-term sentiment support for the USD. A Trump win would bolster expectations of higher global tariffs and generous tax cuts which would lift inflation and boost growth and underpin firm or firmer yields in the US.”

“Longer term risks for the USD cold arise under this scenario, however, with isolationism fueling de-dollarization and large tax giveaways undermining already weak fiscal sustainability. Gold might continue to outperform as a hedge against these this range of risks in the meantime.”

“It’s another day full of central bank speaking engagements, including the ECB’s Lagarde, Lane and Knot. The Fed releases its Beige Book while Bowman and Barkin speak and both are FOMC voters this year. There is a 20Y Treasury auction (results at 13ET). After the close, Japan releases October PMI data at 20.30ET.”

The heads of state and government of the BRICS countries are currently meeting in Kazan, Russia. From a political point of view, it may appear to be a gathering of those who represent the counter-model to the open, liberal constitutional states of the West, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

BRICS currently has no edge against the USD

“USD transactions that violate US sanctions have not been possible, regardless of the jurisdiction of the parties involved in the transaction. This is because US financial institutions are always involved. And even when transactions are in other currencies, the US sanctions also apply outside the US. Because companies and banks worldwide have to fear being hit with ‘secondary sanctions’ by the US authorities if they deal with trading partners who are on US sanctions lists.”

“As long as transactions that do not have to be carried out via such a system (because they fear US sanctions or are forced to use it in their domestic jurisdiction) are not carried out via such a system, such a system may fragment world trade, but it will not endanger the status quo on a global scale.”

“If the US were to pursue a policy of sanctions that a significant portion of Western industrialized nations did not accept, they could agree with the BRICS to establish a payment system independent of US access and not to accept the extraterritorial encroachments of US sanctions policy. If the BRICS and the Western states (excluding the US) were to agree, the critical mass would certainly be reached.”

• NZD/USD retreats to 0.6020 as the US Dollar extends its upside.
• Dismal market sentiment due to US political uncertainty weighs on risk-sensitive assets.
• NZD/USD stays below the 61.8% Fibo retracement.

The NZD/USD pair falls back to near 0.6020 after a short-lived recovery in Wednesday’s European session. The Kiwi pair faces pressure as rising US Treasury yields have strengthened the US Dollar (USD) further. 10-year US bond yields rise to an almost 12-week high near 4.22% amid uncertainty over United States (US) presidential elections and Middle East risks staying afloat.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, climbs to near 104.40.

The outlook of the US Dollar has strengthened further as the International Monetary Find (IMF) has upwardly revised US growth projections for the current and the next year. The IMF expects the US economy to end 2024 and 2025 year with a Gross Domestic Product (GDP) growth of 2.8% and 2.2%, respectively.

Meanwhile, the New Zealand Dollar (NZD) remains fragile due to dismal market sentiment. A sharp decline in S&P 500 futures in European trading hours suggests weakness in investors’ risk appetite.

NZD/USD posts a fresh two-month low near 0.6020. The Kiwi pair resumed its downside journey after retreating from the 61.8% Fibonacci retracement around 0.6050. The Fibo tool is plotted from the July 29 low at 0.5857 to the September 30 high at 0.6380.

A bear cross, represented by the 20- and 50-day Exponential Moving Averages (EMAs) near 0.6150, suggests a downside trend.

The 14-day Relative Strength Index (RSI) oscillates below 30.00, indicating a strong bearish momentum.

More downside is highly likely towards the August 15 low of 0.5974 and the round-level support of 0.5900 if the pair breaks below the psychological support of 0.6000.

On the flip side, a reversal move above the October 8 high of 0.6146 will drive the asset towards the 50-day EMA at 0.6173 and the October 4 high near 0.6220.

NZD/USD daily chart

This afternoon UK time, the Bank of Canada (BoC) will announce its regular interest rate decision - and after the developments of the past few weeks, there is much to suggest that it will accelerate the pace of rate cuts, Commerzbank’s FX Analyst Michael Pfister notes.

Monetary policy remains too restrictive

“Just a few weeks ago, BoC Governor Tiff Macklem hinted that larger moves might be appropriate at upcoming meetings. Initially, the market was doubtful, but with inflation recently falling by a surprisingly large margin and now threatening to undershoot the target, sentiment has changed. The surprise has become part of a remarkable period of disinflation in which price pressures have nearly collapsed.”

“As a result, Canadian one-year inflation expectations are now only 1.2%, roughly in line with the average for the 2010s, when the policy rate was also significantly lower on average. Or to put it more succinctly: Despite the three rate cuts of 25 basis points so far, monetary policy remains too restrictive because inflation has collapsed at the same time.”

“Today's larger cut should therefore no longer come as a surprise. What will be more interesting is how clearly further such large rate cuts will be announced. Given the inflation trend, we think it likely that the BoC will cut rates by another 50 basis points in December unless inflation miraculously picks up. If the BoC signals this more or less clearly today, the CAD is likely to come under pressure again.”

The current resilience of the US economy is in stark contrast to that of Germany. The extent of the vulnerability of the EUR next year under either a Trump or a Harris presidency will depend on how dovish the ECB becomes, Rabobank’s FX analyst Jane Foley notes.  

Parity is within the realm of possibilities

“The ECB is mandated to target inflation. However, there are signs that growth concerns have spread within the Governing Council. Yesterday, the IMF forecast no growth for Germany this year, following a -0.3% contraction in 2023. Germany’s government expects economic activity to contract by -0.2% this year.”

“This suggests that Germany is on course for being the weakest economy in the G7 for the second consecutive year. The IMF point to the weakness in manufacturing in both Germany and Italy. German exporters face a weak China, the ongoing impact of the energy transition and an ageing demographic which has shrunk the pool of available labour.”

“The latter, however, is inflationary. In view of economic headwinds, we would expect that many German exporters would welcome further softening in monetary conditions and a lower value for EUR/USD. It would appear that parity is within the realm of possibilities. We will revise our forecasts in early November.”

What would be different under Trump? For FX analysts, specifically: Would a second Trump term lead to US dollar strength or weakness? When US goods become more expensive relative to goods from the rest of the world, it can happen in two ways. Either the price tag on the goods shows a higher price (i.e. US inflation), or the US dollar appreciates against other currencies, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

Trump policies’ influence is unpredictable for the USD

“If the Fed prevents domestic inflation, then the terms-of-trade move occurs via the USD exchange rate. If the Fed were to lose its independence and would have to set interest rates as Trump wants, he will certainly not accept that the Fed destroys all the positive real economic effects that his tariff and tax policy intends. He will then in all likelihood accept inflation. If the Fed has to follow Trump's wishes, the announced tariff and tax policies would result in considerable USD weakness.”

“Trump has announced that he will intern and deport millions of workers, thus depriving the US labor market of them. This would reduce the US economy's production potential. Economists call this a negative supply shock. That would be inflationary.”

“But there is another channel of influence here, and it is clearly USD negative: if the US labor market has fewer workers available, capital invested in the US is less productive. Then the US is not as profitable an investment location as it used to be. And the US dollar – the entry ticket for investments in the US – will lose value. In all these cases, it depends on the combination of the policy areas mentioned above.”

Scope for USD/THB to trade higher given official concerns over THB, DBS’ FX & Credit Strategist Chang Wei Liang notes.

BOT doesn’t want to see rapid moves in the THB

“BOT Governor Suthiwartnarueput said today that BOT’s rate cut last week was a ‘recalibration’, and that the BOT also doesn’t want to see rapid moves in the THB, with recent THB volatility being too high.”

“Indeed, THB had strengthened significantly in Q3 and has supplanted PHP as the most over-valued currency in Asia, based on our DEER valuations.”

“We see scope for USD/THB to trade higher given official concerns over THB, and with Governor Suthiwartnarueput also acknowledging the economic impact of rising export competition from China.”

• EUR/JPY rallies to near 164.50 even though a few ECB officials see key borrowing rates declining below the neutral rate.
• ECB officials worry about growing Eurozone economic risks.
• Investors will focus on BoJ Ueda’s speech for fresh interest rate guidance.

The EUR/JPY pair posts a fresh 14-week high near 164.50 in Wednesday’s European session. The cross soars even though a few European Central Bank (ECB) officials see the Deposit Facility Rate falling below neutral levels, which is currently at 3.25% after three interest rate cuts this year.

ECB officials see more interest rate cuts as appropriate as they worry that inflationary pressures in the Eurozone could remain below 2% due to poor economic growth. Eurozone’s largest nation, Germany, is expected to end the current year with a decline in the output by 0.2%, predicted by the German economic ministry. This would be the second straight year of contraction in a row.

According to economists, the ECB neutral rate is around 2% or 2.25%, Reuters reported. ECB funds rate heading below the neutral rate suggests the central bank to continue easing in 2025. Meanwhile, traders have already priced in one more interest rate cut in the December meeting. This has weakened the Euro (EUR) against its major peers.

However, market participants have underpinned the Euro against the Japanese Yen (JPY) amid growing uncertainty over whether the Bank of Japan (BoJ) will hike interest rates further this year. In the last policy meeting, BoJ members didn’t offer any cues about potential rate hikes in the remainder of the year. The next BoJ policy meeting is scheduled for October 31 in which market participants expect the central bank to leave interest rates unchanged, with US election risks looming large.

In today’s session, investors will pay close attention to BoJ Governor Kazuo Ueda’s speech at the International Monetary Fund (IMF)-hosted “Governors Talk” for fresh guidance on interest rates.

For now, the most interesting G10 pair remains USD/JPY, ING’s FX Francesco Pesole notes.

The 155.00 level becomes a tangible risk before the US election

“After clearing the 151.3 200-day moving average level, there is no clear technical resistance level into 155.0. The Japanese Yen (JPY) slump is both a function of higher USD yields and domestic political risk premium ahead of next weekend’s election.”

“The lack of verbal intervention by Japanese authorities so far has probably built speculative sellers' confidence, but we still think any threat of fresh FX intervention can lead to a material USD/JPY correction given the success of the latest Bank of Japan operations.”

“If the Minister of Finance stays quiet on the yen, 155.0 becomes a very tangible risk before the US election.”

Yesterday's National Bank of Hungary meeting brought no change in rates to 6.50% as expected. The central bank accompanied this with hawkish comments but tried to avoid commenting on rate hikes that circulated in the Q&A session, ING’s FX Frantisek Taborsky notes.

Market can benefit from an increase in the rate differential

“The NBH seems to have done as much as possible while avoiding extreme scenarios in the current environment. The market also sees this and has taken hawkish guidance with a test of 400 EUR/HUF again but the 400-402 range seems to be here to stay. Of course, after the NBH meeting the focus shifts back to the global story and HUF is not under central bank control. At the same time, EUR/HUF is a key variable for the length of the pause in the cutting cycle and a possible return to the rate cuts discussion.”

“Paradoxically, it will now depend mainly on the outcome of the US election. We see HUF as the most exposed currency within the CEE region in case of a Trump victory, while relief in case of a Harris victory would be more visible in PLN and CZK. NBH will thus face a challenging following weeks. Overall, HUF may have found some new range, but it is not out of the woods yet and the coming weeks do not suggest calming. HUF recovery will thus take more time and will mainly depend on the global story.”

“Yields after the sell-off seem attractive, on the other hand, the market will remain risk averse at least until the outcome of the US election, which may reflect on weak demand and return the market to sell-off mode again. On the FX side, in the case of calm, the market may benefit from a significant increase in the rate differential. The CZK saw some gains yesterday and remains our favourite currency within the Central and Eastern Europe (CEE) region, which we believe has a chance to outperform CEE peers in the current environment.”

Room for USD to rise to 7.1500; a sustained break above this level seems unlikely. In the longer run, 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 note.

Room for USD to rise to 7.1500

24-HOUR VIEW: “We indicated yesterday that ‘there is room for USD to rise to 7.1500 before levelling off.’ However, USD traded in a tight range between 7.1300 and 7.1385, closing unchanged at 7.1364. Despite the quiet price action, the underlying tone seems firm. Today, we continue to see room for USD to rise to 7.1500. A clear break above this level is unlikely. Support levels are at 7.1300 and 7.1250.”

1-3 WEEKS VIEW: “Our update from two days ago (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.”

Markets are pricing in 45bp of easing by the Bank of Canada today. The reasoning is that inflation has now slowed below target and a soft growth picture warrants a faster, 50bp, move to neutral rates, ING’s FX Francesco Pesole notes.

The Loonie can take a hit on a rate cut

“It is a very close call, but we think 25bp remains slightly more likely. The core measures of inflation did not slow further in September, and the labour market recently posted strong gains with the unemployment rate inching lower. The growth picture is incidentally showing some tentative signs of improvement, with the BoC Business Outlook reporting a recovery in future sales expectations in the third quarter. If the conditions for continuing to ease policy persist, those for an outsized rate cut may not.”

“The BoC’s decision today is incidentally made more complicated by the recent hawkish repricing in Fed rate expectations, with some FOMC members now casting doubts on back-to-back cuts into year-end. The BoC has claimed its independence from the Fed, but an excessive gap with US rates may be undesirable, as it weakens CAD ahead of a potentially turbulent US election period, among other reasons. The currency isn’t at the top of the BoC’s concerns, but a persistent depreciation in CAD can lead to higher imported costs.”

“All in all, macro factors and the recent Fed repricing point to a 25bp cut. If the BoC goes ahead with 50bp, one of the reasons may be not to disappoint market pricing. In FX, we think the balance of risks is skewed to the upside for CAD. The loonie can take a hit on a rate cut, but Governor Macklem might not want to endorse expectations for back-to-back 50bp reductions, and the CAD curve does not have much more room to shift lower. We continue to expect CAD outperformance versus other commodity currencies into the US election thanks to the loonie’s lower exposure to Trump-related risk.”

• Gold extends its uptrend on the back of safe-haven flows due to the continued conflict in the Middle East. 
• The BRICS summit further puts the spotlight on the precious metal as an alternative to the dominance of the US Dollar. 
• XAU/USD breaks above the $2,750 psychological level as the multi-time-frame uptrend extends. 

Gold (XAU/USD) continues trending higher and enters the territory of the $2,750s on Wednesday, reaching new all-time highs. Investor demand for safe havens is a major driver of the rally amid the continued conflict in the Middle East and increased election uncertainty in the US. There, former President Donald Trump and Vice President Kamala Harris are running neck-and-neck in opinion polls and the increased chance of a Trump victory is seen as a threat to a stable geopolitical outlook. 

A further factor could be the focus on the BRICS trading bloc as the group kicks off its 2024 summit and its members – especially Russia – seek to find an alternative to the dominance of the US Dollar (USD), with a currency backed by Gold touted as a viable alternative.  

Limiting gains for the precious metal, however, is the global bond rout as investors see interest rates around the world falling at a slower pace than previously envisioned. 

This revision in outlook is the starkest in the US, where the US Federal Reserve (Fed) had previously been expected to be more aggressive in slashing interest rates, but is now on a much gentler downward trajectory. With interest rates and the US Dollar expected to remain relatively elevated, Gold loses some of its luster as a non-interest-paying asset. 

Gold backed by safe-haven flows 

Gold pushes ever higher as war wages on in the Middle East. Fighting continues between the Israeli army, Hamas and Hezbollah in Gaza and Lebanon despite efforts at a ceasefire. Investors are turning to safe-haven assets like Gold to lessen risk. 

The death of the Hamas leader Yahya Sinwar failed to provide the chink of light for opening negotiations that commentators had hoped. On his eleventh visit to the region, US Secretary of State Anthony Blinken seems no closer to securing a ceasefire despite headlines announcing progress, as was the case on his last visit. 

Indeed, according to news just breaking on Sky News, Blinken has had to take cover in a bunker after air-raid sirens went off over Tel Aviv on Wednesday.  Eye-witness reports also tell of how the Israeli military has begun attacking the ancient city of Tyre on Lebanon's Mediterranean coast, after issuing a warning to residents to evacuate their homes. 

Additionally, more – not less – conflict is expected as the Israelis prepare for an anticipated retaliatory attack on Iran. Their plans appeared to gain greater urgency on Monday after an Iranian drone penetrated Israeli air defense systems and exploded near Israeli Prime Minister Benjamin Netanyahu’s private residence over the weekend. 

Technical Analysis: Gold extends uptrend to new highs

Gold rallies ever higher, breaching above the $2,750 mark and round-number, psychological barrier. The yellow metal is in a steady uptrend on all time frames (short, medium and long) which given the technical dictum “the trend is your friend” favors more upside. After having reached the $2,750 target it is now likely to set its sights on the next big-figure level at $3,000. 

XAU/USD Daily Chart

The Relative Strength Index (RSI) is overbought, however, advising long-holders not to add to their positions because of the risk of a pullback. Should RSI close back in neutral territory, it will be a sign for long-holders to close their positions and open shorts as a deeper correction might be evolving. Support lies at $2,750, $2,700 (key round-number levels) and $2,685 (September high).  

Gold’s overall strong uptrend, however, suggests that any corrections will probably be short-lived, and afterward, the broader bull trend will resume.  

• The Pound Sterling rises against the majority of its peers as BoE’s Greene attributed soft volatile components to the decline in UK inflation in September.
• Investors await BoE Bailey’s speech and flash S&P Global/CIPS PMI data for October.
• The IMF has upwardly revised US growth projections for the current and the next year.

The Pound Sterling (GBP) outperforms the majority of its peers, except the US Dollar (USD) and the Canadian Dollar (CAD), on Wednesday. The British currency gains on Bank of England (BoE) Monetary Policy Committee member Megan Greene’s slightly hawkish interest rate guidance in a discussion with the Atlantic Council think-tank on the sidelines of the International Monetary Fund’s (IMF) meeting on Tuesday.

“I think it's most likely that monetary policy must continue to bear down to bring inflation to target,” Greene said. When asked whether the recent drop in United Kingdom (UK) inflation will influence her vote in the monetary policy in November, Greene said that a sharp fall in inflation came from volatile components. Therefore, she would not put too much weight on them. 

Investors should note that Greene was one of the four Monetary Policy Committee (MPC) members who voted to keep interest rates unchanged in August, in which the BoE reduced them by 25 basis points (bps) to 5%.

The next trigger for the Pound Sterling will be BoE Governor Andrew Bailey’s speech, which is scheduled at 18:45 GMT. Investors will pay close attention to get fresh cues about the likely monetary policy action in November and December. Meanwhile, traders have priced in another interest rate cut in November.

On the economic front, market participants will focus on the flash S&P Global/CIPS Purchasing Managers Index (PMI) data for October, which will be published on Thursday. The PMI report is expected to show that the overall business activity expanded at a modest pace.

Daily digest market movers: Pound Sterling weakens against US Dollar amid uncertainty over US elections

• The Pound Sterling stays below the psychological resistance of 1.3000 against the US Dollar in Wednesday’s London session. The GBP/USD pair faces pressure as the USD extends its upside on multiple tailwinds. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, jumps to near 104.35 and approaches the August high of 104.45.
• The appeal of the US Dollar as safe-haven has been strengthened by uncertainty over the United States (US) presidential elections on November 5. According to the Reuters/Ipsos polls, Vice President Kamala Harris leads a slight margin against former President Donald Trump.
• Market participants worry that the scenario of Trump winning the election will result in higher tariffs, which will have a significant impact on exports from the Eurozone, Canada, Mexico, China, and Japan, which are closed trading partners to the US.
• Also, firm expectations for a Federal Reserve’s (Fed) gradual policy-easing cycle in the remaining year and 2025 have also boosted the appeal of the US Dollar. Meanwhile, the IMF has raised US growth forecasts for this year to 2.8% compared to 2.6% projected in July. The agency has also raised Gross Domestic Product (GDP) projections for 2025 to 2.2% from prior expectations of 1.9%.
• For the current status of economic health, investors will focus on the Fed’s Beige Book, which summarizes economic conditions across 12 Fed districts and will be published at 18:00 GMT. 

Technical Analysis: Pound Sterling remains below 1.3000

The Pound Sterling stays below the psychological level of 1.3000 in European trading hours. The outlook of the GBP/USD pair is bearish as it remains below the 50-day Exponential Moving Average (EMA), which trades around 1.3080. 

The 14-day Relative Strength Index (RSI) slides near 40.00, signalling that a bearish momentum in underway.

Looking down, the upward-sloping trendline drawn from the April 22 low of 1.2300 will be a major support zone for Pound Sterling bulls near 1.2920. A downside move below the same would drag the pair toward the 200-day EMA, which trades around 1.2845. On the upside, the Cable will face resistance near the 20-day EMA around 1.3110.

The New Zealand Dollar (NZD) is expected to trade in a range between 0.6020 and 0.6060. In the longer run, price action indicates that 0.6005 is likely within reach; the next level to watch below 0.6005 is 0.5985, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The next level to watch below 0.6005 is 0.5985

24-HOUR VIEW: “Our view for NZD to ‘continue to decline’ yesterday was incorrect. Instead of declining, it rebounded to 0.6060 before closing at 0.6041 (+0.18%). The current price movements are likely part of a range trading phase. Today, we expect NZD to trade between 0.6020 and 0.6060.”

1-3 WEEKS VIEW: “We continue to hold the same view as yesterday (22 Oct, spot at 0.6030). As highlighted, ‘the recent price action indicates that 0.6005 is within reach.’ Looking ahead, the next level to watch below 0.6005 is 0.5985. On the upside, if NZD breaks above 0.6085, it would mean that the weakness that started early this month has stabilised.”

USD/JPY had rebounded above 151, with the JPY being highly sensitive to the sharp rise in US yields, DBS’ FX & Credit Strategist Chang Wei Liang notes.

High risks of MOF intervention

“There is a risk that excessive JPY weakness will lead the BOJ to consider bringing forward its next rate hike, although this will likely await the outcome of Japanese elections on 27 Oct, with PM Ishiba having promised a supplementary budget post elections.”

“The IMF estimates Japan’s nominal neutral rate at about 1.50% and expects the BOJ to gradually raise rates. USD/JPY short-term volatility is high, but there is scope for a retracement below 150 if BOJ is to sharpen its rate guidance, as it had previously noted the stronger impact of exchange rates on inflation.”

“Furthermore, excessive JPY volatility, with USD/JPY having risen by over 10 big figures from 140 in September, heighten risks of MOF intervention. Being short USD/JPY at around 152.50 may offer a good risk-reward.”

Silver prices (XAG/USD) fell on Wednesday, according to FXStreet data. Silver trades at $34.66 per troy ounce, down 0.57% from the $34.85 it cost on Tuesday.

Silver prices have increased by 45.64% 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 79.45 on Wednesday, up from 78.87 on Tuesday.

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The Australian Dollar (AUD) is expected to trade in a sideways range of 0.6660/0.6695. In the long run, rejuvenated momentum suggests AUD weakness remains intact; the level to monitor is 0.6620, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The level to monitor is 0.6620

24-HOUR VIEW: “After AUD dropped sharply two days ago, we expected it to ‘decline further’ yesterday. However, AUD rebounded, closing at 0.6683 (+0.36%). AUD appears to have entered a sideways trading phase. Today, we expect it to trade between 0.6660/0.6695.”

1-3 WEEKS VIEW: “AUD fell sharply two days ago. Yesterday (22 Oct, spot at 0.6715), we highlighted that ‘the rejuvenated momentum suggests that the AUD weakness from early this month remains intact.’ We added, ‘the level to monitor is 0.6620.’ We did not expect the subsequent rebound that reached a high of 0.6695. From here, if AUD were to break above 0.6705 (no change in ‘strong resistance’ level), it would mean that the weakness in AUD has stabilised.”

• AUD/JPY continues to rise amid Japan's political instability, which casts uncertainty over the Bank of Japan's policy direction.
• Recent polls show that Japan's Liberal Democratic Party-led coalition may lose its majority in Parliament.
• The Australian Dollar gained ground due to the rising hawkish mood surrounding the RBA.

AUD/JPY extends its gains for the third consecutive day, trading near 101.60 during European hours on Wednesday. The Japanese Yen (JPY) is under heavy selling pressure due to growing concerns over political instability, which further clouds the outlook for the Bank of Japan's (BoJ) monetary policy.

In Japan, recent polls indicate the ruling coalition led by the Liberal Democratic Party (LDP) may lose its majority in the general election this weekend, which could jeopardize Prime Minister Shigeru Ishiba's position or push the party to seek an additional coalition partner to remain in power, per Reuters.

In its October World Economic Outlook (WEO) report, the IMF downgraded Japan's economic growth forecast to 0.3% for this year, down from 1.7% in 2023. The projection was revised downward by 0.4% compared to the July outlook. Looking ahead, the IMF expects the economy to grow by 1.1% in 2025, driven by stronger private consumption as real wage growth picks up.

Furthermore, traders will likely observe the speech of the Bank of Japan Governor Kazuo Ueda at the IMF-hosted "Governors Talk" session scheduled later in the North American session.

The Australian Dollar (AUD) receives support as upbeat employment data has strengthened the hawkish sentiment surrounding the Reserve Bank of Australia (RBA). Further support for the Aussie Dollar came from China's recent rate cuts, as China remains Australia's largest trading partner.

On Monday, RBA Deputy Governor Andrew Hauser expressed some surprise at the robust employment growth. He pointed out that the labor participation rate is notably high and clarified that while the RBA relies on data for its decisions, it is not overly fixated on it.

• USD/CAD ticks higher amid an extension of the recent USD rally to a nearly three-month top.
• Bets for a larger BoC rate cut, softer Oil prices undermine the Loonie and also lend support.
• The technical setup favors bullish traders and supports prospects for further near-term gains.

The USD/CAD pair attracts some dip-buyers following the previous day's modest slide and sticks to its positive bias around the 1.3825 region through the first half of the European session on Wednesday. Spot prices remain within the striking distance of the highest level since August 6 touched earlier this week as traders keenly await the Bank of Canada (BoC) policy decision before positioning for the next leg of a directional move. 

Heading into the key central bank event risk, the recent US Dollar (USD) upswing to its highest level since early August, led by bets for a less aggressive policy easing by the Federal Reserve (Fed), continues to act as a tailwind for the USD/CAD pair. Apart from this, a downtick in Crude Oil prices is seen undermining the commodity-linked Loonie and offering additional support to the currency pair amid expectations for a larger BoC rate cut later today. 

From a technical perspective, this week's breakout and a daily close above the 1.3800 mark could be seen as a fresh trigger for bullish traders. This, along with the fact that oscillators on the daily chart are holding comfortably in positive territory, suggests that the path of least resistance for the USD/CAD pair is to the upside. That said, it will still be prudent to wait for a move beyond the monthly high, around the 1.3850 area, before positioning for further gains.

The subsequent move-up has the potential to lift spot prices beyond the 1.3875 intermediate hurdle, towards reclaiming the 1.3900 mark. The USD/CAD pair could eventually aim to challenge its highest level since October 2022, around the 1.3945 region touched last month. 

On the flip side, the 1.3800 round figure could offer some support ahead of last week's swing low, around the 1.3750-1.3745 area. A convincing break below might prompt technical selling and drag the USD/CAD pair further below the 1.3700 mark, towards testing the 100-day Simple Moving Average (SMA), near the 1.3665 region. This is followed by the 200-day SMA, around the 1.3625 zone, which if broken might shift the bias in favor of bearish traders.

USD/CAD daily chart

EUR/USD briefly printed below 1.0800 overnight. Markets could see the pair stabilise around current levels for a bit longer, but the chances of a sustainable rebound remain slim as the USD:EUR two-year swap rate gap is now at its widest since May (145bp) and it’s hard to pinpoint any clear driver for a retightening in the near term, ING’s FX Francesco Pesole notes.

Cable can still move to 1.28 by month-end

“One of the reasons that the gap will stay wide is that ECB speakers have followed a rather dovish script in post-meeting commentary. Even the most hawkish members like Austria’s Holzmann decided not to push back against market pricing for back-to-back ECB cuts into mid-2025, and President Christine Lagarde reiterated her generally dovish tone at a TV interview yesterday.”

“Today, the eurozone calendar includes consumer confidence figures for October, and a bunch of other ECB speakers – including Lagarde again and Chief Economist Lane. The policy communication however appears quite clear, and markets may start to overlook some of those comments. If PMI fails to surprisingly rebound, the ECB should keep cutting, and EUR short-term swap rates will still remain capped. Our call remains for EUR/USD at 1.07 before the US election.”

“Elsewhere in Europe, we continue to see downside risks for sterling ahead of speeches by Bank of England Governor Andrew Bailey today, tomorrow and Saturday, as well as some potential risk premium being built before the UK Budget announcement next week. Cable can still move to 1.28 by month-end.”

The DXY had firmed slightly above 104, but the US Dollar’s (USD) momentum could be tapering off already, DBS’ FX & Credit Strategist Chang Wei Liang notes.

USD momentum fades

“Re-repricing in US short-end rates looks done with less than two 25bps rate cuts priced over the next two FOMC meetings. Markets are also fully appreciating Trump’s presidential chances, given closely matched poll numbers in the key swing states.”

“On the long-end, US 10Y yields have already risen back to pre-Jackson Hole levels at 4.20%, which is remarkable given the start of Fed rate cuts in September, with more to come later.”

The Pound Sterling (GBP) could dip towards 1.2940 again before a more sustained rebound is likely. In the longer run, GBP must break and remain below 1.2940 before a resumption of weakness can be expected, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

GBP must break and remain below 1.2940 to dip further

24-HOUR VIEW: “On Monday, GBP fell sharply. Yesterday (Tuesday), when GBP was at 1.2980, we were of the view that it ‘is likely to continue to weaken, even though the 1.2940 level is expected to provide strong support.’ During NY trade, GBP fell to a low of 1.2945 before rebounding. It then closed largely unchanged at 1.2985 (+0.01%). Downward momentum has increased slightly, but there is a chance for GBP to dip towards 1.2940 again before a more sustained rebound is likely. GBP is unlikely to break clearly below 1.2940. On the upside, should GBP break above 1.3015 (minor resistance is at 1.3000), it would mean that the current mild downward pressure has faded.”

1-3 WEEKS VIEW: “We highlighted yesterday (22 Oct, spot at 1.2980) that GBP ‘must break and remain below 1.2940 before a resumption of weakness can be expected.’ We also highlighted that ‘The likelihood of GBP breaking clearly below 1.2940 will remain intact, provided that the ‘strong resistance’ level at 1.3060 is not breached in the next couple of days.’ Our view remains unchanged.”

The US Dollar (USD) continues to benefit from a wide range of supporting factors. US 10-year Treasury yields have risen by 15bp since the start of the week, the 2-year USD OIS is inching higher again with only 37bp of Fed easing now in the price, oil prices are rebounding and the proximity to a closely contested US election can continue to favour deleveraging and defensive repositioning, ING’s FX Francesco Pesole notes.

USD benefits from a wide range of supporting factors

“One of our key calls for the next two weeks is that implied 1M volatility in USD crosses has room to become increasingly expensive relative to historical volatility, following a path similar to the pre-election period in 2020 and 2016. Also, a potential dry-up in FX liquidity next week can lead to less liquid currencies (like NOK in G10) underperforming.”

“In the US, the data calendar remains light, with only MBA mortgage applications and home sales figures released today. Expect some potential market impact from the Fed’s Beige Book, which has grown in relevance lately. Four months ago, nine of 12 Fed banks reported growth, but by 4 September, only three did. This likely influenced the Fed’s September 50bp rate cut, with further weakness expected to prompt more easing.”

“On the Fedspeak front, we’ll hear from Bowman and Barkin today, with the former being arguably the most hawkish voice in the FOMC. We could see some mid-week loss of momentum for the dollar today, but the balance of risks remains skewed to the upside into the election.”

The Euro (EUR) is under mild downward pressure; it is likely to edge lower but is unlikely to break the major support at 1.0770. In the longer run, downward momentum has not improved much, but there is a chance for EUR to drop to 1.0770 before stabilisation can be expected, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Chance for EUR to drop to 1.0770

24-HOUR VIEW: “After EUR fell sharply two days ago, we indicated yesterday that ‘there is potential for EUR to decline further.’ However, we pointed out that ‘it remains to be seen whether 1.0770 is within reach today.’ We also pointed out that ‘there is another support level at 1.0800.’ Our view was not wrong, as EUR dropped to a low of 1.0792, closing at 1.0797 (-0.17%). There has been a slight increase in momentum. Today, we expect EUR to edge lower, but it does not appear to have enough momentum to break the major support at 1.0770. Resistance is at 1.0815; a breach of 1.0830 would indicate that the current mild downward pressure has faded.

1-3 WEEKS VIEW: “We turned negative in EUR early this month (see annotations in the chart below). After EUR dropped sharply two days ago, we indicated yesterday (22 Oct, spot at 1.0815) that ‘Despite the relatively sharp decline, downward momentum has not improved much.’ We also indicated that ‘there is a chance for EUR to drop to 1.0770 before stabilisation can be expected.’ We continue to hold the same view as long as 1.0870 (‘strong support’ level was at 1.0880 yesterday) is not breached. Looking ahead, if EUR breaks clearly below 1.0770, the next level to watch is a significant support at 1.0740.”

• The Mexican Peso is trading sideways ahead of key economic data for Mexico. 
• The latest IMF report maintained its lower GDP growth estimate for the country and suggests data in H2 will be weak. 
• USD/MXN describes a range below the key 20.00 hurdle but remains in a broader uptrend overall. 

The Mexican Peso (MXN) trades range bound in its key pairs on Wednesday, continuing the theme of the week so far. Uncertainty over the outcome of the US election on November 5 (a Trump win would be negative for the Peso), the general hit to emerging market assets due to the global sell-off in bonds amid a smoother downward trajectory of US interest rates, weak economic activity data and lower International Monetary Fund (IMF) growth forecasts for the Mexican economy, are amongst the major themes impacting the Peso and its counterparts.  

Mexican Peso vulnerable if IMF forecasts hold true

The Mexican Peso is ranging within a broad downtrend as multiple negative factors weigh. Lower projected economic growth is one of the key ones. 

The IMF released its October World Economic Outlook on Tuesday and maintained its 1.5% Gross Domestic Product (GDP) growth forecast for Mexico in 2024. This is well below Q2 GDP data, which showed a 2.1% rise in annualized growth in the quarter but is equal to Q1’s 1.5%. It would suggest that the next two quarters of growth in Mexico are likely to be substantially lower. 

Further, in 2025, the IMF expects Mexico to grow by only 1.3%, which is well below the Bank of Mexico’s (Banxico) 3.0% target. In 2026, the IMF expects growth of 2.1%. 

If the IMF forecasts are accurate, the lower growth will probably lead to a sharper disinflationary trend and encourage Banxico to cut interest rates more aggressively. Economists are already factoring in a 50 basis points (bps) (0.50%) of cuts by the end of 2024, bringing the bank’s main interest rate down to 10.00%. This, in turn, is likely to put downward pressure on the Peso, since lower interest rates attract less foreign capital inflows. 

Mexican Economic Activity data out on Tuesday may already have given investors a taste of what is to come after falling well below estimates. On a month-over-month basis, activity sank 0.3% in August, down from 0.6% in July and below the estimated decline of 0.1%. On an annual basis, Economic Activity expanded by 0.4%, beneath forecasts of 0.7%, and down from July’s 3.8% growth.

Mexican Retail Sales data for August is scheduled for release on Wednesday and is expected to show a 0.4% decline on an annual basis and a 0.2% rise monthly.  This is followed by inflation data out on Thursday, which will be significant for the Mexican Peso as it impacts on Banxico monetary policy decisions. 

Technical Analysis: USD/MXN remains range-bound within an uptrend

USD/MXN trades up and down with a mini range just below the 20.00 handle. However, it is in a medium and long-term trend, so once the consolidation ends, the pair will probably go higher. Given the principle in technical analysis that “the trend is your friend,” the odds favor more upside to come. 

USD/MXN 4-hour Chart 

The break above 19.83 (October 1 high) has confirmed a probable move up to the next target in the vicinity of the September 10 high at 20.13.

• EUR/GBP faces challenges as traders expect the ECB to deliver another rate cut in December.
• ECB policymakers have started discussing whether interest rates may need to fall below the neutral level.
• The BoE may deliver more rate cuts in November and December.

EUR/GBP remains subdued near 0.8310 during European trading hours on Wednesday, following losses in the previous session. The Euro is facing pressure as money markets have raised their expectations for further European Central Bank (ECB) rate cuts. This shift comes after improvements in inflation control but growing concerns about the Eurozone’s economic outlook.

The ECB has already cut its Deposit Facility Rate three times this year, with another reduction widely expected at the December meeting. Remarks from ECB President Christine Lagarde were seen as indicating a weaker economic outlook, prompting markets to anticipate a 25-basis point cut at each meeting through mid-2025.

According to sources familiar with the discussions, Reuters reported on Wednesday that European Central Bank (ECB) policymakers have begun debating whether interest rates will need to drop below the neutral level during the current easing cycle. One source noted, "I think neutral is not enough," implying that the ECB may aim for significantly lower rates in the coming months.

The Pound Sterling (GBP) encountered challenges following declining consumer and producer inflation rates, along with weak labor market data in the United Kingdom (UK). These conditions are driving expectations that the Bank of England (BoE) might introduce a 25 basis point rate cut in November, followed by another in December.

On Tuesday, BoE Governor Andrew Bailey emphasized the need for the UK central bank to strengthen its oversight of the less transparent non-banking sector. Speaking at a Bloomberg event in New York, Bailey remarked, "We are nearing a point where we must shift focus from rule-making to surveillance" to better monitor financial activities outside traditional banking.

• Bank of Canada (BoC) is expected to cut its policy rate by 50 bps.
• The Canadian Dollar remains on the defensive against the US Dollar.
• Headline inflation in Canada dropped below the bank’s 2% target.
• The BoC will also release its Monetary Policy Report (MPR).

There is broad anticipation that the Bank of Canada (BoC) will cut its policy rate for the fourth consecutive meeting on Wednesday. Unlike previous moves, there seems to be a consensus for a 50 basis point rate cut this time, taking the benchmark interest rate to 3.75%. 

Since the beginning of the year, the Canadian Dollar (CAD) has weakened against the US Dollar (USD), with USD/CAD reaching an almost two-year high near 1.3950 in early August. Following a period of quite a significant appreciation in August, CAD has since then embarked on a firm downward path that currently flirts with the mid-1.3800s against its North American counterpart.

In September, Canada's annual inflation rate, measured by the headline Consumer Price Index (CPI), broke below the central bank’s 2% target for the first time since the Covid-19 pandemic, showing prices rising by 1.6% over the last twelve months. The BoC's core CPI, despite rebounding marginally last month, remained well below the bank’s threshold.

It is worth noting that the BoC aims to maintain consumer prices around the midpoint of the 1%-3% range.

A dovish cut appears well on the horizon

Despite the anticipated rate cut, the central bank's overall stance is expected to lean towards the bearish side, particularly against the backdrop of declining inflation, further cooling of the labour market, and GDP running below the bank’s latest forecasts.

So far, swaps markets in Canada see around a 70% chance of a half-point rate reduction on Wednesday.

According to a BoC survey released on October 11, Canadian firms reported continued weak demand and slow sales growth, though they noted a marginal improvement in conditions during the third quarter. The survey also suggested that rate cuts could potentially provide a further boost to these conditions.

Following the rate cut on September 4, the Minutes published on September 18 revealed that the bank’s Governing Council was divided on the inflation outlook ahead of its decision to cut rates for the third consecutive time. The BoC stated that it was balancing the effects of two conflicting forces on inflation: the ongoing high costs of shelter and services and a slowing economy coupled with rising unemployment. 

According to the Minutes, council members expressed the view that if the economy and labour market did not improve as expected in response to lower borrowing costs, it could be necessary to reduce the policy rate more rapidly.

At his latest remarks on September 24, BoC Governor Tiff Macklem indicated that, given the bank’s ongoing progress in bringing inflation back towards the 2% target, further rate cuts are a reasonable expectation. Macklem emphasized the bank’s goal of keeping inflation near the middle of its 1%-3% control range. "We need to stick the landing," he said, adding that the bank is aiming for stronger economic growth to help absorb the remaining slack in the economy.

Previewing the BoC’s interest rate decision, analysts at Standard Chartered noted: “We now expect the Bank of Canada (BoC) to lower the policy rate by 50bps (instead of 25 bps) at both the October and December meetings, taking the year-end rate to 3.25% (3.75% prior). The September headline inflation undershoot and diminishing inflationary pressure from shelter prices are likely to open the door for faster easing. Falling inflation expectations and continued slack in the economy further bolster the case for 50bps moves.”

When will the BoC release its monetary policy decision, and how could it affect USD/CAD?

The Bank of Canada will announce its policy decision at 13:45 GMT on Wednesday, followed by a press conference from Governor Macklem at 14:30 GMT.

With no major surprises anticipated, the impact on the Canadian Dollar (CAD) is expected to stem more from the central bank’s messaging than the actual interest rate decision. 

Pablo Piovano, Senior Analyst at FXStreet, notes that USD/CAD has been in a strong upward trend since late September, with the pair hitting October tops near 1.3850 so far this week. The strong rebound came almost exclusively on the back of the robust recovery of the US Dollar (USD).

Pablo adds: "The immediate target emerges at the 2024 peak at 1.3946 recorded on August 5."

He concludes: "Occasional bearish attempts could prompt USD/CAD to retest the provisional 100-day SMA at 1.3664, ahead of the more significant 200-day SMA at 1.3622, all prior to the September bottom of 1.3418 seen on September 25.”

• USD/CHF rises as US Dollar advances amid higher Treasury yields.
• Fed’s Daly stated that the economy is evidently in a stronger position, with a significant decline in inflation.
• Lower Swiss inflation strengthens the likelihood of the SNB delivering another rate cut in December.

USD/CHF appreciates and trades around 0.8680 during the early European hours on Wednesday. This upside of the pair could be attributed to solid US Dollar (USD). Additionally, improved US Treasury yields also contributed support for the Greenback and underpinned the USD/CHF pair.

The US Dollar Index (DXY), which tracks the US Dollar against six major currencies, is trading near a two-month high at 104.30. Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.05% and 4.22%, respectively.

Recent indicators of economic strength and worries about a possible rebound in inflation in the United States (US) have reduced the likelihood of a substantial interest rate cut by the Federal Reserve in November. According to the CME FedWatch Tool, there is an 89% chance of a 25-basis-point rate cut, with no expectation for a more significant 50-basis-point reduction.

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.

Market participants expect another interest rate cut by the Swiss National Bank (SNB) at its upcoming December meeting. The continued slowdown in Swiss inflation strengthens the dovish sentiment surrounding the SNB. In September, the SNB reduced its key rate for the third time in a row by 0.25%, bringing it to 1%.

• EUR/USD falls further as several ECB policymakers said they expect the Deposit Facility Rate to fall below the neutral level at around 2% or 2.25%.
• ECB Lagarde said she is hopeful about inflation falling at a faster-than-expected pace.
• The uncertainty ahead of the US presidential election is expected to keep market sentiment on its toes.

EUR/USD slides slightly below 1.0800 in Wednesday’s European session. The major currency pair stays under pressure as the Euro’s (EUR) outlook has worsened due to the faster-than-expected decline in inflation and growing risks of a downturn in the Eurozone economy, which have prompted speculation for more interest-rate cuts by the European Central Bank (ECB).

The ECB has already reduced its Deposit Facility Rate three times this year and is widely anticipated to cut again in the December meeting. Therefore, traders start predicting the likely destination of ECB borrowing rates, a level that should allow to keep inflation under control and also spurt growth. 

A few ECB officials have recently debated over whether interest rates could be lowered below the so-called neutral rate to boost economic growth and diminish inflation risks, Reuters reported. This week, Lithuanian central bank governor and ECB Governing Council member Gediminas Šimkus discussed the risk of inflation remaining too low. "If the disinflation processes get entrenched it's possible that rates will be lower than the natural level," Šimkus said.  According to market experts, the neutral rate is around 2% or 2.25%.

On Tuesday, ECB President Christine Lagarde remained confident about inflation sustainably returning to the bank’s target of 2% in the course of 2025, sooner than previously expected, she said in an interview with Bloomberg at the sidelines of the International Monetary Fund (IMF) meeting. When asked about the monetary policy outlook, Lagarde said that the direction is clear but that the pace of further interest rate cuts will depend on the incoming economic data. 

Daily digest market movers: EUR/USD is under pressure due to multiple headwinds

• EUR/USD is also facing pressure from the US Dollar’s (USD) rally. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, extends its upside to 104.20 and aims to revisit the August high of 104.45. The Greenback has strengthened amid political uncertainty ahead of the US presidential election and firm expectations that the Federal Reserve’s (Fed) policy-easing cycle will be more gradual than previously expected.
• The sheer strength of the US Dollar can also be attributed to increasing market bets that former US President Donald Trump could win the election, which will be held in less than two weeks. However, the latest Reuters/Ipsos polls show that current Vice President Kamala Harris leads by a slight margin. Trump’s victory is expected to result in higher tariffs and lower taxes, which could force the Federal Reserve (Fed) to return to a restrictive policy stance.
• Meanwhile, markets expect the Fed to cut interest rates further by 50 basis points (bps) in the remaining year, suggesting that there will be two 25 bps rate cuts in November and December, according to the CME FedWatch tool. 
• The Fed is unlikely to repeat the jumbo rate cut move seen in September again this year as the latest Nonfarm Payrolls (NFP) data showed that labor demand has not slowed much. "Wage growth has slowed since the peak in 2022, but it is still stronger than at any point in the decade before the pandemic," analysts at UBS said.
• In Wednesday’s session, investors will pay close attention to the Fed’s Beige Book, which will be published at 18:00 GMT. Several Fed and ECB members, including President Lagarde, are set to speak.

Technical Analysis: EUR/USD declines toward 1.0750

EUR/USD tests region below 1.0800 in European trading hours. 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 the Double Top formation on a 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) dives below 30.00, indicating a strong bearish momentum. However, a recovery move remains on the cards as conditions turn oversold.

On the downside, the major could find support near the upward-sloping trendline at 1.0750, which is plotted from the October 3 low around 1.0450. Meanwhile, the 200-day EMA and the psychological figure of 1.1000 will be the key resistance for the pair.

Here is what you need to know on Wednesday, October 23:

The action in financial markets remain choppy early Wednesday following a relatively quiet Tuesday. The Bank of Canada (BoC) will announce monetary policy decisions later in the day. The US economic calendar will feature Existing Home Sales data for September and the Federal Reserve (Fed) will publish its Beige Book in the American session. Meanwhile, investors will keep a close eye on comments from major central bankers throughout the day.

Following Monday's rally, the US Dollar (USD) Index, which tracks the USD's valuation against a basket of six major currencies, registered small gains on Tuesday. The index holds steady above 104.00 in the European morning on Wednesday. Wall Street's main indexes closed little changed on Tuesday and US stock index futures trade marginally lower so far on the day.

EUR/USD edged lower on Tuesday and dropped below 1.0800 for the first time since early August. The pair stays in a consolidation phase near 1.0800 to start the European session on Wednesday. European Central Bank (ECB) President Christine Lagarde said on Tuesday that inflation numbers in the Eurozone are "relatively reassuring" but added that they can't jump to a conclusion that it's a done deal. Later in the day, Lagarde will speak on the European economic outlook at the 2024 Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG).

The BoC is forecast to lower the policy rate by 50 basis points to 3.75% from 4.25%. Following the rate decision, Governor Tiff Macklem will speak on the policy outlook and respond to questions from the press starting at 14:30 GMT. USD/CAD closed in the red and snapped a three-day winning streak on Tuesday. The pair fluctuates in a narrow channel above 1.3800 early Wednesday.

Gold gathered bullish momentum and gained more than 1% on Tuesday. XAU/USD continued to stretch higher during the Asian trading hours on Wednesday and reached a new record-high above $2,750.

USD/JPY extends its uptrend on Wednesday and trades at its highest level since late July above 152.00. Bank of Japan Governor Kazuo Ueda will speak at the IMF-hosted "Governors Talk" at 10.30 GMT.

GBP/USD recovered slightly but failed to stabilize above 1.3000 on Tuesday. The pair struggles to make a decisive move in either direction early Tuesday and continues to move sideways below 1.3000.

• GBP/USD may face challenges as the BoE is widely expected to deliver a 25 basis point rate cut in November.
• BoE Deputy Governor Sarah Breeden may participate in a panel discussion on financial regulation in Washington on Wednesday.
• Fed’s Daly stated that the economy is evidently in a stronger position, with a significant decline in inflation.

The GBP/USD pair edges higher toward 1.3000 during Asian trading on Wednesday. However, the Pound Sterling (GBP) faced headwinds due to declining consumer and producer inflation figures, coupled with weak labor market data in the United Kingdom (UK). These factors are fueling expectations that the Bank of England (BoE) may implement a 25 basis point rate cut in November, followed by another quarter-point cut in December.

On Tuesday, BoE Governor Andrew Bailey highlighted the need for the UK central bank to enhance its ability to monitor developments in the less transparent non-banking system. Speaking at a Bloomberg event in New York, Bailey noted, "We are approaching a point where we need to pivot from rule-making to surveillance" to better track financial activities outside the traditional banking sector.

Furthermore, BoE Deputy Governor Sarah Breeden is scheduled to participate in a panel discussion on financial regulation, organized by the Institute of International Finance (IIF) in Washington on Wednesday.

The US Dollar (USD) gains ground as Treasury yields rise due to the increasing likelihood of nominal rate cuts by the Federal Reserve (Fed). The US Dollar Index (DXY), which tracks the US Dollar against six major currencies, is trading near a two-month high at 104.20. Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.05% and 4.23%, respectively.

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.

FX option expiries for Oct 23 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

• 1.0800 610m
• 1.0850 3.9b
• 1.0900 1.3b
• 1.0905 531m
• 1.1000 598m
• 1.1025 1b

USD/JPY: USD amounts                     

• 146.75 645m
• 147.05 667m
• 148.75 500m
• 149.00 1b

USD/CHF: USD amounts     

• 0.8550 488m

AUD/USD: AUD amounts

• 0.6630 612m
• 0.6655 564m
• 0.6670 1.1b
• 0.6675 581m

USD/CAD: USD amounts       

• 1.3755 430m
• 1.3760 418m

NZD/USD: NZD amounts

• 0.6000 481m
• 0.6100 489m

• NZD/USD struggles to lure buyers amid the underlying bullish tone surrounding the USD.
• Bets for smaller Fed rate cuts and elevated US bond yields continue to boost the buck.
• A weaker risk tone also undermines demand for the Kiwi amid dovish RBNZ expectations.

The NZD/USD pair fails to capitalize on the previous day's modest recovery gains and seesaws between tepid gains/minor losses through the Asian session on Wednesday. Spot prices currently trade around the 0.6035-0.6040 region and remain close to over a one-month low touched on Tuesday amid a bullish US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, prolongs its monthly uptrend and climbs to its highest level since early August in the wake of bets for a less aggressive policy easing by the Federal Reserve (Fed). In fact, the markets have fully priced out the possibility of another jumbo Fed rate cut in November as the recent US macro data suggested that the economy remains on strong footing. 

Apart from this, the risk-off impulse, persistent geopolitical risks stemming from the ongoing conflicts in the Middle East and the US political uncertainty turn out to be other factors underpinning the safe-haven buck. The New Zealand Dollar (NZD), on the other hand, is pressured by expectations that the Reserve Bank of New Zealand (RBNZ) will cut rates aggressively. This further contributes to capping the NZD/USD pair.

From a technical perspective, the recent breakdown below the 200-day Simple Moving Average (SMA) and the lack of buying interest suggest that the path of least resistance for the NZD/USD pair is to the downside. Hence, any attempted recovery move is more likely to attract fresh sellers and remain capped. Traders now look to the US Existing Home Sales data and Richmond Fed President Thomas Barkin's speech for a fresh impetus.

Citing sources with knowledge of the matter, Reuters reported on Wednesday that the “European Central Bank (ECB) policymakers are starting to debate whether rates will have to go below neutral level in current easing cycle.”

One source said, "I think neutral is not enough", suggesting that the ECB aiming for lower rates by much more in the coming months.

Market reaction

At the time of writing, EUR/USD is trading unfazed near 1.0800, posting small gains on the day.

• Silver price holds position near a 12-year high of $34.87, recorded on Tuesday.
• The demand for safe-haven Silver rises amid escalating tensions in the Middle East.
• The tight situation in the upcoming US election has further heightened demand for safe-haven assets.

Silver price (XAG/USD) halts its six-day winning streak, trading around $34.87 per troy ounce, the highest level not seen since October 2012, during Asian trading hours on Wednesday. The outlook for Silver is bullish, driven by safe-haven demand amid escalating tensions in the Middle East.

On Tuesday, Israel confirmed the death of Hashem Safieddine, the successor to the late Hezbollah leader Hassan Nasrallah, who was killed in an Israeli operation last month. The Israeli military stated that Safieddine was killed in a strike conducted three weeks ago in the southern suburbs of Beirut, according to Reuters.

Additionally, US Secretary of State Antony Blinken conveyed to Israeli Prime Minister Benjamin Netanyahu on Tuesday that Israel's efforts to facilitate increased humanitarian aid into Gaza have been inadequate. Blinken urged Israel to take further action to improve the situation.

The upcoming US election has further heightened demand for safe-haven assets like Silver. A recent Reuters/Ipsos poll indicates that Democratic Vice President Kamala Harris holds a narrow lead of 46% to 43% over former Republican President Donald Trump.

This lead, recorded in a six-day poll that closed on Monday, is only slightly up from her 45% to 42% advantage in a poll conducted a week earlier, highlighting the tightness of the race with just two weeks remaining before the November 5 election.

Additionally, demand for non-yielding Silver has been boosted by monetary easing measures from major central banks. The People's Bank of China (PBoC) and the European Central Bank (ECB) have both recently reduced key lending rates, contributing to increased interest in Silver.

Furthermore, the Bank of Canada (BoC) is expected to announce a significant interest rate cut of 50 basis points during its upcoming monetary policy meeting on Wednesday. In contrast, expectations for aggressive rate cuts by the Federal Reserve have decreased following a series of positive economic data.

• Gold price ticks lower, though it lacks follow-through and remains close to the record high.
• Bets for smaller Fed rate cuts, elevated US bond yields and the USD weigh on the XAU/USD. 
• Geopolitical risks, US political uncertainty and easing monetary policy regime offer support.

Gold price (XAU/USD) ticks lower during the Asian session on Wednesday, albeit lacking follow-through and remains close to the record peak touched the previous day. The US Dollar (USD) climbed to its highest level since early August amid the prospects of smaller interest rate cuts by the Federal Reserve (Fed), which triggered the recent upswing in the US Treasury bond yields to a three-month top. This, in turn, prompts some profit-taking around the non-yielding yellow metal amid slightly overbought conditions on the daily chart. 

Any meaningful corrective decline for the Gold price, however, seems elusive in the wake of geopolitical risks stemming from the ongoing conflicts in the Middle East and the US political uncertainty. Furthermore, the prevalent risk-off environment and the expected interest rate cuts by major central banks should contribute to limiting the downside for the XAU/USD. Hence, it will be prudent to wait for strong follow-through selling before confirming that the precious metal has topped out in the near-term and positioning for deeper losses.

Daily Digest Market Movers: Gold price bulls take a brief pause amid rising US bond yields and bullish USD

• The US Dollar rally remains uninterrupted amid firming expectations for a less aggressive policy easing by the Federal Reserve and exerts some downward pressure on the Gold price on Wednesday.
• According to CME Group's FedWatch Tool, traders pricing in a nearly 90% chance that the US central bank will lower borrowing costs by 25 basis points at the next monetary policy meeting in November.
• Moreover, rising odds of former President Donald Trump winning the November 5 US Presidential election next month fuel speculations about the launch of potentially inflation-generating tariffs.
• This leads to an extended selloff in the US bond market and pushes the yields to a multi-month peak, underpinning the buck and contributing to driving flows away from the non-yielding yellow metal.
• The yield on the benchmark 10-year US government bond hovered near 4.2% after topping that level on Tuesday for the first time since July amid renewed concerns about a resurgence in inflation.
• Hezbollah fired rockets at two bases near Tel Aviv and a naval base west of Haifa as the market await the impending Israeli strike against Iran in retaliation to the latter's ballistic missile attack on October 1.
• Meanwhile, diplomatic efforts, so far, have failed to bring an end to the year-long conflict in the Middle East, which weighs on investors' sentiment and should offer support to the safe-haven XAU/USD.
• Traders now look forward to the release of the US Existing Home Sales data for short-term impetus ahead of a scheduled speech by Richmond Fed President Thomas Barkin later during the US session.

Technical Outlook: Gold price could target dynamic ascending trend-channel resistance near the $2,767 area

From a technical perspective, the XAU/USD faced rejection near the $2,750 area, which is followed by the top boundary of a two-week-old ascending channel, around the $2,767 region. The said barrier should act as a key pivotal point, which if cleared decisively should pave the way for an extension of the recent well-established uptrend. The subsequent move up might then lift the Gold price to the $2,800 round-figure mark.

On the flip side, any subsequent slide is likely to find decent support near the $2,725 area, representing the lower end of the aforementioned trend channel. A convincing break below the latter might prompt some technical selling and drag the Gold price to the $2,700 mark en route to the $2,680-2,675 support. The latter is near the 100-period Simple Moving Average (SMA) on the 4-hour charts and should act as a strong base.

Gold prices remained broadly unchanged in India on Wednesday, according to data compiled by FXStreet.

The price for Gold stood at 7,434.28 Indian Rupees (INR) per gram, broadly stable compared with the INR 7,430.82 it cost on Tuesday.

The price for Gold was broadly steady at INR 86,712.02 per tola from INR 86,671.66 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 receives downward pressure from sustained outflows in Indian equities.
• Indian PM Modi is set to meet Chinese President Xi Jinping on the second day of the BRICS Summit.
• The US Dollar appreciates as Treasury yields continue to rise amid increased risk aversion.

The Indian Rupee (INR) remains relatively stable against the US Dollar (USD) on Wednesday. However, traders noted that potential interventions by the Reserve Bank of India (RBI) limited the upward movement of the USD/INR pair.

The Rupee receives downward pressure from outflows, as foreign institutional investors have sold around $10 billion in Indian stocks so far this October, exceeding the previous record monthly outflow of $8.35 billion set in March 2020, according to a Reuters report.

Indian Prime Minister Narendra Modi and Russian President Vladimir Putin on Tuesday held a meeting on the sidelines of the 16th BRICS Summit in Kazan. During their discussion, Modi expressed his desire for peace in Ukraine and conveyed that New Delhi is prepared to assist in reaching a truce to resolve Europe's deadliest conflict. Modi is also scheduled to meet Chinese President Xi Jinping on Wednesday.

Daily Digest Market Movers: Indian Rupee faces challenges due to outflows from domestic equities

• The US Dollar appreciates as Treasury yields rise amid rising odds of nominal rate cuts by the Federal Reserve (Fed). Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.04% and 4.21%, respectively.
• According to the CME FedWatch Tool, there is a 91% probability of a 25-basis-point rate cut, with no expectation of a larger 50-basis-point cut.
• 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.
• 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.
• Federal Reserve Bank of Minneapolis President Neel Kashkari highlighted on Monday 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 Reserve Bank of India stated in its October bulletin that aggregate demand in India is expected to rebound from the temporary slowdown observed in the second quarter, driven by a surge in festive demand and an increase in consumer confidence.

Technical Analysis: USD/INR maintains position above 84.00, nine-day EMA

The USD/INR pair continues to trade above 84.00 on Wednesday. A review of the daily chart shows that the pair is consolidating within an ascending channel pattern, indicating a bullish trend. The 14-day Relative Strength Index (RSI) is also above the 50 mark, reinforcing the current bullish momentum.

In terms of resistance, the pair may encounter a challenge at its all-time high of 84.14, achieved on August 5, followed by the upper boundary of the ascending channel near 84.20.

On the support side, immediate backing is found at the nine-day Exponential Moving Average (EMA) around the 84.02 level, which coincides with the lower boundary of the ascending channel close to the psychological level of 84.00.

USD/INR: Daily Chart

• WTI holds steady amid hopes for a demand recovery in China and Middle East tensions.
• A larger-than-expected rise in US crude stock caps the commodity amid a bullish USD.
• Traders now look forward to the official US inventory data for short-term opportunities.

West Texas Intermediate (WTI) US Crude Oil prices trade with a positive bias for the third successive day on Wednesday and placed around mid-$71.00s during the Asian session. The commodity remains close to over a one-week high touched on Tuesday amid hopes for improving demand from China and geopolitical risks stemming from the ongoing conflicts in the Middle East. 

Investors remain hopeful that China's massive stimulus measures announced recently will ignite a lasting recovery in the world's second-largest economy and boost fuel consumption in the world's largest crude-importing nation. Moreover, concerns that a further escalation in the Middle East conflict could impact supply in the key oil-producing region and tighten market balances in the months ahead. This turns out to be key factors lending support to Crude Oil prices. 

Meanwhile, industry data published by the American Petroleum Institute (API) on Tuesday US crude stocks rose more-than-expected, by 1.64 million barrels last week. Apart from this, the ongoing US Dollar (USD) rally to its highest level since early August, bolstered by bets for smaller interest rate cuts by the Federal Reserve (Fed), is holding back bullish traders from placing fresh bets and keeping a lid on any further appreciating move for Crude Oil prices. 

Market participants now look forward to the Official US government oil inventory data for a fresh impetus later this Wednesday. Apart from this, fresh geopolitical developments and the USD price dynamics should contribute to producing short-term trading opportunities around Crude Oil prices.

• The Japanese Yen continues losing ground amid the uncertainty over BoJ’s rate-hike plans.
• The recent intervention warnings and the risk-off mood do little to lend support to the JPY. 
• An extension of the recent USD rally pushes the USD/JPY pair to a nearly three-month high.

The Japanese Yen (JPY) remains on the back foot against its American counterpart and slides to a fresh low since July 31, around the 151.75 region during the Asian session on Wednesday. The uncertainty over the Bank of Japan’s (BoJ) ability to hike interest rates further this year has been a key factor behind the recent JPY downfall since the beginning of this month. This prompted Japanese officials to make verbal warnings on potential government intervention, though it did little to provide respite to the JPY bulls. Even the risk-off mood and Middle East tensions fail to offer any support to the safe-haven JPY. 

Meanwhile, the recent upswing in the US Treasury bond yields to a three-month high supports prospects for a further near-term depreciating move for the lower-yielding JPY. Furthermore, the ongoing US Dollar (USD) rally to its highest level since early August, bolstered by bets that the Federal Reserve (Fed) will cut rates at a slower pace, suggests that the path of least resistance for the USD/JPY pair remains to the upside. Traders, however, might refrain from placing aggressive bets and opt to wait for the release of Tokyo consumer inflation data on Friday for fresh cues about the BoJ's rate-hike plans. 

Daily Digest Market Movers: Japanese Yen remains depressed amid doubts over further BoJ rate-hikes this year

• The Japanese Yen touched the weakest level in almost three months against its American counterpart amid doubts over the Bank of Japan's rate-hike plans.
• The JPY bears seem unaffected by the recent verbal interventions by Japanese authorities, following a slide below the key 150.00 psychological mark. 
• The prospects of slower rate cuts by the Federal Reserve and bigger fiscal deficits after the US Presidential election led to a selloff in the bond market.
• The yield on the benchmark 10-year US government bond rises to levels last seen in July and lifts the US Dollar to its highest level since early August.
• San Francisco Fed President Mary Daly noted that the economy is in a better place, inflation has fallen and the labor market has returned to a more sustainable path. 
• Odds have swung in favor of former President Donald Trump winning the US election next month, fueling speculations about inflation-generating tariffs. 
• As markets look for the impending strike by Israel against Iran, Hezbollah fired rockets at two bases near Tel Aviv and a naval base west of Haifa on Tuesday.
• Diplomatic efforts, so far, have failed to bring an end to the year-long conflict in the Middle East, tempering investors' appetite for perceived riskier assets.
• Traders now look to the release of the US Existing Home Sales for some impetus, though the focus remains on Tokyo consumer inflation data due on Friday.
• The crucial report will play a key role in influencing the JPY ahead of Japan's general election on October 27 and the BoJ policy meeting on October 31.

Technical Outlook: USD/JPY seems poised to prolong its appreciating move, 100-day SMA breakout in play

From a technical perspective, the overnight breakout above the 100-day Simple Moving Average (SMA) was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in positive territory and support prospects for additional gains towards the 152.00 mark. Some follow-through buying should pave the way for an extension of the recent well-established uptrend witnessed over the past month or so. That said,

That said, the Relative Strength Index (RSI) on the daily chart has moved on the verge of breaking into overbought territory and warrants some caution for aggressive bullish traders. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for any further appreciation.

On the flip side, any meaningful corrective slide now seems to find some support near the 151.20-151.15 region ahead of the 151.00 mark. A further decline could be seen as a buying opportunity, which, in turn, should help limit the downside for the USD/JPY pair near the 150.60 area. The latter should act as a key pivotal point, below which spot prices could accelerate the fall towards the 150.00 psychological mark.

• USD/CAD remains steady as traders adopt caution ahead of the BoC interest rate decision.
• Traders expect the Bank of Canada to deliver a substantial 50 basis point rate cut in October.
• The US Dollar gains ground as Treasury yields rise amid rising odds of nominal rate cuts by the Fed.

The USD/CAD pair moves sideways, trading around 1.3820 during the Asian session on Wednesday, as traders await the Bank of Canada (BoC) interest rate decision later in the North American session. Market expectations are leaning toward a more substantial 50 basis point rate cut from the BoC.

This potential rate cut would mark the third consecutive rate cut and the first of this magnitude, prompted by decreasing price pressures, along with a significant decline in labor growth and household spending. Consumer inflation fell to 1.6% in September, the lowest level in over three years, reflecting the second consecutive month of price growth within the Bank of Canada's 2% target.

However, TD Securities stated in its analysis, "We expect the Bank of Canada (BoC) to cut rates by 25 basis points to 4.00% in October, as we do not believe larger cuts are necessary to maintain 2% inflation. Additionally, we do not anticipate that market pricing will heavily influence the Bank's decision."

However, the downside of the commodity-linked Canadian Dollar (CAD) could be mitigated due to higher crude Oil prices, as Canada is the largest Oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price extends its gains for the third successive session, trading around $71.40 per barrel at the time of writing.

The US Dollar (USD) strengthened as rising Treasury yields amid rising odds of nominal rate cuts by the Federal Reserve (Fed). The US Dollar Index (DXY), which tracks the USD against six major currencies, is trading near a two-month high at 104.20. Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.04% and 4.21%, respectively.

Recent signs of economic resilience and concerns about a potential resurgence of inflation have diminished the chances of a significant rate cut by the Federal Reserve in November. According to the CME FedWatch Tool, there is a 91% probability of a 25-basis-point rate cut, with no expectation of a larger 50-basis-point cut.

• The Australian Dollar loses ground as US Dollar appreciates amid higher Treasury yields.
• The Aussie Dollar may limit its downside due to the hawkish mood surrounding the RBA.
• The US Dollar receives support from rising odds of a nominal rate cut by the Fed in November.

The Australian Dollar (AUD) retraces its recent gains on Wednesday. The AUD/USD pair faces pressure as the US Dollar (USD) strengthens with rising Treasury yields. Market risk aversion has increased due to the growing likelihood of Donald Trump winning the presidency, adding to the selling pressure on US Treasury bonds.

The downside for the AUD could be restrained due to hawkish sentiment around the Reserve Bank of Australia (RBA), bolstered by the positive employment data. Further support for the Aussie Dollar came from China's recent rate cuts, as China remains Australia's largest trading partner.

The US Dollar gains ground as recent signs of economic resilience and concerns about a potential resurgence of inflation have diminished the chances of a significant rate cut by the Federal Reserve in November.

According to the CME FedWatch Tool, there is a 91% probability of a 25-basis-point rate cut, with no expectation of a larger 50-basis-point cut.

Daily Digest Market Movers: Australian Dollar loses ground due to increased risk aversion

• 2-year and 10-year yields on US Treasury bonds stand at 4.04% and 4.21%, respectively, at the time of writing.
• 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.
• San Francisco Fed President Mary Daly supported further easing, stating she sees no reason to stop lowering rates. In contrast, Kansas City Fed President Jeffrey Schmid adopted a more cautious approach, favoring restraint in large rate cuts and emphasizing that the labor market is undergoing normalization rather than showing signs of deterioration.
• On Monday, RBA Deputy Governor Andrew Hauser addressed the CBA 2024 Global Markets Conference in Sydney, expressing slight surprise at the strength of employment growth. Hauser noted that the labor participation rate is remarkably high and emphasized that while the RBA is data-dependent, it is not data-obsessed.
• 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%, 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 falls toward 0.6650, six-week lows

The AUD/USD pair trades around 0.6670 on Wednesday, with technical analysis of the daily chart pointing to a short-term bearish outlook as the pair remains below the nine-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) is below 50, further supporting the bearish sentiment.

On the downside, the AUD/USD pair could test its six-week low of 0.6622, last seen on September 11. The next key support is at the psychological level of 0.6600.

Resistance is expected at the nine-day EMA at 0.6698, followed by the 50-day EMA at 0.6733. A break above these levels could pave the way for a move toward the psychological resistance of 0.6800.

AUD/USD: Daily Chart

On Wednesday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1245, as compared to the previous day's fix of 7.1223 and 7.1262 Reuters estimates.

Federal Reserve Bank of San Francisco President Mary Daly, in a post on social media platform X, said that the economy is clearly in a better place, inflation has fallen substantially and the labor market has returned to a more sustainable path. 

Additional comments:

Market Reaction:

The remarks do little to provide any meaningful impetus to the US Dollar (USD), which stands firm near its highest level since early August amid bets for a less aggressive policy easing by the Federal Reserve (Fed).