EUR/USD Price Analysis: Further gains on the cards above 0.9900

• EUR/USD extends the decline to the vicinity of 0.9900.
• The multi-month support line near 0.9900 holds the downside.

EUR/USD comes under further pressure and trades closer to the 0.9900 neighbourhood on Monday.

The 0.9900 region, where the 8-month support line and the 55-day SMA converge, emerges as a quite decent contention zone for the time being. While above this region, the pair could attempt another visit to the October top near 1.0100 (October 27).

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0495.

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Gold Price Forecast: XAUUSD pressured as core PCE jumps, justifying further Fed action

• Gold price records a fresh three-day low spurred by a strong US Dollar.
• The Fed’s preferred gauge for inflation, the Core PCE, smashed estimates, justifying additional action.
•  US Treasury bond yields jumped, with the 10-year eyeing to recoup the 4% threshold.

Gold price slides and extends its losses below $1650 due to stubbornly high US inflation reported namely the Core Personal Consumption Expenditures (PCE), the Federal Reserve’s favorite gauge of inflation, which increased more than estimates, bolstering the US Dollar. Therefore, the XAUUSD is trading at $1641.62, diving 1.23%, eyeing the weekly lows of around $1638.

The Fed’s gauge of inflation justifies additional tightening

On Friday, the US Commerce Department revealed that September’s US inflation, as measured by the Core PCE, which strips volatile items like food and energy, jumped 0.5% MoM, higher than the previous reading, while annually based, escalated by 5.1%, above 4.9% forecasts by street’s analysts. In a separate report, the Employment Cost Index (ECI), an indicator used by the Fed in addressing inflation on wages, increased by 1.2% in the July-September period, as reported by the Department of Labor.

Given the backdrop, the so-called Fed pivot narrative could be tossed away as inflation remains stubbornly high and salaries are rising, despite the Federal Reserve’s effort to tame inflation.

Of late, additional US economic data was reported, with the University of Michigan (UoM) Consumer Sentiment unchanged at 59.9. Consumer’s inflation expectations for the 1-year horizon easied from 5.1% to 5%, and for a 5-years and beyond, were unchanged at 2.9%.

US Dollar bolstered on PCE data, Federal Reserve meeting eyed

After the data was released, the XAU remained on the defensive, as the reasons above will justify further Fed tightening. The US Dollar Index, a measure of the buck’s value against six currencies, is up 0.20%, at 110.78, while US Treasury yields, namely the 10-year benchmark rate, recover five bps up at 3.973%.

In the meantime, Wall Street holds to gains amidst a decent earnings season, keeping US equities in the green.

Now market participants turn to the next week’s Federal Reserve Open Market Committee (FOMC), in which most analysts expect the Fed to hike rates by 75 bps, as reported by the CME FedWatch Tool, with odds at an 84.5% chance. However, December’s meeting is split between 50 or 75 bps, with the majority of the investors

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EUR/USD Price Analysis: Next on the upside comes 1.0100

• EUR/USD comes under renewed downside pressure well below parity.
• The resumption of the bid bias targets the October top near 1.0100.

EUR/USD extends the corrective downside to the 0.9930/25 band on Friday.

In case bulls regain the upper hand, the surpass of the 1.0100 zone could spark a more serious recovery in the short-term horizon. That said, the immediate barrier is now expected at the September top at 1.0197 (September 12) ahead of the August peak at 1.0368 (August 10).

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0502.

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GBP/USD could now test the 1.1760 level – UOB

GBP/USD remains firm and could extend the upside momentum to the 1.1760 region in the next weeks, suggest Market Strategist at UOB Group Quek Ser Leang and Economist Lee Sue Ann.

Key Quotes

24-hour view: “While we expected GBP to strengthen yesterday, we were of the view ‘1.1600 is unlikely to come into view for now’. In other words, we did not expect the strong surge that sent GBP to a high of 1.1639. Upward momentum is still strong and GBP is likely to rise further, albeit likely at a slower pace. Resistance levels are at 1.1700 and 1.1760. The latter level is unlikely to be challenged today. Support is at 1.1590 but only a break of 1.1540 would indicate that GBP is not strengthening further.”

Next 1-3 weeks: “When GBP was trading at 1.1300 two days ago (25 Oct), we noted that it is mildly supported and could edge higher. After GBP soared, we highlighted yesterday (26 Oct, spot at 1.1460) that the strong boost in momentum is likely to lead to further strength. We indicated that the next resistance is at 1.1600. GBP took out 1.1600 in London trade yesterday and surged to a high of 1.1639. The price action suggests GBP is still strong and is likely to strengthen further. The next level to monitor is at 1.1760. The GBP strength is intact as long as it does not break the ‘strong support’ at 1.1440 (level was at 1.1310 yesterday).”

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US: International trade deficit widens to $92.2 billion in September

• International trade deficit of the US widened in September.
• US Dollar Index stays deep in negative territory but holds above 110.00. 

The data published by the US Census Bureau showed on Wednesday that the US international trade deficit widened by $4.9 billion to $92.2 billion in September from $87.3 billion in August.

"Exports of goods for September were $177.6 billion, $2.8 billion less than August exports," the publication further revealed. "Imports of goods for September were $269.8 billion, $2.2 billion more than August imports."

Market reaction

The US Dollar Index recovered slightly from multi-week lows it touched earlier in the day and was last seen losing 0.45% on the day at 110.38.

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 EUR/JPY Price Analysis: Room for extra upside near term

• EUR/JPY adds to Thursday’s gains and prints new highs.
• Further upside could target the 149.80 region in the short term.

EUR/JPY extends the optimism seen in the second half of the week and advances to new cycle highs around 147.60 on Friday.

Considering the current price action in the cross, the door still looks open to extra upside. That said, the immediate target now emerges at the December 2014 high at 149.78 (December 8).

In the short term the upside momentum is expected to persist while above the October lows near 141.00.

In the longer run, while above the key 200-day SMA at 136.85, the constructive outlook for the cross should remain unchanged.

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GBP/USD remains vulnerable, though volatility will drift lower

GBP/USD is on the back foot around 1.1200 as the UK political drama deepens. The British pound remains vulnerable as market pricing for rate hikes looks excessive.

UK political soap opera continues

“The UK political soap opera continues, but Jeremy Hunt’s appointment as Chancellor has separated the politics from economic policy.”

“Ignoring the noise in Westminster, we are left with a dramatic U-turn in fiscal policy, which is now tight enough to harden the economic landing and make the 5.2% that is priced-in for UK rates in 12 months’ time look excessive, outright and relative to the 4.9% priced in for the Fed, or the 3.1% priced for the ECB. This leaves sterling vulnerable, even from here, though surely volatility will drift lower.”

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 USD Index Price Analysis: Further upside seen above 114.00

• DXY reclaims part of the ground lost and advances to 2-day highs.
• The surpass of the 114.00 region could pave the way for extra gains.

DXY sets aside two daily pullbacks in a row and extends further the recent breakout of the 112.00 barrier on Wednesday.

So far, the index looks poised to keep navigating within a 112.00-114.00 range at least until the next FOMC event. In case bulls break above the 114.00 region, gains could then accelerate to the 2022 peak near 114.80.

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 8-month support line near 108.10.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 103.52.

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USD Index Price Analysis: No changes to the consolidative theme

DXY attempts a mild rebound after bottoming out near 111.80.

Further range bound remains on the cards for the time being.

DXY bounces off multi-session lows in the 111.80/75 band on Tuesday.

So far, the index looks poised to keep navigating within a 112.00-114.00 range at least until the next FOMC event.

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 8-month support line near 108.00.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 103.43.

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GBP/USD to tick down but unlikely to dive below the 1.05-1.07 support zone – Standard Chartered

How likely is it for GBP/USD to break below parity? Economists at Standard Chartered expect cable to edge lower but remain above the 1.0500-1.0700 area.

GBP/USD could see a retest of 1.14 and even 1.16 in the near-term

“While upward momentum could see a retest of 1.14 and even 1.16 over the next few days, we expect cable to edge lower in the coming weeks, with 1.0700 and 1.0500 as key near-term supports.”

“Disappointment on potential rollback or budget proposals could raise the risk of a test of parity, but we believe GBP/USD may struggle to break below the 1.0500-1.0700 region where it should stabilise.”

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EUR/USD Price Analysis: Rising bets for a drop to 0.9630

EUR/USD fades part of the post-CPI sharp upside on Friday.

Next on the downside now comes the weekly low near 0.9630.

EUR/USD gives aways most of its recent advance to the area just above the 0.9800 mark at the end of the week.

The continuation of the pullback appears on the cards and carries the potential to challenge the recent weekly low at 0.9631 (October 13) in the short-term horizon.

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0576.

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US: Annual PPI declines to 8.5% in September vs. 8.4% expected

Annual PPI in the US declined modestly in September.

US Dollar Index stays in positive territory above 113.00 after the data.

The Producer Price Index (PPI) for final demand in the US declined to 8.5% on a yearly basis in September from 8.7% in August, the data published by the US Bureau of Labor Statistics revealed on Wednesday. This print came in slightly higher than the market expectation of 8.4%.

The annual Core PPI edged lower to 7.2% from 7.3%, compared to analysts' estimate of 7.3%. On a monthly basis, the Core PPI was up 0.3%, matching August's print. 

Market reaction

The US Dollar Index stretched higher with the initial reaction and was last seen rising 0.13% on the day at 113.43.

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Gold Price Forecast: XAU/USD to remain vulnerable amid climbing yields and strong dollar – Commerzbank

Gold price is on the retreat again. Strategists at Commerzbank expect the yellow metal to stay offered as rising yields lift the dollar.

US interest rate at its highest level since August 2009

“The renewed price weakness was triggered by a noticeably stronger US dollar again and rising bond yields as further pronounced rate hikes by the Fed are anticipated. This puts the real US interest rate using market-based inflation expectations at 1.7%, its highest level since August 2009. This makes gold less attractive as a non-interest-bearing investment.”

“For as long as the headwind generated by the US dollar and climbing (real) yields persist, gold is likely to remain on the defensive.”

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EUR/USD could tumble close to the 0.90 level before year-end – MUFG

EUR/USD has dipped under 0.97. Economists at MUFG Bank expect the pair to inch closer to the 0.90 level before the Federal Reserve pauses its hike cycle.

The risks are firmly to the downside

“Over the near-term, the risks are firmly to the downside and we expect a period of further US dollar strength as financial market conditions worsen as asset prices correct further to the downside. This will help push inflation expectations further lower.” 

“The key for any broad turn in US dollar strength must be a pause in the tightening cycle. We suspect the Fed will pause after hiking in December which should allow some EUR/USD correction from levels closer to 0.9000.”

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USD Index Price Analysis: Another drop to 110.00 stays in the pipeline

DXY recedes modestly to the 112.00 region on Friday.

Losses could gather pace and attempt another test of 110.00.

DXY comes under some tepid selling pressure after two consecutive sessions with gains at the end of the week.

The index faces an immediate risk with the release of the Nonfarm Payrolls. A negative surprise could encourage sellers to return to the market and drag the dollar to the area of recent lows in the proximity of the 110.00 mark.

On the upside, there is still scope for a move to the 2022 high near 114.80 (September 28).

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 7-month support line near 107.50.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 102.84.

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Gold Price Forecast: XAU/USD to sustain a move downward – TDS

Gold price has extended its gains above $1,720. Nonetheless, strategists at TD Securities still believe that XAU/USD is likely to trend lower.

Shanghai traders start to shy away from gold

“A prolonged period of restrictive rates suggests traders should ignore gold's siren calls, as a sustained downtrend will likely prevail, while quantitative tightening continues to drive real rates higher.”

“Money managers hold their largest net short in gold since 2018, driven by trend followers. We expect a break north of $1,740 could fuel CTA stop-outs, suggesting the squeeze could run further.” 

“Shanghai traders have shied away from precious metals, leaving the market with fewer offers.”

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USD Index rebounds from recent lows and retests 110.50 ahead of data\

The index reverses the recent pullback and advances to 110.50.

US yields attempt a mild recovery across the curve.

ADP Report, ISM Non-Manufacturing take centre stage in the docket.

The greenback regains the smile following the recent sharp decline and retakes the 110.50 region when gauged by the USD Index (DXY) on Wednesday.

USD Index now looks to data

The index picks up some pace and partially reverses two consecutive daily drops amidst some loss of momentum in the risk complex in light of the recent needle-like rebound, particularly in the euro and the British pound.

The recovery in the buck so far comes in tandem with a tepid bullish attempt in US yields across after two consecutive sessions closing with gains, especially in the short end and the belly of the curve.

Interesting calendar in the US later on Wednesday will see the usual weekly MBA Mortgage Applications due in the first turn seconded by the ADP Employment Change Report for the month of September, Balance of Trade results, final S&P Global Services PMI and the ISM Non-Manufacturing.

In addition, Atlanta Fed R.Bostic (2024 voter, hawk) is also due to speak.

What to look for around USD

A hint of a recovery seems to have emerged around the dollar midweek after some decent support appears to have turned up near the 110.00 neighbourhood.

While the near-term outlook for the dollar looks somewhat dented, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues to prop up the underlying positive tone in the index.

Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: MBA Mortgage Applications, ADP Employment Change, Balance of Trade, Final Services PMI, ISM Non-Manufacturing (Wednesday) – Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change, Wholesale Inventories (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.28% at 110.51 and faces the next up barrier at 114.76 (2022 high September 28) seconded by 115.00 (round level) and then 115.32 (May 2002 high). On the other hand, a breach of 110.05 (weekly low October 4) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).

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AUD/USD: Tighter financial conditions to pressure aussie before recovery in 2023 – MUFG

The Australian dollar weakened sharply in September as financial conditions tightened globally. This trend is set to persist for the rest of the year, economists at MUFG Bank report.

Sharp housing market correction is a clear downside risk

“The economy in Australia remains resilient but there are signs of weakness in the housing market. While the still strong labour market is reason for optimism on the outlook for the economy, a sharp housing market correction is a clear downside risk.” 

“With global equities and commodities set for further declines before year-end as major central banks continue to tighten aggressively, we see all currencies weakening further against the US dollar through to year-end. Assuming equities then bottom and central banks are allowed to pause, some reversal for AUD/USD next year seems likely.”

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EUR/USD to remain glued into the lower half of September’s 0.95-1.02 range – SocGen

The US economy dictates EUR/USD prospects. Therefore, the EUR/USD is unlikely to race higher as the American economy continues to outperform the eurozone, Kit Juckes, Chief Global FX Strategist at Société Générale, reports.

It is hard to see the euro staging much of a rally

“The US has been outperforming the eurozone since mid-2021, and that outperformance has been accompanied by a rising dollar. It shows no signs of abating.”

“We’ll see what this afternoon’s US ISM data throws out (the consensus looks for a fall from 53.8 to 52.4), but if the US economy continues to outperform (in both manufacturing and services ISMs, and in the payroll report at the end of the week), then it’s hard to see the euro staging much of a rally.”

“Easier to see it mostly glued into the lower half of September’s EUR/USD 0.95-1.02 range.” 

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