USD Index Price Analysis: A drop to the 200-day SMA cannot be ruled out

• DXY breaks below the 106.00 support to clinch new multi-month lows.
• Immediately to the downside now emerges the 200-day SMA.

DXY quickly fades Monday’s bull run and refocuses on the downside, breaking below the 106.00 mark for the first time since mid-August.

If the selling bias gathers extra pace, then the index could dispute the critical 200-day SMA, today at 104.89.

Below this region, the dollar’s outlook should shift to negative.

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GBP/USD: Rally could extend to 1.1910 and 1.2000 – UOB

Extra upside in GBP/USD could revisit the 1.1910 and even 1.2000 in the short-term horizon, suggested Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “The deeply overbought rally in GBP from Friday appears to be overdone and GBP is unlikely to advance much further. For today, GBP is more likely to trade between 1.1725 and 1.1860.”

Next 1-3 weeks: “Despite surging by an outsized 4.08% last week, solid upward momentum suggests there is room for the rally in GBP to extend to 1.1910, possibly 1.2000. The upside risk is intact as long as GBP does not break below the ‘strong support’ level of 1.1660.”

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 EURUSD Price Analysis: Strong upside could see the August top revisited

• EURUSD accelerates the upside to the boundaries of 1.0300.
• The August top at 1.0368 emerges as the next target.

EURUSD adds to Thursday’s strong advance and flirts with the key barrier at the 1.0300 neighbourhood at the end of the week.

The continuation of the recovery looks the most likely scenario in the very near term. Against that, further upside could motivate the pair to challenge the August high at 1.0368 (August 10) ahead of the always relevant 200-day SMA, today at 1.0437.

In the longer run, the pair’s bearish view should remain unaltered while below the latter.

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Gold Price Forecast: XAUUSD awaits US CPI for a fresh upswing

• Gold price is fading the rebound but holds above the $1,700 mark.   
• The US Dollar resumes its correction but a weak CPI print could revive the downside.
•  XAUUSD buyers gather strength before the next push higher.

Gold price is posting small gains above the $1,700 mark, as bulls turn cautious ahead of the critical Consumer Price Index (CPI) from the United States. The US inflation data is of utmost significance in determining the US Federal Reserve’s rate hike outlook. A softer US core CPI print is likely to bolster expectations of a 50 bps December Fed rate hike. The monthly US CPI is seen rising to 0.6% while the annualized inflation rate is seen softening to 8.0%. The Core CPIs are likely to ease across the time horizon, suggesting signs of peak inflation. Gold price could resume its uptrend on a softer US CPI-induced renewed US Dollar weakness and a risk rally. Markets are currently pricing a 57% probability of a 50 bps December Fed rate hike.

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price is facing a wall of stiff resistance levels at around $1,710. At that level, the Fibonacci 38.2% one-day coincides with the SMA10 four-hour.

The next upside target is seen at the previous high four-hour at $1,713, above which a test of the $1,715 level cannot be ruled out, where the Fibonacci 61.8% one-day and SMA100 one-day meet.

Alternatively, a sustained break below the Fibonacci 23.6% one-day at $1,706 will revive the selling momentum toward the previous low four-hour at $1,704.  

The last line of defense for Gold price is seen at the confluence of the pivot point one-month R1 and one-week R1 at $1,703.

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EURUSD Price Analysis: Solid resistance emerges around 1.0100

• EURUSD comes under pressure near 1.0100 on Wednesday.
• The surpass of this area could allow for extra gains near term.

EURUSD’s strong recovery appears to have met a tough hurdle at the 1.0100 zone so far this week.

If the pair manages to surpass this zone in a sustainable fashion, it could then challenge the September top at 1.0197 (September 12) prior to the August high at 1.0368 (August 10).

While above the 9-month resistance line, today near 0.9840, extra gains look likely.

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0450.

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 AUDUSD loses recovery momentum before testing 0.6500

• AUDUSD managed to erase its daily losses but lost its recovery momentum.
• US Dollar holds its ground amid cautious market mood.
• Investors will keep a close eye on Wall Street in the absence of high-impact data releases.

AUDUSD came under bearish pressure and dropped to a fresh daily low below 0.6450 during the Asian trading hours on Tuesday. Although the pair managed to erase its daily losses in the European session, it lost its recovery momentum before reading 0.6500. As of writing, AUDUSD was virtually unchanged on the day at 0.6478.

Eyes on US stocks

Earlier in the day, the data from Australia showed that the National Australia Bank's Business Conditions Index declined to 22 in October from 25 in September. Additionally, the Business Confidence Index fell to 0 from 5. Combined with the disappointing sentiment data, the risk-averse market environment forced AUDUSD to continue to push lower.

In the meantime, the US Dollar Index holds in positive territory near 110.50 after having registered modest losses on Monday. Nevertheless, US stock index futures are up between 0.35% and 0.6% on the day and a positive opening in Wall Street could allow risk flows to dominate the action in financial markets.

The NFIB Business Optimism Index in the US declined to 91.3 in October from 92.1 in September but this data failed to trigger a noticeable market reaction.

Later in the session, the IBD/TIPP Economic Optimism Index for November will be the only data featured in the US economic docket. The US Mid-Term Elections will also take place but the outcome is likely to be finalized toward the end of the week. 

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The US Dollar is at an advantage against the Euro thanks to the Fed – Commerzbank

Whose monetary policy is more attractive? A comparison of the Fed and ECB shows the US Dollar is more attractive than the Euro, economists at Commerzbank report.

Dollar holds advantage over the Euro

“Fed Chair Jay Powell has pointed out that the Fed is aiming for a key rate level above inflation medium-term. That means the Fed will only stop hiking interest rates or lower them again once it can be sufficiently certain that inflation is easing notably. The impression the ECB is giving to observers is completely different. One gets the impression that Europe’s central bankers have to be forced by high inflation data to get them to hike rates. From the FX market’s point of view that means the Dollar is at an advantage against the Euro.”

“If inflation were to not fall or ease much less than the central banks expect the ECB would always be chasing inflation developments, would stand little chance of anchoring it and would produce negative real interest rates medium-term as a result. The Fed on the other hand would hike its key rate more significantly than it is planning so far. In the end, US Dollar real interest rates would also be positive in that scenario.”

“What is decisive from the FX market’s point of view depends on the rule the central bank applies to set its rates. The Fed’s rule seems to be more suited for protection against negative inflation surprises. That too makes the Dollar attractive, not just the current rate advantage.”

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EURUSD: On course to test the October 13 low near 0.9635 – BBH

EURUSD extends the corrective decline and revisits the 0.9750 region. Economists at BBH expect the worl's most popular currency pair to challenge the October 13 low near 0.9635.

ECB tightening expectations have fallen back a bit

“EURUSD is on track to test the October 21 low near 0.9705 and then the October 13 low near 0.9635.”

“With a big chunk of the eurozone already tipping into recession, can the ECB hike as aggressively as anticipated? It appears that the market is starting to have it doubts.”

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Gold Price Forecast: XAU/USD holds steady above $1,650 ahead of the key Fed decision

• Gold edges higher for the second straight day amid modest USD weakness.
• Hopes for a less hawkish Fed continue to exert pressure on the greenback.
• The upbeat US ADP report fails to impress the USD bulls or provide impetus.
• The market focus remains on the crucial FOMC monetary policy decision.

Gold gains some positive traction for the second successive day on Wednesday and maintains its bid tone through the early North American session. The XAU/USD is currently placed near the top end of its daily range, just above the $1,655 level, as traders keenly await the highly-anticipated FOMC monetary policy decision.

In the meantime, expectations for a less hawkish Fed prompt fresh US dollar selling, which, in turn, is seen offering some support to the dollar-denominated gold. Market participants expect that the US central bank might slow the pace of its rate-hiking cycle amid the deteriorating outlook for the US economy. Even the upbeat ADP report, showing that private-sector employers added 239K jobs in October against 193K expected, fails to boot the USD.

Despite the supporting factor, the XAU/USD lacks bullish conviction ahead of the crucial central bank event risk. The Fed will announce its policy decision later during the US session and is expected to deliver another supersized 75 bps rate hike for the fourth time in as many meetings. The market focus, however, will remain glued to the accompanying monetary policy statement and Fed Chair Jerome Powell's comments at the post-meeting press conference.

Investors will look for fresh clues about the pace of future policy tightening by the Fed, which will play a key role in influencing the USD price dynamics. This, in turn, will help determine the next leg of a directional move for the non-yielding gold. The current market pricing indicates over a 50% chance of a 50 bps Fed rate hike move in December. A more hawkish signal will set the stage for the resumption of the recent bearish trend for the XAU/USD.

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GBP/USD remains stuck between two key DMAs ahead of central banks’ bonanza

• GBP/USD starts November on the right footing amid USD weakness, risk flows.
• Fed and BOE are set to hike policy rates by 75 bps each this week.
• Cable is likely to extend range play between 100 and 50DMAs.

GBP/USD is consolidating the rebound above 1.1500 so far this Tuesday, kicking off November on the right footing. Investors brace for the critical Fed and BOE rate hike decisions, with both the central banks set to announce 75 bps rate increases later this week.

Ahead of the central banks’ bonanza, investors are breathing a sigh of relief, thanks to the FX market repositioning and the rally in Chinese stocks. The risk-on market environment is boding well for the higher-yielding pound sterling at the expense of the safe-haven US dollar.

Attention turns towards the US ISM Manufacturing PMI release, although not much reaction is expected on the data release unless the figure disappoints expectations by a wide margin. Meanwhile, the UK S&P Global Final Manufacturing PMI improved to 46.2 in October vs. 45.8 expected and the first reading of 45.8.

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 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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