Created on October 17, 2024

• The GBP/USD exchange rate is testing the key level of 1.30, with a break potentially opening the door to the 1.2820 level.
• Recently, the pound sterling has declined in mid-week trading after the release of softer UK inflation data that raised the possibility of further interest rate cuts by the Bank of England in 2024.
• At the time of writing, the pair reached a two-month low of 1.2977 and is currently stabilizing around 1.2990 at the time of writing.
• Commenting on the pair’s performance, Alex Kopcewicz, Senior Market Analyst at FXPRO, said, “The British pound has fallen below the 1.30 level against the US dollar after weak inflation data across the board.
• This sent the pound to a two-month low on speculation that the Bank of England will cut interest rates in the coming months.”

The psychological support level of 1.30 for GBP/USD is closely watched by analysts and market participants as an important level. However, analysts believe that sellers will emerge strongly and enter selling trades if 1.30 gives way. In this regard, JP Morgan’s trading desk says, “Through the 1.30 support, the next level of interest is the 100D (moving average) at 1.2950 and then the 1.2820/50 support range would be a fare initial target.”

According to Forex Market Trading, the pound fell against the dollar, the euro and all of its G10 peers after the UK headline inflation rate fell to 1.7% year-on-year in September. Meanwhile, the Bank of England’s inflation rate fell from 5.6% to 4.9%. Accordingly, Robert Howard, market analyst at Reuters, said: “The pound could extend lower towards the 1.28 support if the UK inflation data is cooler than expected, as this would raise the risk of two BoE rate cuts before Christmas.”

Now, 25 basis point cuts are fully priced in for the November 07 Bank of England interest rate meeting, with a 70% chance of another 25-basis point cut now priced in for December. Nick Andrews, chief FX analyst at HSBC, says, “However, the Bank of England’s endpoint is still relatively high at 3.51%, which means that GBP-USD could weaken in the coming months.”

Joe Maher, Associate Economist at Capital Economics, said, “We expect the pound to weaken by around 4% against the euro and around 1% against the US dollar by the end of 2025. We expect the yield gaps to move against the pound, especially against the euro, over the next year. Accordingly, we believe that the Bank of England will cut interest rates by much more than what is currently being discounted in the financial markets.

Technical forecasts for the GPB/USD pair today:

Based on the daily chart performance attached, the overall downward trend of the GBP/USD pair is gaining strength. As mentioned earlier, a move below the psychological support level of 1.3000 will confirm the bears’ strong control of the trend and signal a stronger downward move, especially if the US dollar gains additional positive momentum from today’s US retail sales and weekly jobless claims figures. If this happens, the next support levels will be 1.2920 and 1.2840, respectively. Furthermore, these levels are sufficient to push technical indicators towards oversold levels. Conversely, the first break of the current trend requires stabilization above the resistance level of 1.3160. 

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Created on October 17, 2024

• Today is an important day for the euro against other major currencies, especially against the US dollar, which has plummeted to a support level of 1.0850, the lowest for the EUR/USD pair in more than two months.
• Ahead of the European Central Bank’s announcement, eurozone inflation figures will be released amid expectations of keeping rates low.
• On another front, and according to forex market trading and expectations for the US dollar under a new US administration after next month’s elections, Donald Trump, the Favorite to win the White House in November, has strengthened a number of policies seen as supportive of the US dollar.
• In a new interview, Trump rejected economists’ warnings that the tariffs he proposes would have a negative impact on the economy and raise inflation.

“For me, the most beautiful word in the dictionary is ‘tariff.’”

He wants to impose a 60% tax on imports from China and a flat 10% fee on the rest of the world. Economists say that raising the cost of imports will have a negative impact, raising domestic retail prices. In this regard, Tom Kenny, senior international economist at ANZ Bank, says, “The proposed 10-20% increase in tariffs across the board has the potential to be inflationary.”

“Tariffs tend to be inflationary, which would boost the value of the US dollar, and that’s why we expect the US dollar to be stronger in the first months of a Trump presidency compared to a Harris presidency,” Rabobank said. However, it warned that tariffs could eventually reduce productivity and growth potential. Furthermore, inflationary tariffs mean the Federal Reserve will need to exercise more caution in cutting US interest rates.

Trump’s response? Convince the Fed that it needs to cut rates anyway.

In his interview with Bloomberg, Trump indicated that he seeks greater influence at the Federal Reserve. However, he did not have a direct response to a question about whether he would seek to fire Fed Chairman Jerome Powell. He said he believes it is up to the president to tell the Fed chairman how he thinks interest rates should be changed. He added, “If you’re a very good president and you have common sense, you should be able to at least talk to him,”.

However, Trump stressed that the president should not be able to dictate policy to the Fed.

According to stock trading platforms, European stocks declined amid weak earnings. European stocks closed sharply lower on Wednesday, continuing the previous session’s losses amid pessimistic earnings from the eurozone’s largest companies. The Stoxx 50 index for the single currency area fell 0.7% to 4911, and the Stoxx 600 European index fell 0.2% to 520, with the latter supported by positive UK inflation. Also, ASML shares fell 5.1% to extend the previous session’s 15.6% decline after the chipmaker issued disappointing sales forecasts following its third-quarter earnings report.

Additionally, LVMH shares fell 3.7% after recording a decline in revenue during the third quarter, its first negative change since the COVID-19 pandemic, confirming concerns about declining demand in China. As a result, shares of Hermes and Kering fell 1.3% and 0.8%, respectively, while L’Oreal lost more than 2% after being downgraded by JP Morgan.

EUR/USD Technical analysis and forecast:

Ahead of today’s important events, the EUR/USD pair is stabilizing in a downward trend, and with the break of the 1.0880 support, it has previously shown that it supports the bears’ strong control of the trend and at the same time moves technical indicators towards oversold levels. Obviously, today’s reaction to the announcement of inflation figures in the eurozone and the European Central Bank’s announcement will determine the fate of performance in the coming days. The closest support levels to the current performance may reach support levels of 1.0820 and 1.0770, respectively. Conversely, and according to the daily chart performance, the resistance of 1.1000 will remain the key to the bulls regaining control. 

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Created on October 17, 2024

• The Aussie dollar initially pulled back just a bit during the trading session on Wednesday to test the 200 day EMA.
• The 200 day EMA, of course, is a long term indicator that a lot of people pay attention to and therefore, it’s not a huge surprise to see a little bit of a bounce from there.
• This would be the exact kind of action I would be watching, as the carry trade could be coming back at this point.

That being said, the 100 yen level just above is an area that I think continues to attract a lot of attention. So, with that being said, if we turn around and rally above there, then I think we have a real shot at heading back to the 101 yen level. If we get back above there again, then I think it’s time for the Australian dollar to finally take off against the Japanese yen. Yet again, we recently have broken out above a little bit of resistance and formed a massive W pattern, so now I think we are in a consolidation phase in order to build up the necessary momentum to keep going higher.

On a Move Higher

If and when we break above the 101 yen level on a daily close, we could find ourselves going as high as 108 yen before it’s all said and done. Simply put, it would be a massive move waiting to happen. If you just take the measured move from the W pattern, you could be looking at about a 7% move, which puts you right around 107 yen. So, either way, it looks extraordinarily bullish. Furthermore, keep in mind that the interest rate differential continues to favor the Australian dollar, so you get paid at the end of every day to hold this pair anyway. And I think that’s what a lot of people are looking at in this market, as well as other “yen-related pairs.”

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Created on October 17, 2024

• The Japanese yen rose to around 149.3 against the US dollar on Thursday, but remained close to an 11-week low as investors reacted to disappointing trade figures.
• The data showed that Japan’s trade balance swung to a deficit in September as exports unexpectedly fell, while import growth slowed.
• On the monetary policy front, Bank of Japan board member Seiji Adachi said earlier this week that conditions were already in place to normalize monetary settings, but stressed that the BOJ should raise interest rates at a “very moderate” pace.
• Also, he warned that the BOJ should avoid a radical change in policy given the uncertainty over the global economic outlook and domestic wage growth.

Externally, the Japanese yen continues to face pressure from a stronger US dollar on bets that the Federal Reserve will be less aggressive in cutting US interest rates. The so-called Trump trade also lifted the dollar as his policies are seen as inflationary, which would prevent the Federal Reserve from cutting interest rates further.

In Asian markets, Chinese stocks experienced early volatility and dipped as investor impatience grew over the pace of stimulus measures by the central government. The CSI 300 index, which tracks the largest listed companies in Shanghai and Shenzhen, fell 0.2% by midday after initially declining by 1.3% during morning trading. This latest decline represents a total drop of more than 10% since reaching its peak on October 8. Meanwhile, Hong Kong-listed Chinese stocks managed a modest recovery, with the Hang Seng index rising 0.7%.

The volatile market driven by stimulus optimism fades

The recent market volatility highlights the volatility in Chinese stocks since late September, when a wave of stimulus measures by the central bank briefly sparked optimism among investors. But this initial enthusiasm has now quickly faded as Beijing has yet to provide further details on fiscal spending plans. Moreover, this uncertainty fuels doubts about whether the Chinese authorities are ready to roll out more aggressive measures to stabilize the economy and support stock markets.

“Given how quickly markets have risen, they can fall just as fast. But the overall policy measures are moving in the right direction, and when things calm down, Chinese stocks may still trade in a higher range than before.” Although a 10% decline may typically indicate a technical correction for the CSI 300 index, the recent extreme volatility in Chinese markets has diminished the significance of such landmarks. After rising more than 30% over three weeks from mid-September, the index has now lost its momentum, reflecting mixed investor sentiment about whether the rally has peaked or if more gains are still possible.

USD/JPY Technical analysis and Expectations Today:

Bulls are still watching the possibility of USD/JPY breaking the psychological resistance level of 150.00 to confirm control and thus prepare for stronger upward breaches. Technically, any positive reaction to the announcement of US retail sales figures and the number of weekly jobless claims today will bring bulls more momentum to move towards the resistance levels of 150.70 and 151.40 respectively, which are levels that strengthen the uptrend. On the other hand, and in the same time frame, there will be no break of the uptrend without returning to the support level of 145.90. The currency pair will remain subject to signals from central bank officials regarding the path of tightening, in addition to the extent of investors’ risk appetite or not. 

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• GBP/USD trades in a narrow channel below 1.3000 on Thursday.
• The bearish stance remains unchanged in the near term.
• The US economic calendar will feature Initial Jobless Claims and Retail Sales data.

GBP/USD struggles to stage a recovery and stays below 1.3000 in the European session on Thursday after suffering large losses on Wednesday. The pair remains technically bearish as the market focus shifts to the mid-tier macroeconomic data releases from the US. 

Softer-than-forecast September inflation readings from the UK on Wednesday caused investors to start pricing in multiple Bank of England (BoE) rate cuts this year, triggering a Pound Sterling selloff.

Early Thursday, the cautious market mood helps the US Dollar (USD) stay resilient against its rivals and makes it difficult for GBP/USD to gain traction. In the second half of the day, September Retail Sales and the weekly Initial Jobless Claims data from the US will be watched closely by market participants.

The number of first-time applications for unemployment benefits is forecast to stay unchanged at 258,000 in the week ending October 12. A noticeable decline in this data, with a print below 220,000, could boost the USD and force GBP/USD to stretch lower. On the other hand, a reading near or above the market expectation could pave the way for a weaker USD. In this scenario, GBP/USD could retrace a portion of its weekly decline.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40, suggesting that the bearish stance holds. On the downside, 1.2950-1.2940 (100-day Simple Moving Average (SMA), static level) forms a strong support area ahead of 1.2900 (static level, round level).

In case GBP/USD manages to rise above 1.3000 (round level, static level) and stabilizes there, sellers could be discouraged. In this scenario, 1.3050 (static level) could be seen as next resistance before 1.3100 (round level, static level).