Created on October 23, 2024

• Reducing expectations for further US rate cuts continues to drag on EUR/USD, with losses extending below the psychological support level of 1.0800 to the support level of 1.0792.
• Furthermore, the currency pair is at the lowest level in more than two and a half months.
• Amid this performance the US dollar index rose above 104.1 on Wednesday, recording its highest levels since early August as investors continued to reduce bets on aggressive interest rate cuts by the Federal Reserve, while preparing for the upcoming US presidential elections.

Also, the US dollar is tracking the rise in Treasury yields, with the benchmark 10-year Treasury note reaching 4.22% for the first time since late July amid strong economic data and concerns about the deficit. Now, markets are pricing in a 90% probability that the Fed will opt for a more modest 25-basis point interest rate cut in November after a hefty 50-basis point cut in September. Concurrently, Investors are looking to the Federal Reserve’s Beige Book for updates on the central bank’s economic outlook.

According to forex trading, the US dollar is hovering at multi-month highs against other major currencies, with buying activity most pronounced against the yen.

In general, financial markets have increased their expectations for further rate cuts by the European Central Bank. The ECB cut interest rates for the third time this year, citing improved inflation control but a deteriorating economic outlook for the euro zone. ECB President Christine Lagarde’s comments were interpreted as a signal of a downward revision of economic forecasts, prompting markets to expect a 25bp cut at each meeting until mid-2025.

Investors are closely watching upcoming economic data, including PMI figures, which are expected to confirm the sluggish regional performance and potentially support further ECB action. A 25bp rate cut in December is widely expected, with a 30% chance of a larger 50bp cut. Meanwhile, strong US economic data has dampened expectations of a more aggressive rate cut by the Fed.

EUR/USD Technical analysis and forecast:

No change in my technical view on EUR/USD forecast as the overall trend remains bearish and breaking the 1.0800 psychological support strengthens the bears’ control over the trend and heralds a deeper downside move. Next up will be 1.0745 and 1.0600, respectively. These are enough to push all technical indicators towards strong oversold levels. On the other hand, and on the same time frame, the daily chart will not break the bearish outlook without the currency pair first moving above the psychological resistance of 1.1000. Aslo, the euro price will be affected today by new statements from the Governor of the European Central Bank, Lagarde.

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Gold (XAU/USD) remains bullish at $2,750.21, with support at $2,738.16. Resistance is at $2,754.01, and the 50-day EMA of $2,719.07 strengthens the trend. A break below support could signal sharper declines.

Sterling Awaits Key BOE Speeches Amid IMF Meetings

Sterling (GBP) remains steady as traders anticipate key speeches from MPC member Breeden and BOE Governor Bailey. Both talks are expected to offer insights into future monetary policy, so the pound may experience heightened volatility.

These speeches, alongside ongoing IMF meetings, could provide crucial guidance for the pound’s short-term direction.

Investors will be looking for any signals on interest rate adjustments or economic outlook, which could influence market sentiment and GBP movement.

GBP/USD Technical Analysis

GBP/USD is trading at $1.29688, down 0.11%, staying just below its pivot point of $1.29915. This level is key—if the pair breaks above it, we could see a stronger bullish bias, with immediate resistance at $1.30154 and further levels at $1.30531 and $1.30770.

Created on October 23, 2024

I believe this point in time, if we can break above the 50 Day EMA, I’d be a buyer of this pair. I would have a stop loss at the 1.2975 level, aiming for a move to the 1.33 level.

• During my daily analysis of the GBP/USD pair, the first thing I understood by looking at the chart is just how hesitant we are to make a bigger move.
• That being said, we also get PMI numbers later this week on Thursday, which could have a major influence on both of these currencies as both the United States and the United Kingdom or release those announcements at different points in the day.
• Because of this, think you have got a situation where we might see a bit of volatility between now and then, but ultimately, we will make a bigger decision.

If we can break above the 50 Day EMA, presently trading right around the 1.31 level, then it’s likely that we would see quite a bit of upward momentum in the British pound. Keep in mind that the US dollar is considered to be a bit of a “safety currency”, so therefore you need to be cautious about the overall risk appetite. After all, if we start to see risk appetite get eviscerated, that will help the US dollar strengthen, and that should, at least in theory, drive this pair lower. At that point, I think you have to look at the 200 Day EMA for potential support near the 1.2850 level. Anything below there could be catastrophic for the British pound, but I think it probably would be more or less a result of the US dollar strengthening against almost everything, not necessarily Sterling.

I do believe that we have a lot of noise ahead of us, and I do think that this is a market that will continue to be difficult to get your hands on, so like many of the other major currency pairs, I think that we are essentially in a bit of a “holding pattern.” This is because we are waiting for some type of fundamental analysis and news to get the markets moving. As things stand right now, I think we are simply treading water.

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• USD/JPY flirts with the 151.00 level, driven by rising US Treasury yields but held back by key resistance at the top of the Ichimoku Cloud.
• Momentum remains bullish, with the RSI hitting a new high, suggesting further upside towards the 200-DMA at 151.36 and beyond.
• A break below 151.00 could see support at 149.68, with further downside risks targeting the October low at 149.09.

The US Dollar prints back-to-back gains against the Japanese Yen on Tuesday but struggles to clear the 151.00 figure decisively. At the time of writing, the USD/JPY trades at 150.92, as the US 10-year T-note yield keeps the pair contained at around current exchange rates.

USD/JPY Price Forecast: Technical outlook

The USD/JPY is testing key resistance at the top of the Ichimoku Cloud (Kumo) at around 150.80/95, with buyers eyeing the 200-day moving average (DMA) at 151.36.

From a momentum standpoint, buyers are in charge. The Relative Strength Index (RSI) is reaching a new higher high, signaling bulls are gathering steam.

A daily close above the 151.00 figure could sponsor a test of the 200-DMA at 151.36. On further strength, the pair could test the July 25 swing low turned resistance at 151.93 before cracking 152.00.

Conversely, if USD/JPY dives beneath 151.00, the first key support would be the Tenkan-Sen at 149.68, ahead of the October 21 low of 149.09.

USD/JPY Price Chart – Daily

Created on October 22, 2024

• The Dollar and is Euro is trending downward against the US likely to incur further losses over the next five days.
• According to forex market trading, the EUR/USD exchange rate fell below the 200-day simple moving average last week, which equates to a significant technical deterioration.
• Our forecast model for this week sees the 200-day moving average as a key line, where the exchange rate is in a downward trend when declining and an upward trend when rising.

Commenting on the pair’s performance, W. Brad Bechtel, an analyst at Jefferies, an investment banking and capital markets firm, explains: “200-day moving averages can be key pivot points over long horizons, and currencies, along with other assets, tend to get ‘stuck’ above or below their moving averages for several months at a time.”

EUR/USD Technical analysis and forecast:

Technically, the 200-day moving average is at 1.0871, and early indications suggest that the technical level is now acting as a ceiling, as last week’s bounces failed to clear the hurdle. Therefore, the coming days could see EUR/USD struggle with the pair below the 200-day moving average, and it could be vulnerable to retesting last week’s low of 1.0810.

Fundamentally, the euro is under pressure as financial markets now believe that the European Central Bank will cut interest rates more, and faster, than the US Federal Reserve. This has led to a decline in eurozone bond yields relative to US bond yields, providing a fundamental narrative for the EUR/USD decline. According to analysts at Société Générale, “near-term support for the euro-dollar is at 1.0778, the low of early August. A deeper decline in a repeat of 2016 cannot be ruled out if US yields gain upward momentum after the presidential election.”

Furthermore, the European Central Bank responded last week to the deteriorating inflation dynamics in the eurozone by cutting interest rates by another 25 basis points. This week will see several speakers from the ECB, including ECB President Christine Lagarde herself, who will address this decision and what the future holds. Upside risks for the euro include ECB members seeking to temper expectations about the pace of future cuts, a possibility given how aggressive pricing has been recently.

According to the market, the ECB is now more hawkish than the US Federal Reserve; financial markets are less convinced that there is an urgent need for a US rate cut due to better-than-consensus economic data suggesting that the US economy has gained momentum heading into the final quarter of the year. The Fed will cut US rates again in early November, but not by as much as previously expected (25 basis points, not 50 basis points) and there is a good chance that the Fed will call for caution on future rate cuts.

On another factor influencing the forex market, the US election is less than two weeks away, and analysts say the recent outperformance of the US dollar is linked to signals that Donald Trump is the Favorite to win the vote. His tariff-heavy trade policy and generous tax-cut agenda are believed to support dollar expectations. In this regard, Fouad Razakzada, an analyst at City Index, says: “With Donald Trump gaining ground in the polls, markets have begun to factor in a possible win, which could keep the US dollar supported.”

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Created on October 22, 2024

• In my daily analysis of the USD/JPY pair, the pair has exploded to the upside during the Monday session, as we have broken above the ¥150 level, an area that of course is very important.
• Now that we are above that area, it looks as if short-term pullbacks will continue to get bought into, especially as the 200 Day EMA has offered significant support.
• In general, this is an exhaustively bullish mood, and now that we have broken above the crucial ¥150 level, we could start to see momentum pick up.

Interest Rate Differential Continues

The interest rate differential continues in this pair, as the market has broken to the upside, and I think we will continue to see traders hold onto this pair in order to collect swaps at the end of every day.

After all, the Bank of Japan has recently admitted that he cannot tighten monetary policy any further, so therefore think you get a situation where we will see the upward trajectory continue.

After all, I like the idea of buying short-term pullbacks that we can take advantage of, as the market has shown itself to be important.

Even if we see a breakdown from this area, the 200 Day EMA is likely to provide strong support. Should the price fall below that level, additional support can be found around the ¥148 level, with the 50 Day EMA just beneath it. This creates a scenario where traders may view any dips as opportunities to buy “cheap US dollars”.  Keep an eye on the USD/JPY live chart for real-time movements and potential trade setups.

=On the upside, I think we’ve got a situation where the pair could very easily go to the ¥153.50 level, which is an area that has been noisy in the past.

All things being equal, I do think that the carry trade is back, and therefore we will continue to see this move to the upside. All things being equal, I have no interest in selling this pair.

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• GBP/USD trades slightly below 1.3000 in the European session on Tuesday.
• Key support area seems to have formed in the 1.2950-1.2960 area.
• BoE Governor Bailey will deliver a speech later in the session.

Following a two-day recovery, GBP/USD turned south on Monday and lost 0.5% on the day. The pair struggles to gather recovery momentum early Tuesday and trades slightly below 1.3000.

Markets adopted a cautious stance at the beginning of the week amid escalating geopolitical tensions in the Middle East, allowing the US Dollar (USD) to benefit from safe-haven demand. At the time of press, US stock index futures were down between 0.4% and 0.6%.

A bearish opening in Wall Street, followed by an extended slide in major equity indexes could allow the USD to preserve its strength and force GBP/USD to stretch lower.

The US economic calendar will feature the Richmond Fed Manufacturing Index data for October, which is unlikely to trigger a noticeable market reaction.

In the early American session, Bank of England (BoE) Governor Andrew Bailey will deliver a keynote address at the Bloomberg Global Regulatory Forum in New York. Since he is unlikely to comment on the policy outlook, this event could have little to no effect on Pound Sterling’s valuation. The next important data release for GBP/USD will be S&P Global’s preliminary October Manufacturing and Services Purchasing Managers Index (PMI) data for the UK and the US on Thursday.

GBP/USD Technical Analysis

GBP/USD trades within the descending regression channel coming from late September and the Relative Strength Index (RSI) indicator on the four-hour chart stays well below 50, reflecting the bearish bias.

On the downside, the lower limit of the descending channel and the 100-day Simple Moving Average (SMA) form a strong support area at 1.2950-1.2960 ahead of 1.2900 (round level, static level). Looking north, first resistance could be seen at 1.3050 (static level, upper limit of the descending channel) before 1.3090-1.3100 (Fibonacci 23.6% retracement of the latest downtrend, static level) and 1.3140 (50- day SMA).

• The dollar traded near an over 2-month high against its peers.

• Traders price an 89% chance of a 25-bps Fed rate cut in November.

• Economists expect the next BoJ rate hike in March next year.

The USD/JPY price analysis shows that the bets for a Trump win are rising, boosting the dollar against the yen two weeks before the presidential election. Meanwhile, Japan’s general election might also affect the yen by changing the Bank of Japan’s policy outlook. 

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The dollar extended recent gains to trade near an over 2-month high against its peers. Bets ahead of the November US presidential election show Trump in the lead, supporting the dollar. A Trump win is bullish for the dollar, increasing the likelihood of high interest rates. However, the race is tight, and things might change in the time before the election. 

At the same time, markets are still digesting the new outlook for a gradual Fed rate-cutting cycle. A few weeks back, rate cut expectations indicated a 50-bps cut in November. However, that quickly changed with incoming data. Currently, there is an 89% chance of a 25-bps rate cut in November. 

The US will release business activity data before the policy meeting to show the state of the manufacturing and services sectors. 

Meanwhile, in Japan, the upcoming October 27th general election could change the majority in parliament and affect Ishiba’s position. Such changes could also change the outlook for monetary policy in Japan. The Bank of Japan has paused after implementing its first rate hike in March. Moreover, a recent Reuters poll showed that most economists expect the next rate hike to be in March next year. 

USD/JPY key events today

There won’t be any high-impact reports from the US or Japan today. Therefore, the dollar might extend its rally.

USD/JPY technical price analysis: Bulls make fresh highs

On the technical side, the USD/JPY price is climbing to make a new high in the uptrend. It trades well above the SMA, with the RSI in bullish territory. However, for some time, the price has stayed near the SMA. Consequently, the slope of the uptrend has slowed. 

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At the same time, while the price is making higher highs, the RSI has made lower highs, indicating fading enthusiasm. If this persists, the trend might reverse to the downside. However, if bulls maintain control, the price will revisit the 152.02 resistance level.

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• The Bank of England governor might drop hints on future policy moves. 

• The greenback was steady as traders priced a less aggressive Fed easing cycle.

• US presidential election bets suggest a Trump win.

The GBP/USD outlook shows a rebound from recent lows as market participants await a speech from BoE governor Andrew Bailey. Meanwhile, the dollar remained near a two-and-a-half-month high as markets adjusted their Fed rate cut expectations and awaited the upcoming US elections.

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The Bank of England governor is set to speak this week and might drop hints on future policy moves. Therefore, traders will pay close attention to his speech later today. Despite Friday’s upbeat retail sales report, the UK economy has slowed down and is performing poorly compared to the US economy. At the same time, inflation eased below the BoE’s 2% target, prompting market participants to increase rate-cut bets. As a result, UK yields fell, weighing on the pound. 

Meanwhile, despite a slight retreat, the greenback was steady as traders priced a less aggressive Fed easing cycle. Recent economic reports have slowly shifted the outlook for rate cuts from aggressive to gradual. The US economy is holding up well, with the labor market and sales beating forecasts. At the same time, inflation increased more than expected in September, reducing the pressure to cut rates. 

Meanwhile, Fed policymakers have assumed a more cautious tone. Although they expect more rate cuts, the size and pace are unclear. Currently, traders are pricing an 89% chance of a 25-bps rate cut in November. 

Elsewhere, the US presidential election is on the horizon, and bets suggest a Trump win. If Trump wins, his tax and tariff policies might increase inflation and interest rates, increasing demand for the dollar.

GBP/USD key events today

GBP/USD technical outlook: Double bottom pauses downtrend

On the technical side, the GBP/USD price trades between the 30-SMA resistance and the 1.2975 support level. The bias is bearish because the indicators and price action suggest a downtrend. The SMA is above the price, and the RSI is below 50, in bearish territory. 

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However, it has made a bearish divergence, indicating that the downtrend might be at its end. Furthermore, the price has made a double bottom at the 1.2975 support level. Therefore, the price might soon break above the SMA to revisit the 1.3100 resistance.

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