Created on October 10, 2024

• Amidst a divided Federal Reserve on the size of US interest rate cuts in September, the EUR/USD exchange rate moved towards the support level of 1.0936, its lowest in seven weeks.
• Further supporting the US dollar’s gains were the minutes of the Federal Open Market Committee meeting, which revealed that Fed officials were uncertain about the extent of US interest rate cuts at their September meeting but opted for a half-point cut to balance inflation concerns with Labor market concerns. 

Ultimately, only Governor Bowman opposed a 50-basis-point cut, preferring a 25-basis-point cut instead – marking the first dissent by a Fed governor on US interest rates since 2005. Moreover, The Fed indicated that the 50-basis-point cut should not be interpreted as evidence of a less favourable economic outlook or as a signal that the pace of policy easing would be faster than participants’ assessments of the appropriate path. 

Additionally, almost all members expressed confidence that inflation is moving sustainably towards 2%. The Federal Reserve had lowered the target range for the federal funds rate by 50 basis points to 4.75%-5% in September 2024, the first cut in borrowing costs since March 2020, and expects 100 basis points of easing by the end of the year. 

Prior to that, the yield on the 10-year German bond declined from a 5-week high. According to reliable trading platforms, the yield on the 10-year German bond declined to 2.235% from a five-week high, as investors await the European Central Bank’s monetary policy meeting next week, where another interest rate cut is widely expected. Many European Central Bank policymakers are pushing for another cut, driven by the economic slowdown and rapidly slowing inflation, although some remain cautious. After two cuts this year, financial markets expect the deposit rate to be cut to 3.5% on October 17, with further cuts possible. Furthermore, European Central Bank President Francois Villeroy de Galhau and Bank of Greece Governor Yannis Stournaras support successive cuts. Meanwhile, European Central Bank President Christine Lagarde’s comments have reinforced these expectations. 

However, Belgium’s Pierre Wunsch remains undecided, citing concerns over persistent domestic inflation and rising energy costs linked to tensions in the Middle East. Also, financial markets are expecting the deposit rate to fall to 3% by the end of the year. 

According to stock trading platforms, the German DAX index was largely unchanged. The DAX index was little changed at 19,070 on Wednesday, tracking a generally cautious sentiment among its European peers as the wave of stimulus coming from China faded and traders continued to await more details about the measures announced by the Chinese authorities. At the same time, investors are refraining from making significant bets ahead of the FOMC meeting minutes and the US Consumer Price Index report scheduled for today, which could provide more clarity on the Federal Reserve’s next moves. 

In Europe, the European Central Bank is expected to deliver another 25bp cut in borrowing costs next week. On the economic data front, exports from Germany unexpectedly increased in August while imports fell more than expected. Bayer (-5.1%) was the worst performer, followed by Rheinmetall (-1.5%). Continental, on the other hand, rose more than 5% after the company forecast improved profitability in the third quarter. 

EUR/USD Technical analysis and forecast: 

Based on the daily chart attached, as mentioned earlier, the downward movement of the EUR/USD pair will remain the strongest as long as it remains below the 1.1000 support level. According to performance and ongoing pressures, attention will be directed towards the 1.0880 support level, which may in turn push technical indicators towards oversold levels. From below this level, buying the pair may be considered, but without risk. Conversely, and on the same timeframe, the EUR/USD pair will not return to its upward path without crossing the 1.1120 resistance again. 

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Created on October 11, 2024

• As you can see, the British Pound has pulled back just a bit during the trading session on Thursday as we continue to dance around the 1.30 level.
• The 1.30 level is an area that a lot of people would be looking at as the level has previously been resistance and support.
• So, with this being the case, I think you’ve got a situation where all this market memory should come into the picture to support the British pound.

Keep in mind, the markets will continue to look at this through the prism of what the Federal Reserve is doing more than anything else. As a result, I think you’ve got to look at this as a potential buying opportunity, but if we were to break above the 50 day EMA, then it’s possible that the market could go looking to the 1.33 level. At this juncture, I don’t have any interest in trying to short this pair, although I recognize that the market is probably going to continue to be noisy, and we could very well break down below the 1.30 level.

I am Not Keen on Shorting the Pound

But in this scenario, I would be more apt to buy the US dollar against something else, not necessarily the British pound itself. If we do break above the 50 day EMA, then I think a move to the 1.33 would also open up the possibility of other currencies gaining against the green bank.

The British pound has been one of the better performers and that’s not a huge surprise considering that the interest rate differential is essentially nil between England and the United States. Unlike other currencies like the Euro or perhaps a Canadian dollar, this is a pretty equal fight when it comes to that. So, pay attention, this is probably all about risk appetite at this point

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• EUR/USD trades at its lowest level in nearly two months below 1.0950.
• The hawkish tone in FOMC minutes boosted the US Dollar on Wednesday.
• Investors await September Consumer Price Index data from the US.

EUR/USD came under renewed bearish pressure in the late American session on Wednesday and ended the day deep in negative territory. The pair stays on the back foot early Thursday and trades at its lowest level since mid-August below 1.0950.

The hawkish tone in the minutes of the Federal Reserve’s (Fed) September policy meeting helped the US Dollar (USD) outperform its rivals late Wednesday, forcing EUR/USD to stretch lower.

The publication showed that even though a substantial majority of Fed officials supported the 50 basis points (bps) rate cut, there was even a broader consensus that this initial step would not lock the Fed into any specific pace for future rate cuts. Additionally, some participants favored only a 25 bps reduction in the policy rate cut, while “a few others” mentioned they could have supported that decision as well.

The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for September later in the day. The annual CPI inflation is forecast to decline to 2.3% from 2.5% in August. The core CPI, which excludes volatile food and energy prices, is seen rising 0.2% on a monthly basis.

It will likely require a significant downside surprise, a reading of 0% or lower, in the monthly core CPI data for investors to reconsider the probability of another large Fed rate cut in November. In this scenario, EUR/USD could stage a steady rebound. On the flip side, a print at or above the market forecast could help the USD hold its ground.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 30, suggesting that the pair is about to turn technically oversold. On the upside, immediate resistance is located at 1.0950 (static level, Fibonacci 61.8% retracement of the latest uptrend). In case EUR/USD stabilizes above this level and confirms it as support, it could edge higher toward 1.1000 (Fibonacci 50% retracement) and 1.1050 (Fibonacci 38.2% retracement).

Looking south, interim support could be spotted at 1.0900 (round level) before 1.0870 (Fibonacci 78.6% retracement) and 1.0800 (round level).

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Canadian Dollar.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Created on October 10, 2024

• The Japanese yen has declined below 149.50 yen against the US dollar, heading towards its lowest levels since early August, as traders’ expectations of interest rate cuts by the US Federal Reserve have diminished in light of the latest US jobs report and the minutes of the Federal Open Market Committee (FOMC).
• Investors are also gearing up for the latest US inflation data, which could impact the Fed’s decision on interest rates in November. 

Domestically, economic data showed that producer prices in Japan rose more than expected in September, marking the 43rd consecutive month of producer price inflation. At the same time, the country’s lending activity slowed for the second consecutive month in September to its weakest pace in nearly a year. The Japanese yen has recently come under pressure when new Japanese Prime Minister Shigeru Ishiba and Economy Minister Ryusei Akizawa called for caution before raising interest rates further under current economic conditions. 

According to stock trading platforms, Japanese stocks follow Wall Street in rising. The Nikkei 225 index of Japanese stocks rose 0.5% to more than 39,400 points, while the broader TOPIX index added 0.4% to 2,718 points on Thursday, extending its gains from the previous session and tracking Wall Street’s overnight rally as markets prepare for the latest report on consumer inflation in the United States. 

Domestic stocks continued to benefit from the weakness of the Japanese yen, which fell to its lowest levels since early August. At the same time, data showed that producer prices in Japan rose more than expected in September, marking the 43rd consecutive month of producer price inflation. Heavyweight stocks in the index performed notably, such as Tokyo Electron (0.6%), Toyota Motor (2%), SoftBank Group (1.7%), Mitsubishi UFJ Financial Group (1.4%), and Fast Retailing (0.8%). 

USD/JPY Technical analysis and Expectations Today: 

According to the performance on the daily chart, the USD/JPY price is in an upward channel path. As we mentioned before, the psychological resistance level of 150.00 will remain the most important to confirm the strength of bulls’ control over the trend and increase technical buying opportunities. Especially, if the Japanese central bank remains cautious in providing further policy tightening. Technical indicators will move towards strong overbought levels if the currency pair moves towards the resistance levels of 150.85 and 151.60, respectively. On the other hand, and over the same period of time, the current upward channel will be broken if the currency pair declines towards and below the support level of 145.30. Today the currency pair will be affected by the announcement of US inflation figures through the Consumer Price Index, along with the announcement of the weekly jobless claims. 

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• GBP/USD struggles to shake off the bearish pressure, trades below 1.3100.
• The technical picture highlights sellers’ dominance in the near term.
• September inflation data from the US will be watched closely by market participants.

GBP/USD failed to build on Tuesday’s modest recovery gains and ended the day in the red on Wednesday. The pair fluctuates in a tight channel below 1.3100 in the European session on Thursday as the market focus shifts to September inflation data from the US.

The US Dollar (USD) gathered strength against its rivals after the minutes of the Federal Reserve’s (Fed) September policy meeting offered a hawkish surprise.

The publication reaffirmed that a “a substantial majority” of Fed policymakers supported the decision to lower the policy rate by 50 basis points (bps) but it showed that there was even a broader consensus that this initial step would not lock the Fed into any specific pace of policy-easing in the future. Moreover, the minutes highlighted that some participants favored a 25 bps cut, while “a few others” mentioned they could have supported that decision as well.

The US Bureau of Labor Statistics will release the September Consumer Price Index (CPI) data in the early American session on Thursday. On a yearly basis, the CPI is forecast to rise by 2.3%, at a softer pace than the 2.5% increase recorded in August. The monthly core CPI, which excludes volatile food and energy prices, is seen rising 0.2%.

In case the monthly core CPI unexpectedly comes in at or below 0%, the immediate reaction could cause the USD to come under selling pressure. On the flip side, the market positioning suggests that the USD doesn’t have a lot of room on the upside. Investors see a nearly 20% probability of the Fed leaving the policy rate unchanged and price in about an 80% chance of a 25 basis points (bps) cut in November. Nevertheless, a monthly CPI reading of 0.3% or higher could help the USD hold its ground and make it difficult for GBP/USD to stage a meaningful recovery.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40, reflecting the bearish bias. On the downside, supports could be seen at 1.3050 (static level), 1.3000 (round level, static level) and 1.2940 (static level).

Looking north, first resistance could be spotted at 1.3100 (Fibonacci 78.6% retracement level of the latest uptrend) before 1.3170 (Fibonacci 61.8% retracement).

• The bullish trend for USD/JPY continued at a slower pace.

• Market participants slashed bets for a 50-bps November Fed rate cut. 

• Economists expect inflation to ease from 2.5% to 2.3%.

The USD/JPY forecast shows dark clouds gathering over the recent bullish trend as market participants await the all-important US CPI report. Still, after rallying on lower Fed rate cut expectations, the dollar hovered near a ten-week high against the yen. 

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The bullish trend for USD/JPY continued at a slower pace ahead of crucial US inflation data. Initially, a robust rally followed data showing a resilient labor market. The US nonfarm payrolls report showed an unexpected jump in job growth in September. At the same time, unemployment eased. As a result, market participants slashed bets for a 50-bps November Fed rate cut. 

Before the jobs report, Powell had changed his tone to slightly hawkish. He suggested two more quarter-point rate cuts in 2024. However, before that, policymakers were quite dovish, leading to the massive September rate cut. As a result, the FOMC meeting minutes showed agreement with the super-sized rate cut. However, it was outdated since it came well before the blockbuster jobs report.

Currently, market participants are pricing an 85% chance of a 25-bps rate cut in November. However, this outlook might shift further with the upcoming US CPI report. Economists expect inflation to ease from 2.5% to 2.3%. Meanwhile, the monthly figure might increase by 0.1% after a 0.2% increase in August. The outlook for Fed rate cuts might shift significantly if inflation spikes well above estimates. On the other hand, easing price pressures will support another rate cut in November.

USD/JPY key events today

• US core CPI m/m
• US CPI m/m
• US CPI y/y
• US unemployment claims

USD/JPY technical forecast: RSI signals fading bullish enthusiasm

On the technical side, the USD/JPY price has rallied to a new peak. It trades well above the 30-SMA with the RSI above 50, supporting a bullish bias. However, price action has shifted from massive green candles to mall ones. This could indicate fading strength for bulls. 

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At the same time, the RSI has made a bearish divergence with the price, showing fading momentum. Therefore, bears might be ready to take charge. If the price breaks below its bullish trendline, it might fall to the 30-SMA or lower. Otherwise, bulls might continue making higher highs. 

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Created on October 10, 2024

• The euro initially tried to rally a bit during the trading session on Wednesday and as a result sellers came in and pushed this market lower.
• All things being equal it’s worth noting that the US dollar continues to strengthen as the Federal Reserve cutting rates by 50 basis points is not only a bit of a shock.
• It also suggests that perhaps there’s more trouble out there than people anticipated.
• If that’s the case at this point in time, one would have to think that it’s probably only a matter of time before the markets run back into the bond markets in America, which require US dollars.

That being said, it is worth noting that the 200 day EMA sits right around the 1.09 level, and therefore I think you could see a bit of a floor there. If we break through that large round psychologically significant number, then the Euro could be in serious trouble. Short term balances at this time, probably somewhat likely, but I think that with the currency action that we have seen during the day on Wednesday, it looks like the US dollar is really starting to flex its muscles again, and if that’s the case, I think we probably have further to go and that every time we do rally, we probably have sellers looking to short the euro again.

Both Central Banks are Softening

After all, both of these central banks are very soft at the moment, but if we are going to see a lot of problems, then the U S dollar is by far the first place people want to be that hasn’t changed. And I don’t think it’s going to, at least not in the short term rallies are treated with suspicion at least until we can break above the 50 day EMA. All things being equal, I think this is a very choppy and sideways market, but certainly has more of a downward tilt these days.

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Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on inflation numbers from Japan and the US and central bank commentary. Softer inflation figures from Japan could dampen bets on a Q4 2024 BoJ rate hike. However, a lower-than-expected US inflation rate could raise expectations of a 50-basis point Fed rate cut.

A more dovish Fed rate path may narrow the interest rate differential between the US and Japan, impacting US dollar demand.

Traders should stay alert as monetary policy chatter, Japan’s economic data, and the US CPI Report will impact trading USD/JPY strategies. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay ahead of the market with our expert insights.

USD/JPY Technical Analysis

Daily Chart

The USD/JPY remains comfortably above the 50-day EMA while hovering below the 200-day EMA, affirming bullish near-term but bearish longer-term price signals.

A USD/JPY break above the 200-day EMA could give the bulls a run at 150. Furthermore, a breakout from 150 may signal a move toward the trend line and the 151.685 resistance level.

Inflation figures and central bank commentary require consideration.

Conversely, a break below the 148.529 support level could indicate a drop toward 147.500. A fall through 147.500 may bring the 50-day EMA and the 145.891 support level into play.

The 14-day RSI at 65.28 indicates a USD/JPY move to the 200-day EMA before entering overbought territory.

Created on October 09, 2024

• Amidst selling pressure, the EUR/USD exchange rate is expected to witness further losses in the coming days and weeks, as some analysts see that a return to the 1.0780 support level is not impossible.
• The recent losses of the EUR/USD reached the 1.0951 support level before settling around the 1.0970 level at the time of writing, amid anticipation of the announcement of the minutes of the last meeting of the US Federal Reserve and then the US inflation figures.

Regarding the expected price of the EUR/USD in the coming days: According to Tanmay Purohit, technical analyst at Société Générale, the recovery of the US dollar puts an end to the rise of the euro in 2024, at least in the short term. The analyst says: “The EUR/USD pair struggled to overcome the August peak near 1.1200 in a recent attempt to form a double top.”

EUR/USD Technical analysis and forecast:

Later, the EUR/USD pair gave up the 50-day moving average (1.1050) and fell below the neckline of the pattern, indicating the risk of a deeper decline. These developments come on the heels of strong, better-than-expected US data confirming that the US economy is not on the verge of recession, and that the need for further US rate cuts by the Federal Reserve is not urgent. Therefore, further cuts are certainly coming, but not as intensely and quickly as some had thought. Meanwhile, the European Central Bank will be under pressure to act again amid the slowdown in the Eurozone economy, with successive rate cuts likely at next week’s meeting. Overall, the divergence in interest rate outlook is putting EUR/USD under pressure again, and technical analysts are tasked with assessing the market levels that will come into play. The analyst added, “If EUR/USD fails to reclaim the moving average near 1.1050, the bearish move is likely to extend,” The next potential support levels could be found at 1.0900/1.0870, the 50% retracement level from April and 1.0780.

In the same vein, Fawad Razaqzadeh, FX analyst at City Index, said: “The technical outlook for EUR/USD has turned bearish.”

He explained that EUR/USD has now broken the 1.1000-1.1025 support zone, meaning it has created a temporary low. “Unless the exchange rate rises above this zone, the path of least resistance remains to the downside despite the slight uptick in prices so far this week,” the analyst said. He added that the next key support level to watch is around 1.0900, followed by the 200-day moving average around 1.0875.

On the stock trading front, US futures flat after market recovery U.S. stock futures were little changed on Wednesday after a rally led by technology stocks on Wall Street in the previous session. In regular trading on Tuesday, the S&P 500 and the Nasdaq Composite jumped 0.97% and 1.45%, respectively. Meanwhile, the Dow Jones Industrial Average rose 0.3%. Nine of the 11 sectors in the S&P 500 ended higher, led by technology, telecommunications services and consumer discretionary stocks. Also, Tech giants such as Nvidia (4.1%), Apple (1.8%) and Meta Platforms (1.4%) were notable performers. Meanwhile, energy and materials stocks, including Exxon Mobil (-2.7%), Chevron (-1.6%) and Southern Copper (-3.8%), fell. Clearly, the moves came after a strong U.S. jobs report last week raised hopes that the Federal Reserve will deliver a soft landing. Also, investors reacted to the sharp drop in oil prices, while the US 10-year yield remained above 4%. However, investors expect more volatility in the run-up to the US presidential election. Now, markets are looking ahead to the latest Federal Reserve meeting minutes and major bank earnings.

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