Created on October 30, 2024

• The Euro initially pulled back just a bit during the trading session on Tuesday, only to turn around and show signs of life.
• By doing so, the market is likely to continue to see a lot of noisy behavior.
• I think ultimately this is a situation where the 164 Yen level underneath will continue to be a significant area of interest as it was previous resistance and now should offer support based on market memory.

Keep in mind that the Bank of Japan has an interest rate decision on Thursday, and this of course will have a major influence on what happens next, but the Bank of Japan has already admitted that it can’t do much as far as tightening monetary policy. So, I think you will continue to see the carry trade come back to life.

Carry Trade Continues to Drive this Pair Despite Euro Weakness

While the euro is not necessarily my favorite currency, it’s not as bad as the Japanese yen. And it’s worth noting that you are speaking of relative strength, not strength. Those are two different things. The market could rally to the 168 yen level above where I see a massive amount of market memory just waiting to cause issues. Right now that’s my target. With all of the noise between here and there on the charts and of course the Bank of Japan interest rate decision, I do think it’s going to be a very messy move to that level, but I do think it happens given enough time.

For what it is worth, the 50-day EMA is starting to curl higher, and it looks like it wants to cross above the 200-day EMA, kicking off the so-called Golden Cross. While I’m not a huge advocate of this signal, it is something worth noting for longer-term traders. I’m not a big fan of it, but that being said I know that a lot of the longer-term “buy-and-hold traders” will pay attention to it.

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• GBP/USD holds above 1.3000 in the European session on Wednesday.
• The UK government will announce the Autumn Budget.
• The US economic calendar will feature ADP Employment Change and Q3 GDP data.

Following Monday’s choppy action, GBP/USD gained traction and closed in positive territory on Tuesday. The pair stays in a consolidation phase above 1.3000 in the European session on Wednesday as market focus shifts to key macroeconomic data releases from the US and the UK budget announcement.

UK Chancellor Rachel Reeves will unveil the Autumn Budget later in the day, which is expected to include tax rises and spending cuts. 

Previewing the potential market reaction to the UK budget announcement, “Chancellor Reeves is expected to loosen fiscal policy somewhat and if she manages to pull that off and maintain credibility with investors, the GBP might benefit,” Scotiabank’s Chief FX Strategist Shaun Osborne said in a recently published report.

Meanwhile, the US economic calendar will offer the ADP Employment Change for October and the US Bureau of Economic Analysis’ first estimate of the third-quarter Gross Domestic Product (GDP) growth.

Investors see the employment in private sector rising by 115,000 following the 143,000 increase recorded in September. Additionally, the US’ GDP is forecast to expand at an annual rate of 3% in the third-quarter.

The USD could stay resilient against its rivals if these data arrive near or above market expectations and make it difficult for GBP/USD to push higher. On the other hand, mixed or disappointing data releases from the US could help the pair hold its ground. Nevertheless, it could be risky to bet on a direction in between the US data releases and the UK budget announcement.

GBP/USD Technical Analysis

GBP/USD rose above the descending trend line and the pair closed above the 100-day Simple Moving Average (SMA) on Tuesday. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart rose slightly above 60, highlighting a buildup of bullish momentum.

On the upside, 1.3030 (20-day SMA) aligns as immediate resistance before 1.3100 (round level) and 1.3140 (50-day SMA). In case the pair falls below 1.3000 (round level, static level) and starts using this level as resistance, 1.2970 (100-day SMA) could be seen as next support ahead of 1.2900 (static level).

• EUR/USD edges higher toward 1.0850 in the European session on Wednesday.
• Investors will have many data releases from Germany, the Eurozone and the US to assess.
• The technical outlook points to a buildup of bullish momentum.

EUR/USD gains traction and rises toward 1.0850 in the European trading hours on Wednesday. Although the technical outlook highlights a buildup of bullish momentum, the Euro still faces a two-way risk on high-impact macroeconomic data releases.

Regional Consumer Price Index (CPI) figures and third-quarter Gross Domestic Product (GDP) data from Germany will be watched closely by market participants. Investors expect Germany’s GDP to contract at an annualized rate of 0.3% in the third quarter. A worse-than-expected GDP print, combined with soft regional inflation figures from Germany, could weigh on the Euro with the immediate reaction.

Later in the day, the ADP Employment Change for October will be featured in the US economic docket. Analysts see the employment in private sector rising by 115,000 following the 143,000 increase recorded in September.

Additionally, the US Bureau of Economic Analysis will publish its first estimate of the third-quarter GDP data, which is forecast to show an expansion at an annual rate of 3%.

In case the ADP and the GDP data both disappoint, the US Dollar (USD) is likely to come under renewed selling pressure and open the door for a leg higher in EUR/USD. On the flip side, the USD could regather its strength if these data arrive near or above market consensus. If the figures come in mixed, investors could refrain from taking large positions. In this scenario, the risk perception following the Wall Street’s opening bell could be the driving factor for the USD’s performance.

EUR/USD Technical Analysis

EUR/USD broke out of the descending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart rose to 60, reflecting a bullish shift in the short-term technical bias.

On the upside, the 200-day Simple Moving Average aligns as strong resistance at 1.0870 ahead of 1.0900 (round level) and 1.0940 (100-day SMA). Looking south, first support could be spotted at 1.0810-1.0800 (20-period SMA, 50-period SMA, round level) before 1.0750 (static level) and 1.0700 (round level, static level).

October 29, 2024 – Written by John Cameron

STORY LINK Pound to Euro Rate Today: GBP/EUR Subdued following German Data

The Pound Euro (GBP/EUR) exchange rate treaded water on Tuesday following the publication of Germany’s latest GfK consumer confidence data.

At the time of writing, the GBP/EUR was trading at around €1.2008, virtually unchanged from Tuesday’s opening levels.

The Euro (EUR) faced challenges attracting buyers on Tuesday and remained largely unchanged against most of its counterparts despite encouraging data emerging from the Eurozone’s powerhouse economy.

Germany’s recent GfK consumer confidence report exceeded expectations, affirming a second straight month of improving sentiment. The index for the coming month climbed from the current -21.0 up to -18.3, outpacing the more conservative forecast of -20.5.

Nonetheless, the positive economic indicator failed to boost the single currency, which remained mostly flat following the data release.

The Pound (GBP) experienced little movement against most currencies on Tuesday amid a lack of significant economic data releases from the UK.

Market participants appeared hesitant to make substantial plays on GBP as they looked ahead to Wednesday’s crucial Autumn Budget announcement.

With the UK Chancellor set to unveil her fiscal strategy, the key concern is whether anticipated tax cuts could weigh on GBP exchange rates.

However, should the Chancellor’s initiatives to stimulate investment and ‘rebuild Britain’ be met with optimism, this could lift the Pound during mid-week trade.

Looking forward, the main driver of movement for the Pound Euro exchange rate heading into Wednesday is anticipated to be the UK’s upcoming Autumn Budget release.

This event could spark significant volatility for GBP exchange rates, especially if the UK Chancellor struggles to persuade markets of the benefits of her economic strategies.

Equally, if Rachel Reeves’ initiatives to ‘boost UK growth’ resonate positively, it could strengthen sentiment towards the Pound.

Shifting focus to the Euro, Wednesday brings a series of economic data releases from the Eurozone and Germany.

With both the Eurozone and Germany set to publish their latest GDP figures, alongside Germany’s newest labor data and the Eurozone’s economic sentiment index, the single currency is likely to see fluctuations post-release.

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Created on October 29, 2024

• The Japanese yen traded around 153.30 yen against the US dollar on Tuesday, hovering near its three-month low and remaining under pressure from political uncertainty after Japan’s ruling coalition lost its parliamentary majority in weekend elections.
• Political instability is challenging the Bank of Japan’s plans to normalize monetary policy after decades of stimulus.
• Furthermore, the leader of the Democratic Party for the People also said that the Bank of Japan should avoid making major policy changes as real wages are now stagnant.

Meanwhile, the currency’s weakness prompted Finance Minister Katsunobu Kato to reiterate that authorities remain vigilant on foreign exchange movements. Moreover, financial markets fear that a further drop to the 160 level could increase the likelihood of another currency intervention. Externally, the Japanese yen continued to face pressure from a strong dollar amid expectations of a more cautious Fed rate cut and bets on a Trump victory in November.

According to stock trading platforms, Japanese stocks rise for a second session. According to trading, the Nikkei 225 index of Japanese shares rose 0.1% to around 38,660. Meanwhile, the broad TOPIX index rose 0.3% to 2,665 on Tuesday, rising for a second straight session as investors continued to assess the effects of the recent elections.

The ruling Liberal Democratic Party lost its parliamentary majority in the weekend elections, raising uncertainty about policy and further complicating the Bank of Japan’s interest rate hike plans. Meanwhile, economic data showed that Japan’s unemployment rate fell to 2.4% in September from 2.5% in August, the lowest in eight months.

Now, investors are looking ahead to the Bank of Japan’s policy decision next Thursday, when it is widely expected to keep interest rates on hold. Financial stocks led the attack, with strong gains from Mitsubishi UFJ (2.1%), Sumitomo Mitsui (1.6%) and Mizuho Financial (2%). Other heavyweights in the index also advanced, including Mitsubishi Heavy Industries (1.6%), SoftBank Group (1.9%) and IHI Corp (2%).

USD/JPY Technical Analysis and Expectations Today:

We still expect the upward trend of the USD/JPY to continue until the reaction to the release of US jobs numbers and the Federal Reserve’s preferred US inflation reading, and until the US presidential election is over. Therefore, any decline in the USD/JPY could be an opportunity to buy back in. Currently, the closest support levels for the USD/JPY pair are 151.90 and 150.00, respectively. Conversely, according to the daily chart performance, the initial upward trend will not be broken without moving below the support level of 148.00.

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Created on October 29, 2024

• The previous weekend saw some recovery in the euro, suggesting that the dollar’s appreciation trend may be nearing exhaustion.
• The EUR/USD losses last week reached a support level of 1.0761, the pair’s lowest in three months, and the rebound gains did not exceed the 1.0840 level, stabilizing around 1.0810 at the time of writing this analysis.

Last Thursday’s 0.42% gain was the biggest one-day gain since September 24 and had the potential to mark a turning point from the frenzied selling, with some chatter in the forex commentary that the selling has finally exhausted itself. However, Friday’s price action was not inspiring, and the failure at the 9-day moving average suggests it is too early to call a turnaround.

EUR/USD Technical analysis and forecast:

Accordingly, the next five days could see further weakness, with our initial target being the 1.0760 support level. If EUR/USD can manage a break above the 9-day moving average (currently at 1.0831), neutrality is likely to occur. Technically, this level is certainly close and achievable at the time of writing. Any subsequent consolidation would see EUR/USD return to the 200-day moving average, currently at 1.0869, which would act as resistance.

Moreover, that is as far as we are prepared to go when it comes to the upside, as we need to see a fundamental shift happen for a meaningful recovery to develop.

Aside from a technical perspective, a potential fundamental boost for the euro could arrive on Wednesday with preliminary October inflation data from Spain and Germany. It was the September inflation data for these two countries that sank the euro when it was released at the start of the month, leading to a rate cut by the European Central Bank two weeks later. Markets are expecting inflation to rise slightly by the end of the year, which could soften the impact on the euro if confirmed mid-week. However, any strength would be limited. On the other hand, any decline in inflation figures would only increase the belief that the ECB should be preparing for action, which could weigh on the euro.

Eurozone inflation data is due the following day, although recent history suggests that markets would normally take their cue from German and Spanish data the day before.

Overall, the US side of the equation will remain the more important driver, with Friday’s US Labor market figures the highlight of the week. If the US non-farm payrolls component beats expectations, expect US yields to rise as markets lower expectations for the size of the Fed rate cut in the coming months.

Obviously, this would strengthen the US dollar and lead to further declines in EUR/USD over several weeks.

Also, we expect the US election to be a major focus of the market during all of this. Moreover, what we have seen in recent days is that the odds of a Trump win are consistent with the strength of the dollar. The market is certainly holding at around 60% for a Trump win, and holding around this level could ease the downward pressure on the EUR/USD in the coming days. As such, we believe markets will remain nervous ahead of the vote, with uncertainty remaining high. Ultimately, this is fertile ground for the USD and can only add to the sense that the EUR/USD is biased to the downside.

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Created on October 29, 2024

• The Euro has rallied a bit during the course of the trading session on Monday against the British pound.
• As we continue to see a lot of market participants test the 0.83 level for support.
• Ultimately, we did find it. And that of course is a relatively good sign, but we also have to keep in mind that we have been here multiple times in the past and as a result, the market is still currently cutting back and forth between the 0.83 level on the bottom and the 0.84 level on the top.
• The 50 day EMA sits just below the 0.84 level and is offering significant resistance as was support previously.

If We Break Higher

If we could break above the 0.84 level, then the market is likely to go looking to the 200 day EMA, which is closer to the 0.8480 level. If we were to turn around and break down below the 0.83 level, then the market really starts to unwind as it would be a break of the massive support level that’s been important for multiple years and at multiple times.

All things being equal, this is a market that is neutral, but it’s trying to sort out whether or not we are finding some type of floor for the market. I do expect choppiness and noisy behavior, but quite frankly, that’s nothing new for this pair. And ultimately, this is a market that I think given enough time, we’ll have to make a bigger decision. Once we break out of this 100 point range, then it will become increasingly obvious. If we do break out of that area, then the market is likely to continue to go much higher or lower, and the so-called “measured move” of course would be for 100 points. This is a pair that does tend to be very choppy and noisy, so keep that in mind if you are in fact trying to trade it.

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Created on October 29, 2024

• The GBP/USD exchange rate is likely to remain under pressure in the coming days, with any bouts of strength likely to be short-lived.
• As we previously expected for GBP/USD, the downside was favoured as the exchange rate was capped by the 9-day moving average.
• Fast forward to this week and the same holds true: the exchange rate remains under pressure from the 9-day moving average, with the downside favoured for the next five days, with a target at 1.2909 support.

Technical forecasts for the GBP/USD pair today:

The USD momentum certainly stalled during the latter half of the previous week, leading some to believe that the downtrend is starting to subside. GBP/USD has tried to recover amid USD weakness. However, the rally failed to break above the 9-day moving average at 1.2995, indicating a clear lack of appetite to bet against the USD in the face of impending event risks.

Overall, risk management fundamentals suggest that standing in the way of GBP/USD weakness is unwise at this stage, and those looking to buy the dollar should be able to shed some of their exposure ahead of the US vote next Tuesday. Ahead of the November 5 election, we have the US Non-Farm Payrolls figures due out next Friday.

As is clear, the US dollar’s attack in October was supported by a slew of economic data releases that beat consensus and talked about a strong economy where there is no urgent need for further interest rate cuts from the Federal Reserve.

After entering the month believing that another 75bp of cuts from the Fed were needed, the market is now locked into expecting just one cut. This repricing is certainly significant and may be coming to an end, which could ease the downside pressure on GBP/USD and spark a recovery and a period of neutrality.

However, a strong US Labor market reading on Friday is likely to help US bond yields and the dollar and weigh on GBP/USD.

At the same time, we expect the US election to keep the market focused throughout all of this. What we have seen in recent days is that the odds of a Trump win are consistent with the strength of the dollar. The odds that the market is assuming are certainly settling around a 65% chance of a Trump win, and settling around this threshold could ease the downside pressure on GBP/USD in the coming days. However, we believe that financial markets will remain nervous ahead of the vote, with uncertainty remaining high. Clearly, this is fertile ground for the US dollar and can only add to the sense that GBP/USD is biased to the downside.

Also, this is an important week for the pound as the UK government will release its budget on Thursday. Obviously, we know that this budget is likely to be tough for businesses and investors and therefore a potential headwind for growth. This could weigh on the pound, especially if the market believes that the new tax increases will reduce the UK’s growth potential.

However, analysis suggests that the budget will be expansionary as the Chancellor has changed the UK’s fiscal rules to allow her to borrow more money to invest in projects that could boost the UK’s growth potential. Also, some estimates suggest that the growth boost could be as much as 0.50% in 2025, which would require the Bank of England to be more cautious about cutting interest rates. This would amount to a positive outcome for the pound.

At the same time, the risks to the pound are that the market does not accept expectations of increased borrowing, similar to the reaction to Liz Truss’s aborted 2022 mini budget which caused the pound to collapse. However, all analysts say they have seen and heard enough to believe that this is unlikely, so we believe the budget poses little risk to the pound.

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Created on October 29, 2024

• During my daily analysis of the EUR/USD pair, the first thing I see is that we are hanging around the 1.08 level, an area that of course has been important multiple times.
• This is more of the same action that we have seen over the last several days, and therefore I think we are simply hanging around and trying to sort out what to do next.
• The euro of course is going to continue to be sensitive to the idea of what happens next in the bond market in America, due to the fact that the US dollar strengthening has been the major factor of what we are seeing here.

Technical Analysis

The technical analysis ot the EUR/USD exchange pair of course is rather negative, but the fact that the 1.08 level has offered support multiple times suggest that we are going to continue to see a lot of action in this area.

Ultimately, if we do break down from here, I believe that the 1.0750 level is an area that is the bottom of the “support range” that is active at this point. If we were to break down below there, then things could get rather ugly, and open up the possibility of an even bigger drop from here.

On the other hand, if we do break above the 1.0850 level, it could be the beginning of some type of correction, perhaps all the way to the 200 Day EMA. That is at roughly 1.09 and dropping.

That’s an area that I think would attract a lot of attention, and therefore people would have to watch very closely as to how we behave in that general vicinity. If we were to break above the 200 Day EMA, then it would obviously be a very bullish turn of events. However, if we were to see a significant amount of exhaustion near that area, then I would have to believe that the market is likely to pull back and start falling toward the 1.08 level again. Either way, I think we are going to see a certain amount of choppiness.

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October 28, 2024 – Written by David Woodsmith

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Choppy ahead of UK Autumn Budget

The Pound Euro (GBP/EUR) exchange rate was mixed on Monday as investors braced for the UK Autumn Budget and some high-impact Eurozone data.

At the time of writing, GBP/EUR traded at €1.2000, having wavered in a narrow range.

The Pound (GBP) fluctuated on Monday as markets prepared for the imminent UK Autumn Budget.

The Labour government’s highly anticipated budget has kept GBP investors on edge for weeks, with concerns about potential tax increases and spending cuts counterbalanced by expectations of increased investment.

Given this ongoing uncertainty and the budget’s potential to spark significant volatility in the Pound, investors were cautious about making substantial bets on GBP on Monday.

At the same time, a brightening market mood provided some support to the increasingly risk-sensitive UK currency, helping to mitigate potential losses.

Meanwhile, the Euro (EUR) drew some support on Monday due to its strong inverse relationship with a weakening US Dollar (USD).

The safe-haven American currency was losing ground amid an improving market mood and a decline in US Treasury yields, with USD weakness bolstering EUR.

However, the cautiously optimistic market sentiment also kept the safer Euro from appreciating significantly against the riskier Pound.

Looking ahead, Germany’s upcoming consumer confidence report, scheduled for Tuesday morning, could influence the Euro. If consumers in the Eurozone’s largest economy maintain a deeply pessimistic outlook heading into November, the shared currency may face challenges.

Wednesday’s events are set to bring notable volatility. In the Eurozone, the bloc’s latest GDP figures and German inflation data will be released. Weak Eurozone growth in the third quarter could weigh on the Euro, while a rise in German inflation might lend it support.

For the Pound, Wednesday’s Autumn Budget announcement will be the main focus. A favourable reception to the budget could boost Sterling, while concerns about tax hikes or rising borrowing costs could dampen GBP. Regardless, investors can expect volatility as they process the government’s tax and spending plans.

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