Berita & analisis pasar

The ongoing sell-off in the US bond market has set the tone in FX and wider risk markets on Tuesday in an otherwise very slow news day. The USD has continued to grind higher against the higher yield backdrop with the US Dollar Index (DXY) adding to Mondays gains pushing above the 106 level, tracking yields higher. The Fed’s recent “higher for longer” statement still supporting yields, worries of a US government shutdown looming and more hawkish comments from the Fed’s Kashkari on Monday also giving a tailwind to yields and the US dollar.

EURUSD saw further declines, first breaking support at the May 31 swing low, before also dropping below the psychological 1.06 level, with the major support of the Jan/Feb/Mar lows at 1.0521 very much in play. USD strength was the main driver but also weighing on the EUR was weak world merchandise trade volumes data, the eurozone suffers from a declining trade environment, as does the Euro. GBPUSD also continued to decline after last week’s surprise hold from the Bank of England.

Ongoing USD strength, another hit to the cyclical GBP is the softening risk sentiment in global markets amid a possible US government shutdown. GBPUSD breaching the 1.22 support level and looking little in the way of technical support levels can be expected before the 1.2000/2075 area. USDJPY stalled from its recent grind higher after climbing just shy of the 149.00 handle, another round of the familiar jawboning from Japan’s Finance Minister Suzuki holding it in place for now, JPY also helped somewhat by the weakening risk environment seeing haven flows to the Yen.

The USD sell off continued Thursday moving in lockstep with yields again ahead of today’s key non-farm payroll figure. Unemployment claims came inline and had a limited impact as it was yields driving action in the USD. DXY dropped to close at the lows of 106.32 from earlier highs of 106.86.

So far this looks like a technical pullback from overbought levels, with a strong support at the lower trendline around 106.10 as traders turn to watch todays NFP figure. EUR was propped up once again by USD weakness, with EURUSD testing the key support at 1.05 several times before rallying to hit a high of 1.0558. ECB members de Guindos and Kazimir spoke, with the former saying the current level of rates will help tame inflation, but noted the ECB is data dependent and it is premature to discuss rate cuts.

While Kazimir noted that the September EZ core inflation confirmed ECB expectations, and reiterated he believes the last rate hike was the final one. JPY firmed against the USD with USDJPY dropping below 149.00 led by the softening of US Treasury yields. Traders seemingly still wary of a push above 150.00 seeing potential Yen intervention following the “flash crash” on Tuesday when the pair poked above this level.

AUD and NZD were bid with outperformance in both currencies, bolstered by the improved risk sentiment and lower US yields. AUDUSD rose above 0.6350 and NZDUSD rose above 0.5950, the Kiwi marginally outperforming the Aussie seeing the AUDNZD cross rate drop below 1.07 again, the pair has found some short-term resistance at the 1.07 level this week with cross make a few attempts to break and hold but so far being rejected. Today’s calendar is dominated by the always exciting NFP, a hot figure here will test the markets pricing of interest rates and should see the yield/USD rally recommence.

EURUSD is once again at an interesting technical level coming into key US data this week. After holding firm in a rising channel for most of 2023, price fell away in early September. This coincided with the price also falling below the 200 SMA which also acted as support multiple times in 2023 so far.

After bouncing nicely on the first horizontal support zone, we saw this level fail last week. A couple of days of positive trading sees price back up at this key zone, where we will be waiting to see if that horizontal support flips to resistance to bounce price back south and continue the downward trend. With the US interest rate decision out on Wednesday, we could be in for some volatility on this pair.

The market is currently predicting a 99% change of a continued pause, keeping rates at 5.5%. Any deviation from this is likely to cause some big movements in the USD, and this pair. With mixed inflation data out lately and oil prices soaring, this will be an important decision for the US Fed.

If the 1% probability occurs and the Fed hikes rate, this will likely see strength form in the dollar. With price currently at some key technical levels going into big economic data, it could be an interesting trading period for EURUSD this week.

EURUSD is heading into today’s knife-edge ECB rate decision lacking any real direction after Wednesdays CPI inspired choppy performance. Markets are split on today’s ECB rate decision with money markets pricing around a 65% chance of a 25bps rate hike, but a slight majority of economists polled by Bloomberg expecting a hold. Against this backdrop traders seem to be taking a wait and see approach with EURUSD unchanged, trading in a tight range in Thursdays APAC session and so far in EU session.

This will change at 12:15pm GMT as the ECB announces its rate decision, with a split market there will be almost certain volatility in EURUSD whichever way the ECB goes, with markets pricing in a 65% chance of a hike the risk on balance does seem skewed to the downside for EURUSD. A lot will also depend on the guidance released with the rate decision and the press conference 30 minutes after. No hike and a statement anything less than ultra hawkish will likely see a sharp drop in EURUSD initially, possibly testing the June and September lows support zone just under 1.07.

This will be a key area to watch after the initial reaction. A Hike of 25bp will likely see an initial pop in EURUSD, but attention will then turn to the statement. The ECB is expected to stick with the data dependent narrative as to its future moves, but it will be hints of possible further hikes (hawkish) or hints that they may be at the peak (dovish) which will likely drive the Euro once the initial reaction is done.

Even if we get the 25bp hike today money markets are pricing in 23bp of hikes this year already, this should cap any sustained rise in the Euro after a likely initial spike higher unless the statement hints strongly of more to come, which against a backdrop of a slowing EU economy seems unlikely. The key level to watch to the upside is the psychological 1.08 level, which would also bring EURUSD up to its trendline resistance and would see hard going for further gains unless at a technical perspective. The ECB rate decision will be released at 12:15 GMT with the presser at 12:45 GMT.

WTI Crude oil got off to a flyer on Monday open as news broke of conflict in the Middle East saw a hefty risk premium being priced in fueled by fears of supply disruptions. It seems some of those fears have abated and along with a massive crude inventory build of almost 13mm barrels reported by API on Wednesday, a classic gap fill chart pattern has formed on USOUSD after a steep drop, with USOUSD currently trading at 83.37, down markedly from the conflict spike high of 87.65 in Monday’s session. Geopolitical risk will be very much at the forefront of Oil traders’ minds with an escalation and/or expansion of the current conflict very much having the ability to cause high volatility in oil, we do also have some important technical levels and scheduled economic announcements to watch for the remainder of the week’s trading.

Chart Technicals: Monday’s gap open found resistance at the upward trend line, which up until early October has been a significant support level, to the upside this will be the next technical level to watch, around the 87.225 zone, a retake of this trendline support could then see USOUSD next testing the 23.6 fib level at 88.958 which had also offered support during September. To the downside Fridays low and the nearby 50% fib level at 81.333 will be the first major technical level, a break of this support zone will indicate a possible leg down to the 61.8 fib level around 76.867, which was also a swing low support level back in August. Along with further updates from the Middle East, tonight’s US CPI figure will also be important to watch, a low reading will cheer market participants that are banking on a less aggressive Federal Reserve, this will likely see risk assets rally, and Oil along with them as a less aggressive Fed will take the shackles off the US economy and have oil repricing for a more robust demand.

Global markets head into the new week with one eye on ongoing geopolitical pressures and one eye on US data and comments from Federal Reserve members as we come into the last week before the blackout period ahead of the November 2 FOMC meeting. Along with the geopolitical backdrop there is some key scheduled data this week the traders will be watching with keen interest. These are the markets I’ll be watching especially closely this week.

AUDUSD The Aussie had a tough week as risk sentiment soured somewhat in global markets, and an announcement of Chinese stimulus disappointing the market in its scope. AUDUSD did find good support at the November ’22 lows of 0.6280, a level which has now become key for AUDUSD bulls, a break here has a chart with fresh air until the major 0.62 support level. Aussie watchers this week have a talk by new RBA Governor Bullock and Australian Employment data to look forward to, along with some important data from the US including retail sales and unemployment claims.

Market sentiment will also play a part in the performance of the risk sensitive AUD. Gold Gold benefitted from its safe haven status, strongly rallying all of last week with XAUUSD finishing up around 5% for the week. There was a monster push higher on Friday, with a similar move in the Oil market as traders rushed to exit shorts before the weekend in both markets.

XAUUSD pushed up to its 50% Fib resistance level at 1940 on Friday, today in the APAC session we have seen a modest pullback as presumably some safe haven traders are unwinding longs. Key levels to watch this week will be the 1940 level to the upside, a break and hold here would point to a technical leg higher, to the downside, the 1905 Fib, mid-September lows and upper trend channel support level all pretty much line up and will be an important area of support if XAUUSD is to hold last week’s gains. Oil WTI Crude oil had a choppy and volatile week, pushed and pulled around by conflict in the Middle East and oil storage data.

A gap open higher on Monday retraced during the week until, like Gold, a monster move higher on Friday with no-one wanting to be short going into the weekend and the unknowns of the continued conflict. After recently breaking the medium term trendline that had been in play since July. USOUSD has found this level now become resistance at around the 88.10 USD a barrel level and is shaping to be a key level to the upside.

To the downside the gap fill support level at 83.20 will the support level to watch. Beyond the charts geopolitical events will also play a significant role in Oil price movements this week.