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Alexboltyan

EUR/USD Tests Parity As Market Mood Improves The EUR/USD continued to gain ground on Tuesday as the broad-based selling pressure surrounding the greenback amid the risk-positive market mood persisted. At the time of writing, the EUR/USD trades at the 0.9985 area, 1.64% above its opening price, having reached a two-week high of 0.9999 earlier in the session. The market sentiment improved amid speculation that the tightening cycles from major central banks may be close to an end as global rates are reaching levels that could trigger painful recessions. In that sense, U.S. yields continued to pull back, with the 2-, 5-, and 10-year rates trading at weekly lows of 4.07%, 3.82%, and 3.60%, respectively. On Tuesday, the Reserve Bank of Australia decided to raise rates by only 25 bps, below the 50 bps hike expected, fueling speculation that central banks could start to dial down their hawkishness in upcoming meetings. However, Federal Reserve Chair Powell was clear during his last press conference, claiming that the FOMC needs to see compelling evidence that inflationary pressures are easing and that in order for that to happen, the economy needs to see "some pain" referring to a period of below-trend economic growth and softer labor market conditions. Many Fed officials, have highlighted the costs of failing to restore price stability in terms of the bank's credibility. From a technical perspective, the EUR/USD pair short-term bias has turned positive according to indicators on the daily chart. The RSI and the MACD have entered positive ground, while the price has broken above the 20-day SMA. On the upside, EUR/USD following resistance levels could be found at parity and then at 1.0080, where the upper end of a descending channel drawn from February highs stands. On the other hand, short-term supports are seen at the 0.9900 level, followed by the 0.9750 zone and then the 0.9635 area.
by Alex_Boltyan_FXAnalyst
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GBP/USD Surges After U-Turn On Fiscal PlanThe GBP/USD started October on a positive note, extending its bounce from a record low and posting its fifth gain in a row after the U.K. confirmed a fiscal policy U-turn. In the meantime, the greenback continues to correct lower after an outstanding rally over the last weeks. At the time of writing, the GBP/USD is trading at the 1.1310 area, 1.4% above its Friday’s close and having peaked at an 11-day high of 1.1334. After the recent market turmoil amid a controversial tax cut in the U.K., the government announced Monday that it would reverse its plans. Chancellor of the Exchequer, Kwasi Kwarteng, stated that the former method to cut the top 45% income tax rate paid on earnings would not proceed. “We get it, and we have listened,” said Kwarteng. The knee-jerk reaction was an upsurge in the sterling. Across the pond, the U.S. dollar extended its pullback, further weighed by disappointing economic data. Despite the S&P and ISM Manufacturing PMIs for September confirming an expansion of the sector, the latter came in at 50.9, down from the previous reading of 52.8 and missed the market consensus of 52.2. From a technical perspective, the GBP/USD pair maintains a short-term bearish bias, although indicators are beginning to gather upward momentum according to the daily chart. The RSI points higher, about to cross its midline, while the MACD jumped to positive territory. On the upside, the immediate resistance level is seen in the 1.1370 zone, followed by the 1.1400 area. On the other hand, the immediate support level could be faced at the 20-day SMA, currently at 1.1290, followed by the 1.1200 psychological level.
by Alex_Boltyan_FXAnalyst
1
U.S. Dollar Index Regains Ground But Posts A Weekly DeclineThe U.S. dollar pushed higher on Friday after two consecutive days of losses following the release of hotter-than-expected August PCE inflation figures, which back further hawkishness from the Federal Reserve. At the time of writing, the DXY index trades at de 112.15 area, 0.38% above its opening price but is on track to post the first weekly decline in three. On the data front, the U.S. Personal Consumption Expenditures Price inflation rate eased to 6.2% on a yearly basis in August from 6.4% in July. The core PCE inflation, however, rose to 4.9% in the same period, above the 4.7% rate expected. With inflation persistently elevated, markets continue to anticipate aggressive moves from the Federal Reserve as Powell and Co. have expressed their commitment to cool prices down. The WIRP tool suggests that markets lean towards another 75 bps for the next FOMC meeting in November. In the Old Continent, the inflation rate reached its highest level in the euro’s 23-year history, according to the preliminary harmonized CPI, at 10% vs 9.7% expected. The core inflation rate came in at 4.8% YoY vs 4.7% expected, also setting a record high. In that sense, ECB tightening expectations remain elevated as the WIRP tool suggests a 75 bps hike is almost entirely priced in for the next meeting on October 27. The swaps markets are pricing 225 bps of tightening in the next 12 months that would see the deposit rate peak near 3.0%, up from 2.75% anticipated at the beginning of last week. From a technical view, the DXY maintains a bullish outlook on the weekly chart, even though it will be closing this week with modest losses after pulling back from fresh cycle highs. On the daily chart, the DXY also holds a bullish perspective, although indicators suggest a deceleration of the short-term upward momentum. On the upside, the next resistance levels could be found at the 112.70 area, followed by the 113.00 level and September 29 highs near 113.80. On the other hand, support levels are seen at 111.60, followed by the 20-day SMA, currently at 110.80.
TVC:DXY
by Alex_Boltyan_FXAnalyst
EUR/USD Approaches 0.9800 As Dollar Continues To WeakenThe EUR/USD pair is rising for the second day in a row on Thursday as the greenback continues to correct lower after the steep, almost uninterrupted, rally staged over the previous weeks. The U.S. released mixed economic data, while German inflation hit double digits for the first time in the euro era. At the time of writing, the EUR/USD pair is trading at the 0.9785 area, 0.57% above its opening price, after bottoming at a daily low of 0.9635 and extending the bounce off the cycle low struck on Tuesday at 0.9535. The German annual inflation rate – measured by the CPI – reached 10% in September, the highest level in 70 years and higher than the market's consensus of 7.9%. As a response to soaring energy prices, German Chancellor Olaf Scholz announced today plans for a €200 billion relief plan to implement a gas price cap, which he described as a "defensive shield." After Russia's decision to cut its gas supplies to Europe, prices soared, and Germany entered its worst energy crisis since the Second World War, forcing many companies to reduce production or even shut entirely. Across the pond, the greenback struggled to find demand despite mixed data and fragile market sentiment. The Q2 U.S. Gross Domestic Product final estimation contracted by 0.6%, just as expected. On the other hand, the labor market continues to give signs of resilience. The Initial Jobless Claims for the week ended September 23 decreased to 193,000 from the last reading of 209,000, while the markets expected 215,000. Technical View - EUR/USD From a technical perspective, the EUR/USD short-term bias remains bearish, although the selling pressure has eased over the last sessions as the pair has regained over 200 pips from the multi-year low scored on Tuesday. On the daily chart, the RSI points higher, although still below its midline, while the MACD prints lower red bars. On the upside, the immediate resistance level is given by the 0.9800 psychological level and followed by the 20-day SMA at 0.9895. A break above this latter could improve the short-term perspective for the euro. On the other hand, the next support levels are seen at the 0.9635 area, followed by 0.9600 and the cycle low of 0.9535.
by Alex_Boltyan_FXAnalyst
Gold Surges As U.S. Dollar Corrects LowerGold prices advanced for a second straight day on Wednesday as the U.S. dollar weakened across the board, weighed by the decline of Treasury yields and an overdue technical correction. At the time of writing, spot gold, XAU/USD, is trading at the $1,660 area, 1.87% above its opening price, having erased daily losses that saw the yellow metal bottoming out at a fresh cycle low of $1,614 earlier in the session. The main driver behind the yellow metal’s recovery was the pullback seen in global yields – which are considered the opportunity cost of holding gold – after the Bank of England unexpectedly announced a plan to purchase gilts aimed at stabilizing the U.K. markets. U.S. bond yields were down by 3% to 5% across the curve on Wednesday, with the 2-, 5-, and 10-year bond rates at 4.12%, 3.95%, and 3.73%, respectively. The greenback, measured by the DXY index, retreated from a fresh cycle high reached earlier in the session of 114.77, sliding below 113.00 by the end of the New York session. On the data front, U.S. Pending Home Sales showed worrying results and sparkled recession fears. In that sense, many investors are worried that the Fed is being way too aggressive in its war against inflation and that the tighter financial conditions are pushing the American economy into a recession. From a technical standpoint, the XAU/USD holds a short-term negative bias according to indicators on the daily chart, although they point to easing selling pressure. The RSI bounced from oversold levels while the MACD printed a lower red bar, indicating a decreasing selling interest. If the bulls gather momentum, the next resistance levels are seen at the 20-day SMA at around $1,683, followed by the $1,700 psychological level. On the downside, the following support levels could be faced at $1,615 and the $1,600 psychological mark, followed by the $1,590 zone.
OANDA:XAUUSD
by Alex_Boltyan_FXAnalyst
EUR/USD Struggles To Hold Ground Near 0.9600The EUR/USD pair fell for a sixth consecutive day on Tuesday as deepening energy concerns in the Eurozone, monetary policy divergence and risk-off sentiment among traders continue to favor the U.S. dollar versus major rivals. At the time of writing, the EUR/USD pair is trading at the 0.9590 zone, 0.2% below its opening price. The euro managed to advance to a daily high of 0.9670, but the recovery faltered at the beginning of the New York session. However, the shared currency managed to stay above Monday’s two-decade low. Mixed data from the U.S. benefited the greenback. Durable Goods Orders dropped 0.2% in August, less than the 0.4% decline expected. The Nondefense Capital Goods Orders excluding Aircraft increased by 1.3%, beating the market consensus of 0.2%. On the other hand, housing price data showed worrying results as the Housing Price Index retreated by 0.6% MoM in July while the S&P/Case-Shiller Home Price Index grew by 16% YoY in July. August New Home Sales increased more than expected by 0.685M MoM and, together with the Conference Board’s Consumer Confidence Index, which advanced from 103.6 in August to 108 in September, helped the greenback to gain momentum and reverse early losses. From a technical perspective, the EUR/USD pair retains the short-term bearish bias according to indicators on the daily chart. The RSI remains in oversold territory but is starting to move higher, while the MACD keeps printing higher red bars, signaling that the bears are in the driver’s seat. On the downside, the following support levels are seen at the September 26 low of 0.9552, followed by 0.9500, where the lower end from a descending channel traced from the February high reinforces the psychological level. On the other hand, short-term resistances could be faced at this week’s highs around 0.9700 and the 0.9790 level, mid-line of the mentioned channel. Still, the euro would need to regain the 20-day SMA, currently around 0.9900, to ease the immediate selling pressure and aim for a steeper recovery.
by Alex_Boltyan_FXAnalyst
EUR/USD Recovery Falters Amid Risk AversionThe EUR/USD pair fell to fresh 20-year lows on Monday, weighed by broad-based dollar strength and the sour market mood. Monetary policy divergence continued to fuel U.S. yields advance and benefited the greenback. At the time of writing, the EUR/USD pair is trading at the 0.9610 area, 0.82% below its opening price, after bottoming at a multi-decade low of 0.9552 earlier in the session. The Eurozone IFO indexes showed a pessimistic economic outlook. The Business Climate Index came in at 84.3, below the market consensus of 87.1, while the Current Assessment indicator also missed the expectations coming in at 94.5 versus 96 expected. Likewise, the Expectations index also failed to live up to expectations and plummeted to 75.2 from its previous reading of 80.5. Elsewhere, Christine Lagarde and Luis de Guindos from ECB’s Governing Council spoke earlier in the session but didn’t offer any news. They just reassured their commitment to the 2% medium-term inflation target. They both highlighted the risks of inflation, confirming that there would be further increases in the next meetings but that the pace and size of the hikes will remain data-dependent and decided meeting by meeting. Meanwhile, the Federal Reserve of Chicago released its monthly National Activity index, which showed stagnation in August in the U.S. The greenback, measured by the DXY index, extended its rally today to a 20-year high of 114.52 but backed away from highs following the release of the data. From a technical perspective, the EUR/USD short-term technical outlook remains bearish according to indicators on the daily chart, while the price continues to print lower lows. Still, with the RSI already pointing to extreme oversold conditions, the EUR/USD pair could take a breather before another led south. On the downside, support levels are seen at 0.9552, followed by the 0.9500 area, where the lower end from a descending channel traced from the February high stands. On the other hand, bounces will face immediate resistance at the 0.9700 zone, followed by the 0.9800 level and the 20-day SMA around 0.9940.
by Alex_Boltyan_FXAnalyst
GBP/USD Spirals Down And Breaks Below 1.1000The GBP/USD pair tumbled on Friday, losing more than 3% on the day, making this its worst weekly decline since 2020. The pound weakened across the board and fell to its lowest level since 1985 against the greenback at 1.0839, weighed by a widening Fed-BoE rate differential following both banks' meetings this week. Additionally, the U.K. announced on Friday the most significant tax cut in over 50 years, while U.K. preliminary S&P Global PMI figures showed disappointing results, contrasting with U.S. PMIs, which came in better than expected. At the time of writing, the pair trades at the 1.0870 area, losing almost 400 pips, or 3.4%, on the day. U.K. Finance Minister Kwasi Kwarteng announced a radical economic plan to boost growth, which included massive fiscal cuts and investment incentives for businesses estimated to total £45 billion by 2026-27. Investors seemed spooked by the scale of the fiscal giveaway as it will be financed with debt. As a reaction, investors ditched U.K. bonds, sending the 10-year yield on the Gilt up by more than 9% to its highest level since 2011, around 3.84%. More bad news for the British economy was confirmed by the S&P Global PMIs. Both the manufacturing and services sectors contracted, as their indexes came in at 48.5 and 49.2, with the former resulting worse than expected but with the latter beating the market's consensus. In contrast, the U.S. services sector PMI showed a contraction but came in better than the consensus at 49.3 vs 44.7 expected, while the manufacturing sector expanded, with the PMI hitting 51.8, above the forecast of 51.1. The greenback, measured by the DXY index, received a fresh boost from data and rose to a cycle high of 113.23, last visited in May 2002. According to the weekly chart, the technical outlook for Cable remains strongly bearish as this week's candle will close with the steepest loss YTD of around 4.8%. The short-term bias is also bearish, according to indicators on the daily chart. However, oversold conditions in the RSI could anticipate a temporal bounce or at least a pause of losses. On the downside, further support levels are seen at the new low of 1.0839, followed by the 1.0800 and the 1.0700 zones. A break below the latter could expose the all-time low of 1.0520 hit on January 1985. On the other hand, the bulls must retake the 1.1000 area to alleviate the immediate pressure.
by Alex_Boltyan_FXAnalyst
1
GBP/USD Falls To Lowest Since 1985 Despite BoE Rate HikeThe GBP/USD pair fell to its lowest level since 1985 on Thursday following the Bank of England's decision to raise interest rates by 50 basis points, sending the key rate to 2.25%, to curb inflation. Still, bearish pressure on the GBP/USD pair intensified as the Fed–BoE rate gap widened on the back of Wednesday's Federal Reserve's decision to hike the fed funds range by 75 bps to 3-3.25%. Furthermore, the economic perspective seems much more benevolent in the U.S. than in the U.K., giving more room to the Fed to be more aggressive. At the time of writing, the GBP/USD trades at the 1.1260 area after hitting its lowest in over 37 years at 1.1211 earlier on the day. The Monetary Policy Committee (MPC) of the Bank of England decided to raise its interest rates by 50 bps for the second time in a row as five members voted to raise by 50 bps, three members preferred to increase 75 bps and only one member voted to hike the Bank Rate by 25 bps. In addition, the MPC decided unanimously to reduce the stock of purchased U.K. government bonds, financed by the issuance of central bank reserves, by £80 billion over the next twelve months, in line with what was decided in the August meeting. On the other hand, the Monetary Policy Summary stated that the MPC will take the actions necessary to return inflation to 2% and that further rate hikes will be decided meeting by meeting with the scale and pace reflecting the Committee's assessment of the economic outlook and inflation data. According to the forecasts, the UK GDP is set to decline by 0.1% in Q3 and inflation is expected to peak in the next month at 11% as their outlook suggests more persistent inflationary pressures from stronger demand supported by the labor market tightness and wage inflation. The report also stated that the government's announcements of the Energy Prices Guarantees would significantly limit further CPI increases and support the MPC inflation projections to peak in October. From a technical perspective, the GBP/USD pair holds the short-term negative bias, as indicators dive deeper into negative ground while the price continues to hit lower lows. If the bearish momentum persists, the following support levels are seen at 1.1211, followed by the 1.1200 psychological area and then the January 1985 low of 1.1100. On the upside, the bulls must regain the 1.1300 area to improve the short-term picture and pave the way towards 1.1350 and then to the 1.1400 zone.
by Alex_Boltyan_FXAnalyst
EUR/USD Hits Fresh Two-Decade Low After Fed Raises RatesThe EUR/USD pair tumbled to its lowest level since 2002 on Wednesday after the Federal Reserve decided to raise interest rates by 75 basis points for the third time in a row, taking the fed funds' range to 3.0%-3.25%, as expected. The EUR/USD bottomed at 0.9812 as the knee-jerk reaction but bounced toward the 0.9900 area during Jerome Powell's press conference. At the time of writing, the pair is trading at the 0.9840 area, recording a 1.3% daily loss. Chair Powell reinforced his hawkish rhetoric. He assured the FOMC's commitment to bring inflation down, stating that it is the Fed's sole job. He confirmed that ongoing data-dependent rate hikes may be appropriate and that the committee is willing to maintain the funds' rate at a restrictive level and keep them higher "for some time" to restore price stability. According to the median projections, and the so-called dot plot, the members of the FOMC are seeing the funds rate at 4.4% by the end of this year (1% higher than June's projection), 4.6% in 2023, 3.9% in 2024, and 2.9% in 2025. The PCE inflation forecasts where adjusted to 5.4% in 2022, 2.8% in 2023, 2.3% in 2024 and 2% in 2025. From a technical perspective, the EUR/USD pair holds a short-term bearish bias according to indicators on the daily chart. The RSI and the MACD remain in negative territory while the price develops below its main moving averages. On the downside, the 0.9812 low is the immediate support level. A break below this level could pave the way towards the 0.9700 area. On the other hand, short-term resistances line up at the 20-day SMA, currently at around 0.9983, followed by the parity level and the 1.0100 zone.
by Alex_Boltyan_FXAnalyst
Gold Tumbles as Fed Meeting Gets Underway Gold prices fell sharply on Tuesday as the U.S. dollar is getting traction thanks to rising U.S. bond yields ahead of the Fed's interest rate decision. Bond yields and the greenback managed to stay in positive territory despite mixed housing data from the U.S. economy. At the time of writing, the spot price XAU/USD is trading at the $1665 zone, 0.65% below its opening price, after scoring a daily high of $1679 earlier in the session. Ahead of the Federal Reserve decision, U.S. bond yields reached fresh cycle highs, with the 2-, 5- and 10-year rates – which could be seen as the opportunity cost of holding the non-yielding gold – peaking at 3.992%, 3.777%, and 3.604%, respectively. The WIRP tool suggests that investors favor a 75 bps hike and bet on smaller odds of nearly 20% of a bigger increase of 100 bps. The swaps markets are now pricing a terminal rate of 4.75%. The advance of the yields supported the dollar, whose DXY index trades 0.55% higher on the day at the 110.20 area. For the next few days, gold prices could take another hit as on Thursday, the central banks of Japan, Switzerland, and the U.K. – among others – will announce their monetary policy decisions. Despite the fact that it is expected that the BoJ will cut interest rates by 0.1%, the markets are expecting 50 bps hikes announcements by the Swiss National Bank and the Bank of England, which could have a significant impact on risk sentiment and gold prices. According to the daily chart, the short-term technical outlook for XAU/USD remains bearish. The RSI holds a negative slope below its midline and moves towards oversold territory, while the MACD printed a higher red bar, indicating growing selling pressure. On the downside, the next support area stands at the cycle low struck last Friday at $1654. If this level is lost, the XAU/USD could test the $1640 and $1620 areas, last seen in April 2020. On the other hand, resistance levels are seen at the $1660 zone, followed by the $1700 psychological mark and the 20-day SMA, currently at $1710.
OANDA:XAUUSD
by Alex_Boltyan_FXAnalyst
EUR/USD Struggles Around Parity As Investors Brace For The Fed The EUR/USD pair advanced slightly on Monday but remained trading within a narrow range as investors take the backseat ahead of the Federal Reserve monetary policy decision on Wednesday. At the time of writing, the EUR/USD pair is trading at the 1.0025 zone, recording a 0.14% daily gain, the fourth in a row. The FOMC interest decision, the dot plot Chair Powell’s press conference on Wednesday, will be the week’s highlights. Amid a scarce macroeconomic calendar and growing Fed’s tightening expectations – reflected by rising U.S. bond yields – the U.S. dollar will likely remain firm. Markets have already priced in a 75 bps hike, but the case of a 100 bps increase has risen to 25% odds. The DXY index trades little changed at the 109.60 area after hitting highs in the 110.15 zone supported by the 2 and 5-year U.S. bond yields reaching fresh highs of 3.970% and 3.714%, respectively. Across the ponds, ECB officials’ hawkish tone has been keeping the euro afloat. Over the weekend, Joachim Nagel said that “if the data trend continues, more interest-rate increases have to follow, that’s already agreed in the Governing Council.” Meanwhile, Luis de Guindos restated the need for the bank to preserve its credibility. For the ECB’s October 27 meeting, the WIRP tool suggests 85% odds of another 75 bps rate hike. From a technical perspective, the EUR/USD pair maintains a short-term bearish bias, although indicators are beginning to gather upward momentum according to the daily chart. On the downside, the immediate support level could be found at the 20-day SMA around 0.9990, followed by the 0.9900 zone and the cycle low of 0.9864. On the upside, short-term resistance levels are seen at the 1.0100 level and the 1.0160 zone.
by Alex_Boltyan_FXAnalyst
U.S. Dollar Index Turns South After Data But Posts Weekly GainThe U.S. dollar, measured by the DXY index, came under pressure on Friday after the release of September’s Michigan Consumer Sentiment data, which disappointed investors. At the time of writing, the DXY is trading little changed on the day at the 109.75 area, having erased daily gains that took the index to an intraday high of 110.26 earlier in the session. Still, the DXY is set to post a weekly gain of around 0.7%. The University of Michigan released its Consumer Sentiment Index, which consists of a personal survey of consumer confidence in economic activity and shows a picture of whether or not consumers are willing to spend money. The index showed a modest improvement compared to the August reading but came in lower than expected at 59.5 vs. the consensus of 60. The 5-year Inflation Expectations slid in September from 2.9% to 2.8%. Investors focus now turns to next week’s FOMC interest rate decision, the dot plot and Chair Powell’s press conference. The WIRP tool suggests that investors have already priced in a 75 bps hike while the odds of a 100 bps increase eased to 16%. Looking ahead, the swaps market is pricing a terminal rate of 4.5%, which increased sharply after Tuesday’s inflation report. The weekly chart shows a clear bullish outlook as the DXY resumed its upward path. The positive outlook is not as clear in the daily chart as its indicator shows growing bearish momentum in the immediate short term. The RSI holds a neutral slope above its midline, while the MACD printed a higher red bar today, indicating growing selling pressure. On the downside, support levels are seen at the 109.55 area, followed by the 109.40 zone, and below the 20-day SMA, currently at 109.21. On the other hand, resistance levels stand at the 110.00 psychological mark, followed by the daily high of 110.26 and then the cycle high of 110.78.
TVC:DXY
by Alex_Boltyan_FXAnalyst
EUR/USD Struggles To Make A Decisive MoveThe EUR/USD pair continues to gravitate around parity on Thursday. The pair gathered momentum after mixed U.S. data, which showed a modest increase in August Retail Sales but a sharp decrease in the Philadelphia Fed Manufacturing Index. At the time of writing, the EUR/USD pair is trading just a couple of pips below 1.0000, up 0.18% on the day, after hitting a daily high of 1.0017 earlier in the session. The U.S. Census Bureau of the U.S. released August Retail Sales data, which showed an increase of 0.3% after its previous reading of -0.4%. The reading beat the market consensus of 0.0%. On the other hand, the market participants were surprised by the poor numbers of the Philadelphia Fed Manufacturing Index, which came in at -9.9 in the same period from the previous 6.2 printed in July, well below the expectations of 2.8. At the same time, weekly Initial Jobless Claims resulted lower than forecasted at 213,000. As a reaction, the greenback came under moderate pressure. The DXY is hovering around the 109.50 area, virtually unchanged on the day. In the meantime, several European Central Bank members were on the wires offering different perspectives. On Wednesday, Chief Economist Phillip Lane argued that the current inflation transition will require the ECB to continue to raise interest rates but that those future hikes would remain data-dependent, while François Villeroy said the ECB could reach the neutral rate by the end of this year, around 2% in nominal terms, arguing that the bank needs to act in a determined but in an “orderly” way. On Thursday, ECB’s VP Luis de Guindos delivered a more hawkish message emphasizing that the central bank’s most valuable asset is its credibility and that it becomes even more valuable in times of uncertainty. He also stated that the ECB’s monetary policy needs to be focused on price stability. De Guindos called the bank to act “decisively” to control inflation and ensure its credibility isn’t lost. From a technical perspective, the EUR/USD short-term outlook is neutral to slightly bearish, with indicators turning flat on the daily chart following several sessions of indecisive price action. On the downside, the next support levels are seen at 0.9900 and the cycle low of 0.9863 ahead of the 0.9580 area, where the lower end of a descending channel traced from the February high stands. On the other hand, above parity, the following resistance levels are seen at 1.0100 and the 1.0180 zone, where the upper side of the same channel arises as the last defense before 1.0200.
by Alex_Boltyan_FXAnalyst
EUR/USD Trades Near Parity After U.S. PPI DataThe shared currency is up on Wednesday, trading near parity against a weaker greenback, after U.S. PPI data showed a decline in producer inflation in August. At the time of writing, the EUR/USD pair trades at 0.9995, with modest gains of 0.28%, after peaking at a daily high of 1.0023 earlier in the session. The U.S. Bureau of Labor Statistics released August Producer Price Index data, which came in mixed. The PPI inflation eased to 8.7% YoY from its previous reading of 9.8% and slightly below the 8.8% expected. Meanwhile, the core PPI inflation (which excludes energy and food volatile items) slowed to 7.3% YoY from July’s 7.7%, still above expectations of 7.1%. After Tuesday’s dollar impressive rally, in which the Dollar Index gained more than 1.5%, the DXY trades with modest losses near the 109.50 area as the 10-year bond yields eased down. Ahead of next week’s meeting, markets participants are expecting that the Fed will continue its contractive cycle at a faster pace. The WIRP tool shows that a 75 bps hike is already priced in and that investors are betting on 34% odds of a 1% interest rate increase. No Fed officials will be on the wires until next week and with most relevant data already behind, the U.S. bond yields and risk sentiment will dictate the pace of the markets for the rest of the week. According to the daily chart, the EUR/USD short-term technical outlook remains bearish although downward momentum is fading. The RSI holds a positive slope below its midline, while the MACD prints lower green bars. On the downside, the next two critical support levels stand at the 0.9900 mark and the cycle low of 0.9863. To regain traction, the bulls must secure the parity level to advance to the 1.0100 psychological mark and then to the 1.0180-1.0200 zone, where the psychological level is being defended by a descending trendline.
by Alex_Boltyan_FXAnalyst
Gold Falls To $1700 After Hot U.S. CPI ReportGold prices fell on Tuesday, snapping a three-day winning streak, amid a surge in the U.S. 10-year bond yields on the back of higher-than-expected CPI figures. At the time of writing, gold spot XAU/USD is trading at the $1705 area, posting a % daily decline, having set a daily high of $1731 earlier in the session and a low of $1697 post data. The U.S. Department of Labor Statistics released August’s CPI figures. The headline inflation rate climbed to 8.3% YoY versus expectations of 8.1%. The core inflation annual rate reached 6.3%, above the market consensus of 6.1%. Just as Chair Powell commented in Jackson Hole, the Fed welcomed July’s reading, but they argued that the job wasn’t done, and with the August figures, market participants are expecting more aggressive moves from the Committee in the next meetings. The WIRP Tool suggests that a 75 basis points rate hike is now fully priced in for the September meeting, and investors are betting on 14% odds of a bigger increase of 100 bps. As a reaction, U.S. 10-year bond yields, which could be seen as the opportunity cost of holding gold, surged more than 2.5% to the highest level since June 16 to 3.46%. The yields’ rally boosted the U.S. dollar, with the DXY index rising more than 1% to a peak of 109.69. From a technical perspective, the XAU/USD short-term bias remains bearish, with indicators suggesting increasing downward momentum. On the daily chart, the RSI is gaining a significant negative slope, while the MACD crossed below its signal line and printed a higher red bar, indicating a growing selling interest. On the downside, the bulls will try to defend the $1690 area and the cycle low of $1680, critical support. A loss of the latter would expose the $1665 zone, last visited in June 2020. On the other hand, resistance levels are seen at the $1710 zone, followed by the 20-day SMA, currently at $1728, and then the $1740 area.
OANDA:XAUUSD
by Alex_Boltyan_FXAnalyst
GBP/USD Climbs To Two-Week Highs Despite Weak U.K. DataThe Cable started the week on a strong note amid a better mood across the markets. The GBP/USD pair gapped higher and stretched to its highest level since August 30 despite weaker-than-anticipated U.K. data. At the time of writing, the GBP/USD pair is trading at the 1.1680 area, posting a 0.8% daily gain, having set a high of 1.1704 earlier on the day. UK GDP grew at a slower pace than expected by 0.2% in July, below the market consensus of 0.5% but bouncing after a contraction of 0.6% seen in June. At the same time, Industrial Production decreased by 0.3%, while the market expected an expansion of 0.4%, and Manufacturing Production expanded at a slower-than-expected rate of 0.1%, below the consensus of 0.6%. Other data showed that the Index of Services decreased by 0.2%, while the U.K. Trade Balance deficit was confirmed at £7.79 billion as expected. Still, the pound managed to post daily gains for the second session in a row as the greenback staged a downward correction across the board. The U.S. dollar, measured by the DXY index, fell to its lowest in two weeks at 107.81 before trimming losses. Investors’ attention turns to U.S. CPI figures, which will be released on Tuesday, as they could play an important role in the FOMC interest rate decision next week. The WIRP tool points to 90% odds of a 75 bps rate hike by the Fed, while for the BoE’s next meeting – which has been postponed to September 22 in the light of the Queen's death – investors are betting on 60% probabilities of a 75 bps increase. The short-term technical outlook for the GBP/USD pair remains bearish, although it has improved according to the daily chart. The RSI gained a significant positive slope, while the MACD crossed above its signal line and printed a green bar for the first time since mid-August. On the upside, the next critical resistance stands at the 20-day SMA, currently at 1.1710. A break above could pave the way for an advance towards the 1.1750 zone and then to the 1.1800 psychological mark. On the downside, the immediate support could be found at the 1.1600 level. A loss of this area would expose the 1.1500 zone, and the cycle low hit on September 7 at 1.1404.
by Alex_Boltyan_FXAnalyst
Dollar Correction Continues, DXY Posts Weekly DeclineThe U.S. dollar, measured by the DXY index, trades lower for a third straight day as the greenback’s rally faltered during the second half of the week. The index pulled back from a fresh cycle high of 110.78 to below 109.00 on Friday. The DXY index ends the week around 109.00, recording a 0.6% daily loss, having bottomed at an intra-day low of 108.36. On Thursday, during his first appearance since Jackson Hole, Fed Chair Jerome Powell held onto his hawkish rhetoric. He reaffirmed his compromise with price stability and highlighted the need to anchor the public’s inflation expectations. He argued that the committee “Needs to act now, forthrightly, strongly as we have been doing” and that the FOMC is “strongly committed to this project and will keep at it.” In addition, Charles Evans from the Chicago Fed commented that the committee will likely lean towards a 75 bps increase in the next meeting but that he hasn’t made up his mind yet. The swap markets suggest that the tightening expectations remain elevated as the WIRP shows higher odds of nearly 90% of a 75 bps hike on September 21, while the terminal rate that the markets are currently pricing remains at 4.0%. According to the weekly chart, the bullish outlook remains intact for the DXY despite printing the first red candle since the start of August. The short-term DXY bias is also bullish, with daily indicators losing momentum but not showing signs of reversal yet. On the upside, the following resistance levels line up at 109.55 and 110.00 ahead of the cycle high of 110.78. On the downside, the immediate support level is seen at the 20-day SMA, currently at 108.60. Loss of this level would expose the August 26 low of 107.58 and then the 107.45 area.
TVC:DXY
by Alex_Boltyan_FXAnalyst
EUR/USD Clings On To Parity After Lagarde And Powell’s Comments The EUR/USD pair fell to lows sub parity before bouncing and erasing intraday losses in a volatile session on Thursday, which featured appearances of both central bankers, ECB’s Christine Lagarde and Fed’s Jerome Powell. At the time of writing, the shared currency trades at the 1.0000 area, virtually unchanged on the day, having oscillated between a low of 0.9930 and a high of 1.0030. The European Central Bank decided to hike rates by 75 basis points, setting the largest interest rate increase in the history of the ECB. During the press conference, Christine Lagarde confirmed that she expects to raise rates in the following meeting to “dampen” demand but that the Governing Council will work meeting by meeting and remain data dependent. In addition, Lagarde stated that she expects inflation to remain high next year as the ECB upwardly revised its inflation forecasts to an average of 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024. On the other hand, Lagarde confirmed that she expects the economy to slow down and then stagnate but not slip into a recession as the bank adjusted GDP growth forecasts to 3.1% in 2022, 0.9% in 2023 and 1.9% in 2024. Meanwhile, Federal Reserve Chair, Jerome Powell, spoke at the Cato Institute’s Annual Monetary Conference and reaffirmed the Fed’s hawkish stance. Powell assured strong commitment to bringing inflation down and accepted responsibility for price stability. According to WIRP, the markets are betting on higher odds of a 75 bps increase for the Fed’s next week's meeting of 86. From a technical perspective, the EUR/USD short-term bias remains bearish, according to the daily chart, although indicators suggest a deceleration of the bearish pressure. The RSI turned flat below its midline, while the MACD crossed above its signal line on Wednesday and printed modestly higher green bars, indicating a growing buying interest. On the downside, the 0.9900 area stands as short-term support. Lose of this level would pave the way to retesting the cycle low of 0.9863 and then the 0.9700 area. On the other hand, to confirm a recovery the bulls must consolidate above the parity level, targeting the 20-day SMA, currently at 1.0021and the 1.0100 psychological mark.
by Alex_Boltyan_FXAnalyst
GBP/USD Drops To Lowest Since March 2020 After The BOE HearingsThe GBP/USD pair managed to erase early losses and trades virtually unchanged on Wednesday. The GBP/USD pair was weighed by cautious comments from the Bank of England officials, while the U.S. dollar strengthened somewhat, with the DXY index hitting a fresh cycle high of 110.78. At the time of writing, the Cable trades little changed at the 1.1530 area, having bounced sharply from a low of 1.1404, last seen in March 2020. BoE officials testified before the Parliament’s Treasure Committee. The Governor, Andrew Bailey, stated that the current high inflation rate doesn’t prove that the bank’s operations were a failure, noting that “we can always learn from experience.” He also commented that the cause of the U.K. economy tipping into a recession is solely Russia’s fault. In addition, the other officials didn’t give a clear pathway for the bank’s monetary policy. Chief Economist Hugh Pill noted that he can’t “speculate yet” on the bank’s response to the proposed energy cost caps or either the moves to cut inflation, while Silvana Tenreyro favored a more gradual pace of tightening to reduce the risk of overshooting and said the BoE should be moving slowly when there is a lot of uncertainty. After these comments, the WIRP tool suggests that tightening expectations have eased. The markets are betting on 55% odds of a 75 bps hike in the September 15 meeting, while at the start of the day, the probabilities stood at 70%. Looking into next year, the market participants are pricing in 250 bp of tightening over the next 12 months, which would see the policy rate peak near 4.25% as opposed to 4.5% at the start of the week. From a technical perspective, the GBP/USD short-term outlook remains bearish according to the daily chart. The RSI hovers in oversold territory for a seventh straight day, while the MACD prints red bars, although slightly easing. On the downside, the 1.1405 level offers strong support. If lost, the Cable could extend its fall to the 1.1350-1.1300 area, which would mark a low since the mid-1980s. On the other hand, the bulls need to regain the 1.1500 area to ease the immediate selling pressure and pave the way to yesterday’s high of 1.1608 and the 1.1680 zone.
by Alex_Boltyan_FXAnalyst
EUR/USD Dips Below 0.9900 As U.S. Traders Return From Labor DayThe EUR/USD pair falls for a second straight day as the U.S. dollar gathered renewed strength on the back of mixed domestic data as traders returned from the three-day weekend. At the same time, disappointing German Factory Orders figures fueled the euro sell-off. At the time of writing, the EUR/USD pair is trading at the 0.9905 zone, 0.23% below its opening price, after bottoming at a new cycle low of 0.9864. Like European figures, U.S. July's S&P Global Composite and Services PMIs were downwardly revised to 44.6 and 43.7, respectively, missing estimates. On the other hand, the Institute for Supply Management (ISM) released optimistic data as the Services PMI jumped to 56.9 in August from its previous reading of 56.7, beating the market's consensus of 55.1. The Services Employment and New Orders Indexes also showed good results for the same period; they came in at 50.2 and 61.8, respectively, both above expectations. After the data, the U.S. dollar, measured by the DXY index, jumped to a fresh cycle high of 110.55, which was last visited in August of 2002. Across the pond, the euro struggled to find demand as weak data from Factory Orders from Germany in July were published during European hours. The Deutsche Bundesbank released its indicator that includes shipments, inventories, and new and unfilled orders, which decreased by 1.1% MoM, well above the consensus of a 0.5% decline, as inflation and the uncertainty about energy supplies continue to undermine Europe's largest economy. Looking ahead, the European Central Bank will announce its rates decision on Thursday, with investors likely to remain sidelined ahead of the event. According to the daily chart, the EUR/USD short-term technical outlook remains bearish. The RSI gained a negative slope and leaps forward towards the oversold area, while the MACD prints higher red bars indicating that the bears remain in control. On the downside, the following support levels are seen at today's cycle low of 0.9864, followed by the 0.9800 and 0.9700 psychological levels. On the other hand, resistance levels stand at parity, then at the 20-day SMA at 1.0057 and above the 1.0100 psychological level.
by Alex_Boltyan_FXAnalyst
EUR/USD Starts The Week On A Soft Note Amid Energy Concerns The EUR/USD pair plunged to a fresh two-decade low during European hours as the U.S. dollar preserved its strength, with the DXY index surpassing the 110.00 mark. In addition to the sour market mood, downward revisions of the EU’s PMIs and energetic crisis concerns triggered the euro sell-off. As the U.S. celebrates Labor Day, local markets remained closed this Monday. At the time of writing, the shared currency trades at the 0.9925 area, 0.23% below its Friday’s close, after bottoming at a fresh cycle low of 0.9878. The energy crisis fears in Europe were exacerbated last Friday after the announcements that Russian giant Gazprom halted all natural-gas flows to Europe after finding faults in Nord Stream 1 pipeline. It was later reported that Moscow’s decision to cut energy to Europe would continue until the EU lift sanctions imposed on the back of the Ukraine invasion. This decision may worsen the energetic outlook for the Old Continent as the cold winter months approach. On the other hand, S&P Global published its final revisions of the EU PMI for August. The German and the EU Composite PMIs were downwardly revised to 46.9 and 48.9 respectively, with the latter falling to its lowest level in 18 months. Other data suggested that the EU Sentix Investor Confidence plunged to -31.8 in September while July Retail Sales advanced 0.3% but are down 0.9% in the yearly reading. Ahead of the ECB meeting on Thursday, market participants are currently pricing 65% odds of a 75 bps rate hike. The short term technical outlook for the EUR/USD pair remains clearly bearish according to the daily chart as indicators suggest that the bears are gathering momentum after a slight deceleration in the last couple of days. The RSI holds a negative slope below its midline, while the MACD printed a higher red bar, indicating growing selling interest. On the downside, the fresh cycle low of 0.9878 is the next support level, followed by the 0.9800 and 0.9700 psychological levels and then the 0.9660 zone, where the lower end of a descending channel drawn from the February high stands. On the other hand, resistance levels are seen at parity, followed by the 20-day SMA at 1.0070 and the 1.0100 psychological mark.
by Alex_Boltyan_FXAnalyst
DXY Retreats After NFP But Posts Third Weekly GainThe U.S. dollar, measured by the DXY index, retreated on Friday following the August nonfarm payrolls report. The greenback weakened as a knee-jerk reaction to a mixed employment report. Still, the bigger picture supports the bullish case for the dollar once the dust settles as the labor market keeps showing resilience to Fed’s aggressive tightening policy. At the time of writing, the DXY trades at the 109.50 area, 0.1% below its opening price, having bottomed in at a daily low of 108.93 after posting on Thursday a fresh cycle high just a couple of pips shy from the 110 level. The US Bureau of Labor Statistics reported the U.S. economy added 315,000 jobs in August, beating the market's consensus of 300,000 but down from the stunning July reading of 526,000. On the other hand, wage inflation, measured by the average hourly earnings, slowed to 0.3% MoM, below the market's expectations of 0.4%. In addition, the unemployment rate jumped to 3.7% from its previous reading of 3.5% and coming higher than expected. The Fed’s tightening plan probably won’t change as Chair Powell made it clear at Jackson Hole that the committee needed to see “substantial” evidence that inflation is slowing down and that they are willing to see some economic pain. In contrast, the jobs report shows that the labor market can handle tighter financial conditions as it beat market’s expectations for a fifth consecutive month. As an immediate reaction, for the September 20-21 meeting, markets are betting on higher odds of a 75 bps hike of 64% and 36% probabilities of a 50 bps increase. According to the weekly chart, the technical outlook for the DXY remains bullish as the index posts the third weekly gain in a row. The positive outlook is also seen in the daily charts, although indicators suggest a deceleration of the bullish momentum. The daily RSI pulled back from overbought territory, while the MACD printed a lower green bar. On the upside, the next resistances are seen at the cycle high of 109.97, followed by the 2003 highs at the 112.00 and 115.00 levels. On the other hand, supports could be faced at the 109.00 zone, followed by the 108.80 area and then the weekly lows at the 108.30 region.
TVC:DXY
by Alex_Boltyan_FXAnalyst