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NZD/USD rises ahead of retail salesThe New Zealand dollar is in positive territory on Thursday. Early in the North American session, NZD/USD is trading at 0.6042, up 0.34%. Retail sales are a key gauge of consumer spending and the New Zealand consumer has been holding tightly to the purse strings. In the second quarter, retail sales fell 1% q/q, with most retail industries showing lower sales volumes. This marked a third consecutive losing quarter. The markets are bracing for another decline for Q3, with a consensus estimate of -0.8%. The soft retail sales data isn't really surprising as consumers are being squeezed by high inflation and elevated borrowing costs. The decrease in household purchasing power has meant a decline in spending. High interest rates are still filtering through the economy, which could further dampen consumer spending in the fourth quarter. The Reserve Bank of New Zealand has put a pause on rates for three straight times, which has naturally raised speculation that the central bank has completed its tightening cycle, which has brought the cash rate to 5.5%. Inflation in the third quarter eased from 6.0% to 5.6% y/y in the third quarter and this decline means that there is a strong likelihood that the RBNZ will hold rates at the November 27th meeting. US markets are closed for the Thanksgiving holiday, which means we're unlikely to see much movement today with the US dollar. That could change on Friday, with the release of US manufacturing and services PMIs. The consensus estimates for November stand at 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). If either of the PMIs miss expectations, that could translate into volatility from the US dollar. NZD/USD Technical NZD/USD is putting pressure on resistance at 0.6076. The resistance line 0.6161 There is support at 0.5996 and 0.5885
by OANDA
NZ dollar slips on weak Chinese data, jobs data nextThe New Zealand dollar has extended its losses on Tuesday. In the North American session, NZD/USD is trading at 0.5808, down 0.60%. October hasn't been kind to the New Zealand dollar, which has declined by 3%. Last week NZD/USD dropped as low as 0.5772, its lowest level in a year. New Zealand's labour market is expected to cool in the third quarter, as elevated interest rates continue to dampen economic activity. Employment is expected to ease to 0.4% q/q, compared to 1.0% in the second quarter. The current unemployment rate of 3.6%, which was the highest since Q2 of 2021, is expected to rise to 3.9% in the third quarter. China is New Zealand's largest trading partner and the significant slowdown in the Chinese economy is having a dampening effect on the New Zealand economy. On Tuesday, Chinese PMIs softened in October. The Manufacturing PMI slipped from 50.2 to 49.5, missing the market consensus of 50.2. The Non-Manufacturing PMI, which covers services and construction, weakened to 50.6, down from 51.7 in September and shy of the market consensus of 51.8. A reading above 50 indicates expansion and below 50 signals contraction. The data indicates that the world's number two economy is still struggling to recover after removing harsh Covid-19 controls at the start of the year. China has responded with increased stimulus but more needs to be done as global demand for Chinese exports has waned and the property sector remains on shaky ground. Beijing is likely to continue lowering interest rates and increasing government spending in order to stimulate the economy. NZD/USD is testing resistance at 0.5819. The next resistance line is 0.5864 There is support at 0.5765 and 0.5720
by OANDA
GBP/USD extends losses on mixed UK dataThe British pound is in negative territory after two days of losses. In the European session, GBP/USD is trading at 1.2245, down 0.40%. The struggling pound is down 1.1% this week and is trading at its lowest levels since late March. It is a busy day on the data calendar for UK releases. Retail sales rose in August by 0.4% m/m, following a 1.1% decline in July and was just shy of the market consensus of 0.5%. The sharp decline in July was largely due to unusually wet weather. On an annual basis, retail sales fell by 1.4%, compared to -3.1% in July. Consumer spending has been in a nasty rut, as annualized retail sales have now declined for 17 straight months. The silver lining was that the -1.4% drop marked the slowest pace of contraction in the current streak. The September PMIs were a mixed bag. The Services PMI slowed to 47.2 in September, down from 49.5 in August and missing the consensus estimate of 49.2. This marked a second straight deceleration and the sharpest contraction since January 2021. The Manufacturing PMI increased to 44.2 in September, up from 43.0 in August and above the consensus estimate of 43.0. The decline in activity in both services and manufacturing points to a UK economy that continues to cool. The Bank of England, which held interest rates on Thursday, will be hoping that the slowdown translates into lower inflation and that it can continue to hold interest rates. UK consumer confidence remains low, but there was a bit of an improvement in September. The GfK consumer confidence index rose to -21, up from -25 in August and beating the consensus estimate of -27. This was the highest reading since January 2022, but the economy has a long way to go before consumers show optimism about the economic outlook. GBP/USD is testing support at 1.2267. The next support level is 1.2156 There is resistance at 1.2325 and 1.2436
by OANDA
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GBP/USD extends losses after weak housing dataThe British pound has extended its losses on Thursday. In the North American session, GBP/USD is trading at 1.2472, down 0.28%. Earlier, the pound touched a low of 1.2445, its lowest level since June 8th. The pound has been unable to find its footing and has posted five losing sessions in the past six, falling 250 basis points during that span. UK house prices continue to fall and posted a decline of 1.9% in August, the steepest drop since November 2022, according to the Halifax Bank of Scotland. The Halifax report noted that house prices have been resilient this year in the face of rising interest rates, but the lag effect of rate hikes may be making itself felt through higher mortgage costs. This week's UK PMI releases highlighted the weakness of the UK economy and have pushed the wobbly pound lower. The Services PMI for August was revised higher to 49.5 from 48.7, following a July reading of 51.5 points. This marked the first decline in services business activity since January. This was followed by the Construction PMI, which decelerated and barely remained in expansion territory at 50.8, down from 51.7 in July. The manufacturing sector has been woeful, and last week's PMI dipped to 43.0 in August, down from 45.3 in July. With the struggling UK economy as the background, Governor Bailey said on Wednesday that it was "much nearer" to ending the current tightening cycle, but added that the BoE might have to raise rates further due to persistently high inflation. Bailey remained non-committal about the September 21st meeting, but the markets are confident that the Bank will deliver a quarter-point hike, with a probability of 82%. GBP/USD pushed tested support at 1.2449 earlier. Below, there is support at 1.2335   There is resistance at 1.2519 and 1.2633
by OANDA
EUR/USD falls to 2-month low on soft Services PMIsThe euro is back to its losing ways on Tuesday, after holding steady a day earlier. In the North American session, EUR/USD is trading at 1.0745, down 0.48%. The euro has faltered badly, losing about 2% since Wednesday and trading at its lowest level since July. ECB Christine Lagarde has been talking about the importance of beating inflation but has shrugged when asked about interest rate policy. Lagarde spoke in Jackson Hole in late August and again on Monday in London, hammering home the messsage that inflation remains too high and the ECB will maintain high rates for as long as necessary in order to bring inflation back to the 2% target. Lagarde's hawkish message in these speeches gave no hints as to whether the ECB would raise rates at its meeting on September 14th. Perhaps she is keeping the markets guessing, but another reason could be that the ECB hasn't yet decided whether to hike or hold, with doves and hawks at the ECB strongly divided on the next move. Inflation remains high at 5.3% but another hike increases the risk of tipping the weak eurozone economy into a recession. Lagarde stressed on Monday that it was critical for the ECB to keep inflation expectations firmly anchored. I can only imagine her frustration today on reading the ECB monthly survey which indicated that inflation expectations for the next 12 months remained at 3.4% in July, and rose from 2.3% to 2.4% for three years ahead. Eurozone inflation has been moving in the right direction, but it appears that bringing it back down to target could take years. Eurozone, German services PMI indicate contraction The services sector has helped carry the eurozone economy at a time when manufacturing continues to decline. However, the expansion in services came to a crashing halt in August as indicated in today's PMIs for the eurozone and Germany. The 50.0 line separates contraction from expansion. The eurozone Services PMI for August was revised to 47.9 from a preliminary 48.3 points. This marked the first contraction in services activity this year and was the weakest reading since February 2021. The news wasn't much better from Germany, the bloc's largest economy. The Services PMI was confirmed at 47.3, the first contraction in eight months and the lowest level since November 2022. The euro has fallen about 0.50% in response to the weak services data, another painful reminder of the fragility of the eurozone economy. EUR/USD is testing support at 1.0716. Below, there is support at 1.0658 There is resistance at 1.0831 and 1.0889
by OANDA
EUR/USD steady after Mfg. PMIs, US NFP loomsThe euro is flat on Friday, after sustaining sharp losses a day earlier. In the European session, EUR/USD is trading at 1.0844. There wasn't much to cheer about after today's Manufacturing PMI reports for Germany and the eurozone. Although both PMIs improved slightly in August, business activity continues to decline in the manufacturing sector. The Eurozone PMI came in at 43.5 in August, up from 42.7 in July and just shy of the consensus estimate of 43.7. In Germany, manufacturing is in even worse shape - the August reading improved from 38.8 to 39.1, matching the consensus. Manufacturing is in deep trouble in the eurozone and in Germany, the largest economy in the bloc. The PMIs point to a constant string of declines since June 2022. The volume of new orders is down and exports, already struggling in a weak global environment, have been hit by the slowdown in China which has reduced demand. Germany's weak manufacturing data is particularly disturbing. Once a global powerhouse, Germany has seen economic growth slide and is officially in a recession, with two consecutive quarters of negative growth in the fourth quarter of 2022 and the first quarter in 2023. In the US, the nonfarm payroll report is expected to decline slightly to 170,000, compared to 187,000 in the previous reading. If nonfarm payrolls are within expectations, it will mark the third straight month of gains below 200,000, a clear signal that the US labour market is cooling down. A soft nonfarm payrolls report would cement an expected pause by the Federal Reserve next week and also bolster the case for the Fed to hold rates for the next few months and possibly into 2024. EUR/USD is tested support at 1.0831 earlier. Below, there is support at 1.0731 1.0896 and 1.0996 are the next resistance lines
by OANDA
EUR/USD dips ahead of US jobless claims, durable goods ordersThe euro has edged lower on Thursday. In the European session, EUR/USD is trading at 1.0851, down 0.11%. On the data calendar, there are no releases from the eurozone. The US releases unemployment claims and durable goods orders and we could see some movement from EUR/USD in the North American session. On Friday, Germany releases Ifo Business Climate. The index has decelerated for three consecutive months and the downturn is expected to continue (87.3 in July, 86.7 expected). Eurozone and German PMIs were nothing to cheer about, as the August numbers pointed to contraction in the manufacturing and services sectors. Germany's manufacturing sector has been particularly weak, although the Manufacturing PMI rose slightly to 39.1 in August, up from 38.8 in July and the consensus estimate of 38.1. Eurozone Manufacturing PMI climbed to 43.7 in August, higher than the July reading of 42.7 and the estimate of 42.6 points. The services sector is in better shape and has been expanding throughout 2023. That trend came to a screeching halt on Wednesday when German and Eurozone Services PMIs fell into contraction territory in August (a reading of 50.0 separates expansion from contraction). Germany dropped to 47.3, down from 52.3 in July and below the estimate of 51.5. Similarly, the eurozone slowed to 48.3, down from 50.9 and shy of the estimate of 50.5 points. The weak PMI reports pushed the euro lower but it managed to recover without much fuss. As for the ECB, the data supports the case for a pause, as the softness in manufacturing and services is evidence that the eurozone economy is cooling down. A pause would give the ECB some time to monitor the impact of previous rate hikes are having on the economy and on inflation. Future market traders are viewing the September meeting as a coin toss between a 25 basis point hike and a pause. There is resistance at 1.0893 and 1.0940 EUR/USD has support at 1.0825 and 1.0778
by OANDA
GBP/USD pares losses after soft PMIsThe British pound has edged lower on Wednesday. In the North American session, GBP/USD is trading at 1.2720, down 0.09%. The UK economy continues to cool down, and today's PMI readings showed deceleration in both the manufacturing and services sectors. The Manufacturing PMI eased to 42.5 in August, down from 45.3 and below the consensus estimate of 42.5. The Services PMI disappointed and fell into contraction territory, with a reading of 48.7. This was lower than the July reading of 51.5 and missed the estimate of 50.8. GBP/USD fell over 100 basis points earlier but has recovered these losses. The weak data might not be such bad news as far as the Bank of England is concerned. The battle to curb inflation has not gone all that well, as the UK has the dubious honour of having the highest inflation among G-7 countries. If weakness in the manufacturing and services sectors dampens hiring and weighs on the tight labour markets, inflationary pressures could ease. The Bank of England meets in September and the markets have fully priced in a rate hike, but it's unclear what will happen after that, with the markets pricing in one more hike before the end of the year. The BoE's rate path after September will depend heavily on upcoming inflation and employment reports. It has been a light week on the data calendar and investors will be hoping for some interesting comments at the Jackson Hole Symposium which begins on Thursday. The Fed and other major central banks are expected to wind up their rate-tightening cycles and Jackson Hole has often served as a venue for announcing shifts in policy. Fed Chair Powell has insisted that the fight against inflation is not done, with inflation still above the 2% target. There is talk in the markets of the Fed trimming rates next year, but I would be surprised if Powell mentions rate cuts in his speech on Friday. GBP/USD pushed below support at 1.2714 and 1.2641 before rebounding higher There is resistance at 1.2812 and 1.2885
by OANDA
New Zealand dollar sinks after soft jobs reportThe New Zealand dollar has extended its losses on Wednesday. In the European session, NZD/USD is trading at 0.6093, down 0.91%. Earlier, NZD/USD touched a low of 0.6091, its lowest level since June 30th. The New Zealand labour market has been tight, despite aggressive tightening by the Reserve Bank of New Zealand. Wednesday's employment report for the second quarter showed some softening, which has extended the New Zealand dollar's losses. The unemployment rate rose to 3.6%, up from 3.4% in the first quarter and above the consensus estimate of 3.5%. Wage growth eased to 4.3%, below the 4.5% reading in Q1 and the estimate of 4.4%. These numbers point to a weaker labour market, but Employment Change rose 1.0%, up from 0.8% in Q1 and above the estimate of 0.5%. The mixed numbers show that the labour market may have lost a step but still remains strong enough to bear further rate hikes from the RBNZ. In July, the central bank maintained the cash rate at 5.50% and meets next on August 16th. China released July PMIs this week, and the soft readings are weighing on the New Zealand dollar. China is New Zealand's largest trading partner and the New Zealand dollar is sensitive to Chinese economic releases. We'll get a look at the Caixin Services PMI on Thursday. The consensus estimate stands at 52.5, following a June reading of 53.9. A reading above 50.0 points to expansion. In the US, the ADP Employment report kicked off a host of job releases, highlighted by nonfarm payrolls on Friday. ADP impressed with a gain of 327,000 for July, below the June reading of 455,000 but blowing past the consensus estimate of 189,000. A month ago, ADP came in at 497,000, fuelling speculation that nonfarm payrolls might follow suit with a strong release. In the end, nonfarm payrolls fell significantly, as expected. Will the NFP follow ADP's lead and crush the estimate? NZD/USD is testing support at 0.6093. Below, there is support at 0.6031 0.6184 and 0.6246 are the next resistance lines
by OANDA
Euro trading quietly around 1.09, FOMC minutes nextEUR/USD is showing limited movement on Wednesday. In the European session, the euro is almost unchanged at 1.0882. The eurozone services sector continues to show growth, but the June numbers showed a deceleration. Eurozone PMI slowed to 52.0, shy of the consensus of 52.4 and down from 55.1 in May. This marked a five-month low. Germany's services sector stalled, dropping from 53.9 to 50.6 and missing the consensus of 50.8 points. The 50.0 level separates contraction from expansion. The eurozone economy has been recovering slowly, with services driving economic activity as manufacturing continues to decline. The ECB, which showed up late to the rate-hiking party but has been quite hawkish, will need to tread carefully in order to guide the economy to a soft landing. The central bank meets next on July 27th and is expected to raise rates. Inflation has been falling but core CPI remains persistently high. The ECB has signalled more rate hikes are coming and Joachim Nagel, head of the German central bank, reiterated the ECB's stance, saying this week that inflation risks are tilted to the upside and the ECB's rate-hike cycle has "some way to go". Wednesday's highlight is the FOMC minutes of the June meeting, when the Fed raised rates by 0.25%, bringing the benchmark cash rate to a range of 5.00%-5.25%. The markets are widely expecting the Fed to hike at the July meeting but aren't sure about another rate hike this year. Fed Chair Powell has signalled that the Fed plans two hikes in the second half of the year and the minutes could change the market's tune if the Fed's tone is hawkish. EUR/USD is testing resistance at 1.0908. The next resistance line is 110.50 1.0838 and 1.0766 are providing support
by OANDA
EUR/USD eyes eurozone and German services PMIsEUR/USD is drifting downward on Tuesday. In the North American session, the euro is trading at 1.0898, down 0.15%. The US markets are closed for the July Fourth holiday, and we can expect limited movement from EUR/USD for the remainder of the day. After disappointing German and eurozone Manufacturing PMIs on Monday, it's the turn of Services PMIs on Wednesday.  Although the Service PMIs are expected to weaken, both are expected to point to expansion, with readings above the 50.0 level. The eurozone PMI is expected to dip to 52.4, down from 55.1, while the German PMI is projected to slow from 57.2 to 54.1. The euro didn't show much of a reaction to the Manufacturing PMIs, as the prolonged decline in manufacturing was not a surprise. I don't expect the Service PMIs to weigh on the euro unless the releases are below expectations. The markets will be keeping a close on the Fed minutes from the June meeting, which will be released on Wednesday. The Fed delivered a 0.25% hike at the June meeting and the markets are widely expecting a repeat in July, which would bring the cash rate to a range of 5.25%-5.50%. The markets have fallen into line with the Fed's aggressive stance, and investors are no longer expecting a rate hike or two before the end of the year. Fed Chair Powell has hinted at one more rate hike after July before the end of the year and there are growing concerns that if the Fed continues to increase rates the economy will tip into a recession. The spread between 2-year and 10-year Treasury note yields hit its widest level since 1981 on Monday, raising fears of a recession. A yield curve inversion is considered a reliable indication of a recession and the current inversion has been in place since July, stoking concern about the direction of the US economy. EUR/USD is testing support at 1.0908. This is followed by support at 1.0838 1.0980 and 1.1050 are the next resistance lines
by OANDA
Euro skids after soft PMI data, markets eye ISM Mfg. PMIEUR/USD has taken a tumble on Friday. In the European session, the euro is trading at 1.0885, down 0.64%. The euro fell as low as 1.0844 earlier in the day. Later today, the US releases ISM Services PMI. The consensus stands at 54.0 for June, following 54.9 in May. The services sector is in solid shape and the ISM Services PMI has posted four straight readings over the 50 level, which separates expansion from contraction. Eurozone PMIs for June pointed to weaker activity in the services and manufacturing sectors. The Services PMI eased to 52.4, down from 55.1 in May and below the consensus of 54.5 points. The Manufacturing PMI fell to 43.6, down from the May reading of 44.8 which was also the consensus. Germany, the largest economy in the eurozone, showed a similar trend, with Services PMI falling from 54.7 to 54.1 and Manufacturing PMI dropping from 43.5 to 41.0 points. The 50 line separates contraction from expansion. The takeaway from these numbers is that the eurozone economy is cooling down. Business activity is still growing but at a weaker pace, while the manufacturing recession has deepened. The eurozone economy is yet to recover after negative growth in the past two quarters, as the ECB's aggressive tightening makes its way through the economy. At first glance, the weak PMI readings should be good news for the ECB, which is trying to dampen economic growth in order to wrestle inflation back down to the 2% target. However, inflation remains very high at 6% and further tightening could tip the weak eurozone economy into a recession. The ECB's efforts to push inflation lower have been made more difficult, as unemployment is at historic lows and wage growth is high. Germany, the bloc's largest economy, isn't the power locomotive that it once was and is still in recovery mode. The ECB has signalled that it will hike rates in July and another increase could be coming in September unless inflation decelerates more quickly. EUR/USD is testing support at 1.0882. The next support level is 1.0793 1.0976 and 1.1031 are the next resistance lines
by OANDA
USD/JPY punches above 140, Tokyo issues warningUSD/JPY is showing little movement on Tuesday. In the European session, USD/JPY is trading at 140.17, down 0.19%. The Japanese yen continues to underperform and has plunged 2.8% in May. The yen fell as low as 140.93 on Monday, its lowest level since November 21st. The sharp depreciation is raising concerns in Tokyo and Masota Kanda, a top official at the Ministry of Finance (MOF) weighed in on Tuesday. Kanda said officials were not focussing on particular exchange rate levels but said they were monitoring the forex market and "would respond appropriately". Kanda's veiled warning should not be ignored, as he blindsided the markets back in December when the MoF intervened in the currency markets in order to prop up the yen. Japanese releases have been solid, reinforcing speculation that inflation isn't going anywhere and the Bank of Japan may have to tighten policy. Service and manufacturing PMIs showed slight expansion last week and retail sales and industrial production will be released on Wednesday. Retail sales are expected to remain strong at 7.0% y/y in April, following a prior reading of 7.1%. Industrial production is projected to improve to 1.5% m/m in April, up from 1.1% in March. President Biden and Republican Speaker McCarthy have reached an agreement in principle on the debt ceiling, after weeks of brinkmanship between Republicans and Democrats. The deal must be approved in both houses of Congress, which is expected to happen despite grumblings from some Republicans. The weeks of uncertainty prior to the deal weighed on risk appetite and the big winners have been US Treasury yields and the US dollar. USD/JPY has support at 139.61 and 138.50 There is resistance at 140.88 and 141.73
by OANDA
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GBP/USD - Pound slips as PMIs dip, BoE hikes againThe British pound is down considerably on Friday and the US dollar has posted gains against the major currencies. In the European session, GBP/USD is trading at 122.13, down 0.60%. UK releases are a mixed bag on Friday. Business activity and manufacturing weakened in March. The Services PMI eased to 52.8, down from 53.5 in February and shy of the estimate of 53.0 points. Manufacturing fell to 48.0, versus 49.3 in February and an estimate of 52.8 points. Manufacturing has declined for eight straight months, with readings below the 50.0 level which separates contraction from expansion. Business activity continues to show modest expansion and is the driver behind economic growth in the UK. Given the weak economic landscape, it's no surprise that consumer confidence remains mired in negative territory. Double-digit inflation and high interest rates have sapped consumer optimism. In March, GfK Consumer Confidence came in at -36, as expected and a bit higher than the previous reading of -38 points. With consumers may in a sour mood, a strong retail sales report for February was that much more surprising, with a gain of 1.2%. This beat the upwardly revised January gain of 0.9% and crushed the estimate of 0.2%. Core retail sales jumped 1.5%, versus 0.9% in January, which was upwardly revised, and beat the estimate of 0.1%. As expected the Bank of England raised rates by 25 basis points on Thursday. This marked an 11th straight hike, although the 25-bp move was the smallest increase since June. Is the BoE done with tightening? This week's disappointing acceleration in inflation has increased the odds of at least one more hike, although BoE Governor Bailey was non-committal when asked about future hikes. Like the ECB, the BoE didn't flinch from delivering an expected rate hike despite the banking crisis and I wouldn't be surprised if more hikes are in store unless inflation shows clear signs of easing. There is resistance at 1.2324, followed by 1.2445 GBP/USD has support at 1.2253 and 1.2132
by OANDA
EUR/USD dips as eurozone inflation easesThe euro remains busy and is down 0.40% on Thursday, trading at 1.0624. This follows the euro gaining 0.90% a day earlier. The euro's moves today and yesterday have in large part been dictated by inflation releases. Earlier today, Eurozone Final CPI came in at 8.6% for January, down sharply from 9.2% in December. Headline inflation eased for a third straight month, after hitting a peak of 10.6% in October. The core rate has not followed this downward trend and ticked higher to 5.3% y/y in January, up from 5.2% in December. The improvement in headline inflation eased worries that the ECB would have to deliver another 50-basis point hike in May, after the expected 50-bp increase at the March 16 meeting. These concerns that the ECB would remain aggressive pushed the euro almost 1% higher on Wednesday after German inflation edged up to 9.3% in February, up from 9.2% in January and above the estimate of 9.0%. The usual suspects were at play in driving inflation higher - food and energy. The government has provided energy subsidies, but energy prices still shot up in January by 23.1% y/y, while food prices surged 20.2% in January y/y. In addition to the German inflation report, France and Spain also recorded unexpectedly strong inflation. The eurozone data calendar will wrap up with German and eurozone Service PMIs, which have been showing improvement and are back in expansion territory, an indication of a pickup in economic activity. The German PMI is expected at 51.3 and the eurozone PMI at 52.3 points. In the US, the Federal Reserve remains hawkish with its message that higher rates are on the way. Fed member Bostic reiterated this stance, saying that the terminal rate would be between 5% and 5.25% and have to remain at that level well into 2024. The markets have priced in a terminal rate of 5.50%, but worries over sticky inflation have led to some calls for rates to rise as high as 6%. EUR/USD is testing support at 1.0655. Below, there is support at 1.0596 There is resistance at 1.0765 and 1.0894
by OANDA
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AUD/USD rises as inflation jumpsThe Australian dollar has extended its rally with solid gains on Wednesday. In the North American session, AUD/USD is trading at 0.7080, up 0.51%. RBA policy makers are no doubt having a bad day at the office, as Australia's inflation climbed sharply in the fourth quarter. CPI rose to 8.4%, up from 7.3% in Q3 and above the consensus of 7.7%. The hot inflation report will douse hopes that inflation has peaked and there's little doubt that the RBA will have to continue raising rates. The markets had priced in a peak rate of 3.6%, but with the cash rate currently at 3.1% and more rate hikes on the way, it appears that the market is underestimating the terminal rate. The inflation release boosted the Australian dollar around 1% and to a five-month high after the CPI report, but the Aussie has pared much of those gains. The outlook for the Aussie is looking brighter for several reasons. The RBA will almost certainly continue raising rates over the next several months, commodity prices are strong and China's reopening will increase demand for Australian exports. There were no major releases out of the US today, but Thursday has a crowded data calendar, with GDP, durable goods and new home sales. GDP is expected to slow to 2.8%, down from 3.2% in Q3 but still respectable. On Wednesday, US PMIs pointed to a decline in the manufacturing and services sectors, pointing to cracks in the US economy as high rates have dampened economic growth. The US dollar has been under pressure as soft US numbers have increased expectations that the Fed will ease up on rate policy due to the slowing economy. A stronger-than-expected GDP would likely provide the US dollar with a much-needed boost, while a soft GDP reading should send the US dollar lower. AUD/USD is testing resistance at 0.7064. Above, there is resistance at 0.7160 0.6968 and 0.6872 are providing support
by OANDA
EUR/USD punches above parity, ECB nextEUR/USD continues to power forward and has breached the parity line for the first time since September 20th. The euro is red hot, having gained 2.1% this week, as the US dollar has hit a bump in the road and is lower against all the major currencies. In the North American session, EUR/USD is trading at 1.0069, up 1.02%. The German economy, the largest in the eurozone, continues to show signs of weakness. September PMIs pointed to contraction in manufacturing and business activity, and these are unlikely to rebound as the Ukraine war continues and an energy crisis looms, with winter close by. The Ifo Business Confidence index fell for a fourth straight month in October and GfK Consumer Sentiment, which will be released tomorrow, is expected to remain deep in negative territory. The ECB meets on Thursday, with policy makers having to contend not only with a gloomy economic outlook in the eurozone, but also with spiralling inflation, with no sign of a peak. Eurozone CPI jumped to 9.9% in September, up sharply from the 9.1% rise in August. The markets have priced in a supersize 0.75% hike, which would bring the cash rate to 2.0% and investors will be looking for the Bank to declare its commitment to bring inflation back to the 2% target. A jumbo full-point increase remains a slight possibility, given that inflation is close to double-digits. Investors will be monitoring the follow-up press conference, and the euro's direction tomorrow could depend on ECB President Lagarde's message to the markets. If Lagarde signals that further rate hikes are coming, the euro will likely gain ground. Conversely, a dovish stance from Lagarde could cut short the euro's rally. EUR/USD has broken above 0.9846 and is testing resistance at 0.9985. The next resistance line is 1.0095 There is support at 0.9753 and 0.9643
by OANDA
UPDATED TRIPLE COMBO CORRECTION CONCEPTBoth X's break their respective channels. Per EW no doubles, triples or triangles permitted in X waves, so would be looking for a clean ABC. Confluences supporting this: Technicals - Bullish divergences on CVD and RSI on higher timeframes - Harmonic conflucence Thesis: - Production numbers in Europe and US came back to today with noteworthy misses, showing demand destruction taking hold and putting pressure on USD. BoA late Friday note that FED's will need to curb rate of hike or risk systemic failures and many commentators echoing the same message post Japan and BoE interventions. Thesis resources: www.forexlive.com www.forexlive.com www.zerohedge.com **NOTE: Previously posted Diagonal - 5 wave count, violates Elliot Wave principles in that 4th wave has not (perhaps yet) broken into the 2nd wave. Therefore WXY or WXYXZ are more likely and fit the current price action.
by Linneaus
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Pound can't find its footingGBP/USD is down sharply today and has fallen below the 1.11 level for the first time since 1985. In the European session, GBP/USD is trading at 1.1125, down 1.16%. The British pound can't seem to find any love. GBP/USD is looking dreadful, down 2.1% this week and 3.8% in September. The currency hasn't sunk to such levels since 1985 and the strong US dollar could extend the pound's current downtrend. The markets are focused on today's mini-budget and UK releases. In the mini-budget, Chancellor Kwasi Kwarteng announced tax cuts and more spending. With no funding for the tax cuts and increased borrowing, gilt yields have jumped, but that has failed to boost the pound. UK releases reiterated that the economy is in trouble, for anyone who needed reminding. GfK Consumer Confidence, which has been in a deep freeze, fell to -49, down from -44 and missing the forecast of -42 points. Manufacturing PMI rose to 48.5, up from 47.3 and above the estimate of 47.5, but remained in contraction territory for a second straight month. Services PMI slowed to 49.2, down from 50.9 and shy of the estimate of 50.0. With both manufacturing and services in decline, the outlook for the UK economy remains grim. The Bank of England raised rates by 0.50% on Thursday. The pound did post some gains but couldn't hold on and closed the day almost unchanged. The move brings the cash rate to 2.25%, its highest since 2008. Still, it's fair to say that the 0.50% underwhelmed the markets, as there were some expectations for a more forceful hike of 0.75%. The BoE has been playing catch-up with inflation, which is running at 9.9% clip. The new Truss government has taken dramatic action to cap energy bills, which should help to curb soaring inflation. With the economy posting two consecutive quarters of negative growth and inflation still not under control, a recession appears unavoidable, which will likely add to the British pound's misery. GBP/USD is testing support at 1.1117. Below, there is support at 1.1038 There is resistance at 1.1269 and 1.1342
by OANDA
BOE delivers 50bp hike, sterling steadyAs expected, the Bank of England hiked interest rates by 0.50%, bringing the cash rate to 2.25%. There was an outside chance that the BoE would press the rate pedal to the floor and deliver a 0.75% increase, but in the end, members decided unanimously on a less aggressive hike. The central bank is grappling with 9.9% inflation and a falling British pound, which means that more large hikes are likely coming. The British pound has edged higher and is trading at 1.1287. With the rate decision out of the way, the markets will focus on UK releases, which are expected to be soft. Later today, GfK Consumer Confidence, which has been in a deep freeze, is projected to tick up to -42, up from -44. The week wraps up with Manufacturing and Services PMIs on Friday. Manufacturing PMI is expected to rise to 47.5, up from 47.3, while Services PMI is projected to slow to 50.0, down from 50.9. The Federal Reserve delivered a third straight hike of 0.75% on Wednesday, raising the benchmark rate to 3.25%. This was largely expected, although there was a possibility that the hawkish Fed might raise rates by a full point. The Fed's decision was a "hawkish 0.75% hike", which gave the US dollar a significant boost, as GBP/USD plunged 1.01% on Wednesday and closed below the 1.13 line. The Fed sent a clear message that it plans to remain aggressive, as inflation has proven much more persistent than anticipated. August inflation fell from 8.5% to 8.3%, but this was higher than the forecast of 8.1% and only reinforced the Fed's hawkish stance. Fed Chair Powell left the door wide open for yet another 0.75% increase in November, and unless inflation shows a dramatic drop, December is likely to bring a hike of 0.50% or 0.75%. With the benchmark rate now above the neutral rate of 2.50%, additional hikes will likely lead to a recession, but this is a price the Fed is willing to pay in order to curb red-hot inflation. GBP/USD is testing resistance at 1.1269. Next, there is resistance at 1.1384 There is support at 1.1144 and 1.1061
by OANDA
Euro dips as 0.75% ECB hike in questionEUR/USD slipped to a new 20-year low earlier today, falling to 0.9864. Currently, the euro is trading at 0.9910, down 0.20%. Eurozone government yields fell sharply today on reports that the ECB may decide to scale down an expected 75 basis point hike on Thursday. This has pushed the euro to a new 20-year low earlier today, as the currency remains under pressure. There have been broad expectations that the ECB, which has been lagging behind most central banks in tightening policy, would deliver a 0.75% rate hike, but apparently, ECB policy makers may be looking at scaling the hike to just 0.60%. The markets are currently pricing in a 67% chance of a 75bp move, sharply lower than the almost 90% likelihood earlier today. We could see the pricing continue to fluctuate as we get closer to the meeting, with investors looking for clues as to how high the ECB will hike. High inflation isn't going anywhere, and the ECB will need to drastically tighten if interest rates are to curb inflation. At the same time, the eurozone economy is weak, and the German locomotive has also slowed down. If the ECB raises rates too aggressively, the economy could tip into a recession. Germany Factory Orders for July, released today, served as a grim reminder that the manufacturing sector remains in trouble. The reading of -13.6% YoY follows a decline of 9.0% in June (-6.0% est). In the eurozone, economic releases are sounding the alarm. PMIs are indicating contraction in manufacturing and business activity, retail sales are down and investor confidence remains mired deep in negative territory. With no indication that things will improve anytime soon, the euro could continue to lose ground. EUR/USD is testing resistance at 0.9984. The next resistance line is 1.0056 There is support at 0.9888 and 0.9816
by OANDA
GBP/USD jumps on weak US housing dataThe British pound has jumped 0.82% today, as the currency has rebounded somewhat from its worst week of the year. GBP/USD plunged 2.53% last week, as the US dollar has found its mojo after weeks of beating a retreat. GBP/USD has climbed today after US New Home Sales dropped to 511 thousand in July, down from 585 thousand in August and well below expectations. UK manufacturing slides The UK Manufacturing PMI crashed into contraction territory in August. The index fell to 46.0, down from 52.1 in July and shy of the estimate of 51.1. The dismal reading is part of a pan-European downward trend in manufacturing, which has been made worse by the prolonged war in Ukraine. Output has been hampered by higher costs, a drop in demand and supply chain problems. CBI Manufacturing Output fell by 7% in the three months to August, according to the CBI, down from +6% in the three months to July. This was the first decline in output since February 2021. Manufacturers are also affected by rising energy bills and higher interest rates, and the situation is only expected to get worse. The energy cap will rise in October and the BoE will have to continue raising rates in order to defeat inflation. There was better news from Services PMI, which was almost unchanged at 52.5, pointing to weak expansion (52.6 prior). Still, it's hard to see how the UK can avoid a recession with weak growth and spiralling inflation. Business optimism is dropping, and that will likely lead to a cutback in spending, hiring and investment, which won't help the economy one bit. There is plenty of anticipation ahead of Jerome Powell's speech at Jackson Hole on Friday, but investors shouldn't overlook some key events prior to Powell's speech. Durable goods orders will be published on Wednesday, with the headline reading expected to slow to 0.6% in July, down sharply from 2.0% in June. Thursday brings US GDP for Q2, which is expected to come in at -0.8% QoQ, after a 0.9% reading in the first quarter. With the Fed stating that US data will be critical in determining its rate policy, the dollar could show some movement after these releases, just as it fell sharply today after the soft New Home Sales reading. GBP/USD faces resistance at 1.1924 and 1.2005 There is support at 1.1699 and 1.1568
by OANDA
1
Euro drops to new 20-year lowEUR/USD has stabilized after a rough start to the week. In the European session, EUR/USD is trading at 0.9931, down 0.10% on the day and its lowest level since November 2002. After weeks in retreat, the US dollar has rebounded and is showing broad strength. The euro has taken it on the chin, falling 2.12% last week and down another 1.07% this week. It looks like the euro has more room to fall and we could see EUR/USD gazing up at the parity line for some time to come. German PMIs for August were mixed and the euro shrugged in response. Services PMI fell to 48.2, down from 49.7. This missed the estimate of 49.0. Manufacturing was slightly better, rising from 49.3 to 49.8 and beating the forecast of 48.2. The readings are worrying, as they indicate that both manufacturing and services have been in contraction for two straight months, with readings below the neutral level of 50.0. The economic outlook for the eurozone's number one economy remains bleak, as high inflation and rising interest rates threaten to tip the economy into recession. Unsurprisingly, confidence levels amongst manufacturers and businesses remain low. Germany's labour market has been a bright spot in the economy, but there is room for concern here too. Employment in the private sector rose in August, but the pace of job creation fell to its lowest since March 2021. With the economy in a downturn, the downside risk to job creation will likely increase. The markets are anxiously awaiting Fed Chair Powell's speech at Jackson Hole on Friday, but there are some key US releases that could have an impact on the direction of the US dollar. New Home Sales will be released later today, with a forecast of 575 thousand for July, following 590 thousand in June. Durable goods orders will be published on Wednesday, with the headline reading expected to fall to 0.6% in July, down sharply from 2.0% in June. With the Federal Reserve in data-dependent mode, investors are keeping a close eye on key US events and we could see some movement in the currency markets following these releases. 0.9959 has switched to resistance. Above, there is resistance at 1.0113 There is support at 0.9877 and 0.9723
by OANDA
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