Currency and market analytics by Tickmill UK

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EURUSD remains range-bound as markets look for fresh upside catalysts


EUR/USD advanced slightly on Friday following strong bearish backlash after the pair tested horizontal resistance level on Thursday. Despite the intensive pullback, managed to sustain pricing above 1.08, with technical indicators signaling a lack of significant bearish momentum. The reversal was instigated by a weakening US Dollar fueled by improved risk appetite in the market. However, the US Treasury bond yields' upward trajectory, supported by favorable US data, limited bearish momentum in the greenback, restraining EUR/USD's bullish aspirations.

Meanwhile, GBP/USD demonstrated resilience as it surged above 1.2700, marking its highest level in three weeks. The momentum, propelled by robust UK private sector activity, encountered headwinds in the American session on Thursday, leading to a partial retracement. Despite early stability above 1.2650, GBP/USD remains vulnerable to fluctuations, especially in the absence of significant data releases from both the UK and the US.

Key economic data releases played a pivotal role in shaping market sentiments. Notably, the decline in first-time jobless claims in the US to its lowest level since early January, coupled with the S&P Global Composite PMI maintaining expansion territory, underscored the resilience of the US economy. Similarly, upbeat PMI data from the UK fueled optimism surrounding the Pound Sterling. However, the surge in the benchmark 10-year US Treasury bond yield to its highest level since late November acted as a catalyst for the US Dollar's resurgence, exerting pressure on GBP/USD's upward trajectory.

Gold prices experienced a retreat from weekly highs, hovering around $2,025 during Friday's London session. The downward pressure stemmed from tempered expectations of imminent rate cuts by the Fed. As Fed policymakers express reservations regarding inflation reaching the coveted 2% target, gold struggles to significantly extend its upside momentum.

The Fed's stance on interest rates, characterized by a preference for maintaining rates within the 5.25%-5.50% range for some time in order to properly assess monetary policy transmission, reflects a cautious approach towards monetary policy. Amidst January's persistent inflation figures, policymakers exhibit a reluctance to hastily implement rate cuts, fearing potential repercussions on consumer price inflation. This cautious demeanor underscores the Fed's commitment to a balanced approach in navigating economic uncertainties.

Gold, often viewed as a safe-haven asset, faces headwinds as the opportunity cost of holding non-yielding assets escalates amidst the Fed's inclination towards prolonging higher interest rates. The diminished prospects of rate cuts diminish the attractiveness of gold as an investment avenue, prompting investors to reassess their portfolios. Consequently, gold prices experience downward pressure amidst the prevailing market sentiment favoring the US Dollar.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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EUR/USD Sees Modest Rise Amidst Dollar Weakness



At the dawn of the trading week, the EUR/USD pair has started on a modestly positive note, edging higher by 0.2%, however remaining below the intraday resistance level at 1.0850. This upward movement comes against the backdrop of a weakened US Dollar, driven primarily by the surprising move from the Chinese central bank, which fixed the Renminbi higher on Monday morning, sparking broad-based USD selling.

While today's uptick suggests a slight recovery, the pair remains ensnared within a new short-term downtrend, trying to regain ground above the critical 200-day SMA line. This downtrend was further exacerbated by last week's decline following the release of Eurozone and US flash PMI data, which underscored the resilience of the US economy, contrasting with Eurozone performance.

The resilience of the US economy has reignited discussions regarding the Federal Reserve's monetary policy trajectory. Despite earlier expectations of three interest rate cuts this year, recent data indicating US economic strength has prompted reassessment. If the Fed opts for a slower rate-cutting pace, it could buoy the US Dollar, drawing increased foreign capital inflows seeking higher returns.

Short-term technical analysis of the Dollar index (DXY) shows that the FOMC-induced decline towards 103 was followed by sharp rebound to 104 and breakout of the medium-term resistance line. This recovery occurred after Friday encouraging PMI data which could be a sign that the market cast doubts on the dovish Fed signals made during the FOMC meeting. In turn, this increases risk that the rally will continue after retest of the line which flipped into support level:

Adding to the market's speculation, the surprise decision by the Swiss National Bank to cut interest rates has raised concerns that the European Central Bank might follow suit. Historically, the ECB and SNB have mirrored each other's policy moves, albeit with the SNB typically following the ECB. However, the recent SNB decision has flipped this narrative, prompting investors to anticipate potential ECB rate adjustments on signs of easing inflation pressures on the European continent, as indicated by the SNB move.

The statements from ECB Chief Economist Philip Lane affirming confidence in wage inflation converging towards the 2% inflation target further underscore the likelihood of impending rate cuts, adding another layer of complexity to the currency markets. Wage pressures have often been cited by the ECB officials as the key variable that explains persistence of inflation due to the self-reinforcing “wage-consumption-inflation” cycle.

Further complicating the currency landscape is the intervention talk emanating from Japan, with Masato Kanda, Japan’s currency chief, hinting at potential market operations to support the Yen. USD/JPY has dipped, hovering in the 151.300s, spurred by the historical precedent of Bank of Japan (BoJ) intervention when the pair breaches the 150.000 mark. This sentiment is bolstered by data from the currency futures market, revealing an increase in bearish bets on the Yen during the BoJ's March meeting week, despite rumors of a rate hike.

The vicinity around the 150 level on USDJPY has consistently posed a formidable obstacle for buyers, with the pair failing to maintain any substantial upward momentum amid concerns of currency interventions. It seems probable that this scenario will persist, and any data indicating weakness in the USD is likely to trigger a surge in bearish momentum, pushing the pair towards levels more favorable for the Japanese government. From a technical standpoint, it appears that the near-term selling target for the pair could lie within the range of 148-148.50:

In the realm of upcoming events, attention turns to the Federal Reserve Bank of Atlanta President Raphael Bostic's scheduled speech, which could offer insights into the Fed's policy stance. Additionally, US New Home Sales and the Chicago Fed National Activity Index releases are poised to influence market sentiment.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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Dollar rally stalls as market participants wait for more signals of the strength of the US economy


The EUR/USD pair is showing resilience, defending its near-term support level at 1.08. Broad, albeit slight dollar weakness contributed to the strength of the pair. However, recent economic data releases from both the United States and Europe have injected fresh dynamics into the forex landscape, influencing market sentiment and shaping expectations regarding central bank policies.

The release of US Durable Goods Orders for February presented a positive surprise, with headline figures surpassing expectations. Headline Durable Goods Orders rose by 1.4%, exceeding the forecast of 1.3%. Moreover, various components, including Durable Goods Orders ex Defense and Nondefense Capital Goods ex Aircraft, outperformed market estimates.

Furthermore, commentary from Federal Reserve officials, particularly from Raphael Bostic, President of the Federal Reserve Bank of Atlanta, has been notably hawkish. Bostic's assertion that the Fed is likely to cut interest rates only once in 2024 contrasts with the market's expectation of three cuts. Such comments temper the extent of dollar sell-offs and contribute positively to the upside potential of the currency.

Conversely, European Central Bank officials have adopted a more dovish tone, signaling a potential shift towards earlier interest rate cuts. ECB Member Fabio Panetta's remarks regarding the emerging consensus for a rate cut, possibly as early as June, have weighed on the Euro's outlook. Additionally, ECB Chief Economist Philip Lane's confidence in wage inflation reaching levels consistent with the ECB's target suggests a forthcoming start of a policy easing cycle.

The prospect of lower interest rates in Europe, coupled with the likelihood of a dovish stance from the ECB, rein in upward momentum in the pair. A rate cut in April, as hinted by Panetta, could further undermine the Euro's attractiveness, potentially leading to decreased inflows of foreign capital.

Short-term technical analysis suggests that the resurgence of buying pressure, signaling a potential pullback, may occur specifically around the medium-support line, aligning with the 1.0750 level:

Meanwhile, the Pound Sterling has exhibited strength against the US Dollar, extending its gains above 1.2650. Despite concerns regarding the Bank of England's (BoE) dovish stance, driven by lower-than-anticipated inflation data, the GBP/USD pair has shown resilience. The BoE's recent monetary policy statement indicated a reluctance to reduce interest rates immediately, although market expectations of rate cuts persist.

Technically speaking, the recent price action has seen a breakdown below both the resistance line and the ascending support line, leaving the pair with limited prospects for an immediate recovery. Sellers are likely to target the 1.25 level before considering their triumph, potentially paving the way for bullish momentum thereafter:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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EUR/USD Dips as Diverging Central Bank Policies Drive Market Sentiment


In the ever-volatile currency markets, the EUR/USD pair demonstrated a downward trajectory on Wednesday, eventually stabilizing in a narrow band between 1.082 and 1.084. Despite Spanish inflation data for March meeting economists' expectations at 3.2% for the headline reading, the pair struggles to meaningfully extend it upsides. In this scenario, Tuesday's bearish reversal can be interpreted as a mere technical retreat from the psychological barrier of the 1.08 level, which swiftly lost momentum, reinstating the pair on its downward trajectory:

EURUSD’s bearish trend underscores the contrasting stances of two major central banks: the US Federal Reserve and the European Central Bank, shaping investor sentiment and currency flows.

The recent discourse among ECB officials suggests a growing likelihood of interest rate cuts in June. ECB Governing Council members, including Madis Muller and Fabio Panetta, hinted at an impending shift in monetary policy, emphasizing the emergence of a consensus favoring rate reductions. Moreover, ECB Chief Economist Philip Lane underscored that wage inflation is steadily converging towards normal levels, signaling a significant step toward removing the primary obstacle to ECB interest rate cuts in the near future.

Conversely, the Federal Reserve's stance appears more divided. While Chairman Jerome Powell advocates for a June rate cut, dissenting voices within the Fed, such as Raphael Bostic and Lisa Cook, advocate for a cautious approach, emphasizing the need for sustainable inflation returns. The variance in viewpoints within the Federal Reserve underscores a heightened level of uncertainty regarding both the pace and magnitude of future interest rate adjustments, surpassing the level of uncertainty observed within the ECB's discussions.

Looking ahead, market participants eagerly anticipate Friday's release of the Core Personal Consumption Expenditures Price Index, considered the Fed's preferred gauge of inflation. The result of this event is positioned to significantly impact the Fed's decision-making process regarding interest rates, as it will complement CPI data by offering a comprehensive view of inflation from the perspective of demand side (compared to supply side as in the case with CPI).

In parallel, the gold market remains in a consolidative phase below the $2,200 mark, as traders await further clarity on the Fed's policy trajectory. The upcoming PCE release on Friday is expected to provide meaningful insights into USD demand dynamics, thereby impacting gold prices. Moreover, upbeat US economic indicators, such as Tuesday's Durable Goods Orders, coupled with persistent inflationary pressures, may prolong the Fed's stance on maintaining higher interest rates, bolstering US Treasury bond yields and the USD.

Short-term price analysis in Gold reveals an initial failure to sustain a breakout above the $2200 level on March 21. Nevertheless, the price swiftly regained its upward momentum, positioning itself for a second attempt at testing this critical level. This resilience suggests robust demand near the all-time high, heightening the likelihood of a new record being established in the near future. A potential bullish target could reside in the mid-$2250 range, reflecting the market's underlying strength and upward trajectory:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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EUR/USD Steadies Near 1.0850 Amid ECB and Fed Speculations



In Tuesday's European session, the EUR/USD remains tethered near the 1.0850 mark, indicating a lull in market volatility. This stasis reflects the greenback's stabilization as traders anticipate pivotal data releases later this week, notably the FOMC Minutes and the preliminary S&P Global PMI data for May.

On the technical side, pair recently broke out of a descending channel, signifying a potential shift in trend. However, the pair is currently experiencing a brief consolidation phase just below the 1.0900 level, as indicated by the recent price action. The Relative Strength Index is hovering near the 60 mark, suggesting that there is still some bullish momentum left in the market. If the pair manages to break above the immediate resistance around 1.0935, it could target higher levels. Conversely, a failure to maintain this breakout could see the pair retreating back towards the 1.0723 support level:

The Euro is holding its ground against the Dollar despite brewing uncertainties around the ECB potential rate cuts post-June. ECB policymakers exhibit a cautious stance, leaning towards initiating a rate reduction next month while refraining from committing to further cuts. They emphasize a data-dependent approach moving forward.

However, some ECB officials have voiced concerns that additional rate cuts in July could reignite price pressures, undermining efforts to control inflation. The ECB's cautious optimism is juxtaposed against the backdrop of US inflation, which showed a predictable decline in April. Nonetheless, the Federal Reserve remains unconvinced that inflation is steadily retreating towards its 2% target.

Michael Barr, the Fed's Vice Chair for Supervision, underscored on Monday that the first quarter's inflation data was disheartening, lacking the reassurance needed to relax monetary policy. Barr's remarks highlight the Fed's commitment to a stringent policy stance until further evidence of disinflation emerges. Complementing this, Atlanta Fed President Raphael Bostic told Bloomberg TV that the Fed requires additional time to ascertain a consistent downtrend in inflation.

Investors are now keenly awaiting the FOMC minutes from May's policy meeting, due Wednesday. These minutes are expected to convey a hawkish sentiment, driven by the stubborn inflation seen in early 2023, which suggests a stalled disinflationary trend.

Across the channel, the Pound Sterling is maintaining a solid position, trading slightly above 1.2700 in the European session. The trajectory of GBP/USD will likely be influenced by the upcoming UK CPI data for April and the FOMC minutes.

Should the anticipated decline in UK inflation materialize, it would bolster investor confidence that inflationary pressures are easing back towards the 2% target. This would fuel expectations for the Bank of England to initiate rate cuts sooner, with the debate centered around whether the first cut will occur in June or August.

The GBP/USD pair is currently trading within a short-term ascending channel, suggesting a bullish outlook in the near term. The pair is approaching the long-term key resistance around 1.2795, which, if breached, could open the door for further gains towards the 1.3000 level. The RSI is hovering near the 60 mark, indicating there is room for additional upward momentum. Immediate support is found at 1.2634, and a drop below this level could see the pair testing the lower boundary of the ascending channel around 1.2516. Overall, the bias remains slightly bullish as long as the pair stays above the 1.2634 support:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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EURUSD Struggles Amid ECB Dovish Expectations; GBPUSD Holds Near 1.30 After Strong UK Retail Sales

The EURUSD pair is struggling to maintain momentum above the key short-term support level of 1.0850. After a modest recovery on Friday, the pair faces renewed selling pressure, with the possibility of touching key medium-term support level near 1.0780:

The primary catalyst for the euro's weakness is the growing expectation that the ECB will continue to ease monetary policy. With the Eurozone grappling with sluggish economic growth and inflation dipping below the ECB's 2% target, market participants are increasingly pricing in the likelihood of another rate cut in December.The dovish sentiment is reinforced by the ECB's latest Survey of Professional Forecasters, which revised the 2024 inflation projection downward to 1.9% from the previous estimate of 2%.

Contrasting the ECB's dovish stance, the US dollar remains firm, bolstered by expectations of a measured approach to monetary easing by the Fed. Interest rate derivatives indicate that markets anticipate a cumulative 50 bps reduction in interest rates by the end of the year, suggesting 25 bps cuts at both the November and December meetings.

Recent US economic data for September have showcased resilience, diminishing the urgency for aggressive rate cuts. Investors are closely monitoring upcoming data releases, including the preliminary S&P Global PMI for October due this Thursday, to gauge the economy's trajectory.

Furthermore, several Fed officials are slated to speak this week, potentially providing additional insights into the central bank's policy direction. Notably, Atlanta Fed President Raphael Bostic recently advocated for caution, suggesting the Fed should refrain from cutting rates too swiftly. He envisions only one rate cut in the remaining two meetings this year and anticipates the federal funds rate settling between 3% and 3.5% by the end of 2025.
Adding another layer to the dollar's strength is the approaching US presidential election on November 5. Betting markets have begun to slightly favor a potential victory for former President Trump. Historically, political uncertainty or shifts towards candidates perceived as pro-business can influence currency valuations. A Trump win could be associated with expectations of fiscal stimulus or deregulation, factors that might further bolster the dollar.
The British pound extends consolidation near the key round support level of 1.30 against the US dollar in today's session. Previously weighed down by expectations of aggressive interest rate cuts from the BoE amid easing inflation, the pound's outlook is now subject to reevaluation following stronger-than-expected UK Retail Sales data for September. Short-term upside looks like a more likely outcome, considering that the main bearish catalysts for the Pound have been factored in and the GBPUSD price managed to sustain above 1.30 support level:

Retail Sales, a critical indicator of consumer spending and economic health, unexpectedly increased by 0.3% month-over-month, defying economists' predictions of a contraction. This suggests that UK consumers remain resilient despite broader economic challenges, potentially reducing the urgency for the BoE to implement immediate rate cuts.

Prior to this data, markets had been pricing in rate reductions at both of the BoE's remaining policy meetings this year. The positive surprise in consumer spending may prompt a reassessment of these expectations. However, it is essential to consider that one data point does not constitute a trend. Investors should monitor subsequent economic indicators to determine if this momentum is sustainable.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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US Dollar Resumes Strengthening Amid Election Uncertainty and Safe-Haven Demand



The US Dollar accelerated its rally on Wednesday ahead of the US opening bell, driven by heightened uncertainty surrounding the upcoming presidential election and a surge in safe-haven inflows as equities continue their downbeat performance. The Dollar Index (DXY) gained momentum as investors sought refuge amid increasing volatility in risk assets.

Technical picture in DXY currently showing strong upside momentum, reflected in its sharp rise from recent lows. However, technical indicators, including the RSI near overbought territory, suggest that the move is becoming overstretched in the short term. A key target for bulls appears to be around the 106 level, which aligns with the upper bound of the medium-term descending price corridor. Given this, bullish positions may be more appealing following a pullback, especially if the DXY finds support around 104, offering a better risk-reward setup:

Market participants are particularly concerned about the potential re-election of President Trump, which could usher in a continuation or escalation of trade tensions. A Trump victory raises the specter of higher tariffs, significantly impacting exports from key US trading partners such as the Eurozone, Canada, Mexico, China, and Japan. This scenario could disrupt global supply chains and dampen international trade, adding to the appeal of the USD as a safe-haven currency.

US Treasury bonds extended their sell-off, pushing yields higher across the curve. The benchmark 10-year yield added more than 0.15% since the start of the week. This upward movement reflects market pricing of a modest policy easing (25 bp rate cut) at the upcoming FOMC meeting on November 7, with interest rate derivatives indicating a nearly 90% probability of a cut versus a 10% chance of rates remaining unchanged. This cautious outlook on monetary easing is further supported by the IMF raising its US growth forecast for this year to 2.8%, up from the 2.6% projected in July. The combination of accommodative monetary policy and robust economic growth enhances the attractiveness of US assets, contributing to the strength of the USD.

The US Mortgage Bankers Association (MBA) reported a fourth consecutive week of declining mortgage applications, with a 6.7% contraction for the week ending October 18, following a steep 17% drop the prior week. The sustained decrease suggests that higher borrowing costs are dampening demand in the housing market. Elevated mortgage rates, driven by rising Treasury yields, are impacting affordability and could lead to a slowdown in residential investment, a key component of GDP growth.

The British Pound remains below the psychological resistance level of 1.3000 against the USD. The currency is under pressure as traders await a speech by BoE Chair Andrew Bailey later today. Market participants are keen to glean insights into the BoE's monetary policy trajectory for November and December, especially as traders have priced in another interest rate cut in November.

On the technical side, GBP/USD pair has seen its short-term bullish trend weaken significantly as sellers have successfully pushed the price below the key 1.30 level, signaling a break of the lower bound of the ascending channel. This breach suggests that the upside momentum has been lost, and further downside pressure is likely. The next significant technical target for sellers is around the 1.28 level, where the 200-day SMA provides potential support, marking a critical level for the pair in the medium term:

Crude oil prices halted their two-day surge on Wednesday after the API weekly report indicated a larger-than-expected increase in US stockpiles. The API data revealed a build of 1.64 million barrels, surpassing the forecasted 0.7 million barrels and reversing the previous week's draw of 1.58 million barrels. The surprise build somewhat increased concerns about oversupply in the market, which could offset recent price gains.

Markets are now awaiting the EIA report due later today. The consensus expectation is for a modest build of 0.7 million barrels following a significant drawdown of 2.2 million barrels a week earlier. Should the EIA confirm a larger-than-anticipated increase in inventories, it may signal persistent oversupply issues, potentially leading to a pullback in crude prices toward the $70.00 per barrel mark or lower.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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US Dollar Retreats Due to Profit Taking Move but Upside Risks Remain



The US Dollar has weakened against most major currencies today, as market participants book profits after the parabolic rise and ahead of crucial US economic data releases. The spotlight is on the PMI data for October, which is expected to provide insights into the health of the US manufacturing and services sectors.

Consensus forecasts suggest the Services PMI will remain broadly stable at 55.0, marginally down from 55.2 in September. A reading above 50 indicates expansion, and stability here could reinforce the narrative of a resilient US economy amid global uncertainties.

A stable PMI and strong labor market data could temper expectations of aggressive monetary easing by the Federal Reserve. However, with US interest rate derivatives pricing in a 93% probability of a 25 bps rate cut at the upcoming FOMC meeting on November 7, the market seems convinced of imminent policy accommodation.

Another important data update, released today, Initial Jobless Claims, decreased to 227K from the previous week's 242K, providing mixed evidence about the much-discussed labor market slack in the US. Downward trend in claims often supports the USD, as it suggests robust employment conditions that may prompt the Fed to delay policy easing:

With the US presidential election scheduled for November 5, markets are bracing for potential volatility. A potential re-election of President Trump raises concerns about the reimplementation of higher tariffs, which could disrupt global trade and negatively impact economies closely tied to the US. The uncertainty surrounding the election outcome may limit significant dips in the USD, as investors often flock to safe-haven assets during periods of political uncertainty.

In the Eurozone, preliminary PMI readings present a dichotomy between member states:

France continues to exhibit contraction across all sectors, with PMIs remaining below the 50 threshold. However, Germany delivered better-than-expected PMI readings. Nevertheless, except for the Services PMI, other sectors remain in contraction territory, signaling that Europe's largest economy is not out of the woods yet:

Mario Centeno, Governor of the Bank of Portugal and ECB policymaker, indicated that a 50 bps rate cut in December is a possibility. His comments highlight accumulating downside risks to growth within the Eurozone. The prospect of additional monetary easing by the ECB may exert downward pressure on the Euro (EUR) against major currencies. For USD-denominated investors, this could influence currency hedging strategies and European asset allocations.

The EUR/USD technical chart shows that the pair has touched the lower bound of a well-established ascending channel, signaling a key technical target has been achieved. This area is likely to act as a strong support level, and the reaction around this level suggests a possible technical rebound is imminent. Short-term momentum indicators, including RSI nearing oversold levels, support this view. A rebound to the 1.0850-1.09 range is likely as market participants could capitalize on the completion of this technical target, eyeing higher retracement levels within the channel. This confluence of factors should draw further buying interest in the near term:

The Pound Sterling has bounced back to near 1.30 against the USD, recovering from a two-month low of 1.2900 observed on Wednesday. The UK's Composite PMI edged lower to 51.7 in October from 52.6 in September, indicating that while the economy continues to expand, the pace is slowing in both manufacturing and services sectors. Governor Andrew Bailey, in his recent speech, expressed confidence that inflation is decelerating faster than anticipated. However, he also cautioned about potential structural changes in the economy that could impact the inflation outlook. Bailey's comments have spurred market speculation of an imminent rate cut by the BoE, possibly as soon as the November meeting, with expectations of a repeat cut in December. Anticipation of lower interest rates will likely maintain structural medium-term weakness in GBP price.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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Market Analysis: Durable Goods Contraction Provides Welcomed Relief to Battered Market Sentiment

The latest data shows that US Durable Goods Orders fell by 0.8% in September, marking the second consecutive month of contraction after a sharp downward revision of the previous month's figure from 0% to -0.8%. While the headline number was better than economists' forecasts, the underlying trend points to weakening demand in the manufacturing sector.
The consecutive declines suggest that businesses may be scaling back on capital expenditures due to economic uncertainties.

Equity markets embraced the softer Durable Goods data, rallying on rising implied odds of additional Fed rate cut in December. Interest rate futures price in a 97% probability of a 25 basis point rate cut at the upcoming FOMC meeting on November 7.

The US Dollar Index (DXY) is at a critical juncture, testing support at the 104.00 level. A close above this threshold could pave the way for a rally toward 105.50, especially as uncertainties surrounding the upcoming US presidential election begin to intensify:

The Pound Sterling has gained traction against the US Dollar, approaching the psychological resistance level of 1.3000. This movement is supported by hawkish comments from Bank of England Monetary Policy Committee member Catherine Mann and stronger-than-expected economic data.

The preliminary S&P Global/CIPS Purchasing Managers' Index (PMI) for October indicates continued expansion in both manufacturing and services, outperforming the US and Eurozone counterparts.
The GBP/USD technical chart shows a clear ascending trendline, which has been respected multiple times, acting as a strong support level. However, the price is currently testing this trendline, and a break below it could signal a bearish reversal. If the price breaks decisively below the trendline, it may open the door for further downside towards the 1.2800 level. The RSI is trending lower, indicating weakening momentum, which supports the potential for a breakdown. A failure to hold this key support could attract more selling pressure, potentially accelerating a bearish move:

Later today, the University of Michigan will release its final Consumer Sentiment reading for October. Expectations are modest, with a slight uptick to 69.0 from the preliminary 68.9. The 5-year inflation expectations are projected to remain steady at 3%.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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USD Poised to Rise as Bearish Correction Concludes; Labor Market Surprises Ahead



The greenback resumed its advance on Wednesday, with the US Dollar Index seemingly completing a modest bearish retracement from 104.50 down to 104. Market participants are holding off on broad profit-taking in the USD due to uncertainties surrounding the upcoming US elections, which maintain significant upside risks for US fixed-income yields and, by extension, the dollar. Furthermore, expectations of strong US economic data releases—which could challenge the disinflation trend and signal a less pronounced easing in the labor market—are making bearish bets against the USD unattractive at the moment:

Today's release of the Consumer Confidence Index and the JOLTS Job Openings figures will provide valuable insights into consumer sentiment and labor market conditions. An improvement in consumer confidence to an expected 99.5 could signal increased consumer spending, a primary driver of GDP growth. Similarly, sustained high levels of job openings near 8 million suggest that the labor market remains tight, which could exert upward pressure on wages and inflation.

The preliminary US Q3 GDP data, scheduled for release on Wednesday, is anticipated to show a robust annualized growth rate of 3%. This strong figure highlights the US economy's resilience and makes it stand out among its major counterparts.

While the Nonfarm Payrolls report on Friday is expected to reveal a slower increase in employment compared to the previous month, the overall strength of the labor market remains a key factor for the Federal Reserve.

Recent strong US economic data have led markets to reassess expectations for the Federal Reserve's interest rate path. Although interest rate derivatives suggest a near-certainty of a 25 basis point cut in November and more than a 70% chance of another cut in December, robust economic indicators could prompt the Fed to adopt a less dovish stance. Higher interest rates typically support the US Dollar by attracting foreign capital seeking higher yields, which could further bolster the DXY.

Gold has pushed higher into the $2,750s per ounce, benefiting from a confluence of factors:

- The recent 6% drop in Brent crude prices, driven by geopolitical developments in the Middle East, has eased concerns over energy-driven inflation. Lower oil prices reduce costs across various economic sectors, potentially accelerating the decline in global inflation rates;

- With uncertainties surrounding global economic growth and geopolitical tensions, investors are increasing allocations to safe-haven assets like gold. The prospect of lower real interest rates enhances gold's appeal, as it reduces the opportunity cost of holding a non-yielding asset.

A near-term technical buying target for gold is the upper bound of its ascending corridor, which is located roughly near $2,800 per troy ounce:

The Pound Sterling is trading cautiously, remaining locked in a tight triangle between the 1.30 horizontal resistance and an ascending support line:

Major upcoming fundamental events—such as the UK's Autumn Forecast Statement slated for Wednesday and US labor market data—are prompting investors to adopt a wait-and-see stance. Regarding the fiscal announcement, it is expected to play a crucial role in shaping the Bank of England's monetary policy. Expansionary fiscal policies could necessitate tighter monetary policy to counter inflationary pressures, while austerity measures might allow for a more accommodative stance.

Market consensus indicates that the Bank of England is poised to cut interest rates by 25 basis points to 4.75% in its November 7 meeting, marking the second rate cut this year. The central bank's decisions will significantly influence the Pound's valuation against major currencies.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

[tickmill-news]

Dollar Rally Stalls Despite Rebound in Trump Victory Odds, FOMC Meeting in Focus


The US presidential election stands as the foremost event this week, with significant ramifications for the US Dollar, bond and equity markets. The Dollar's strength in October was largely attributable to market expectations of a potential victory for former President Donald Trump. His administration's preference for protectionist policies—such as tariffs, tax cuts, and deregulation—had previously supported the Dollar by fostering a perception of "US Exceptionalism". Polling data released this week showed Vice President Kamala Harris leading in traditionally Republican-leaning states, triggering a notable adjustment in Trump’s winning odds on the Polymarket betting website, where they dropped from 67% to 56%:

This shift also caused a sharp retracement of the US dollar against other currencies, with DXY dropping from 104.30 to 103.50. Although implied odds of a Trump victory began to rise again on Tuesday, the dollar showed little reaction, suggesting that the currency correction may have been technically driven, with the polling news serving as a catalyst for the technical profit-taking move:

Nevertheless, a Republican victory will likely reignite a substantial rally in the Dollar, reinforcing policies that may negatively impact the Eurozone and China's economic outlooks. Conversely, a Democratic win might usher in a more multilateral approach to trade, potentially softening the Dollar as global trade tensions ease.

Beyond the election, the Fed’s policy meeting on Thursday is a focal point for investors. The market consensus, as reflected by the interest rate futures, anticipates two 25 bp rate cuts in November and December, with implied odds changing slightly in the last two trading days (even after the NFP report). Fed Chair Jerome Powell's subsequent remarks at the press conference will be scrutinized for indications regarding the trajectory of monetary policy into December and beyond.

The release of the ISM Services PMI data for October is another critical piece of the puzzle regarding much discussed slowdown in the US pace of economic expansion. Forecasts suggest a slight decline to 53.8 from September's 54.9, indicating continued expansion of activity in the sector but at a decelerated pace. Given the rising trend in PMI readings over the past three months, the threshold for a hawkish surprise may be quite high. However, any downside in the upcoming report could trigger a significant dovish reaction, potentially putting downward pressure on the dollar:

In Europe, the Euro's performance against the Dollar remains subdued as market participants await the outcomes of US-centric events. Recent economic data has prompted a recalibration of expectations regarding the ECB policy actions. Improved third-quarter GDP growth figures and upward revisions in manufacturing PMI estimates have alleviated some recessionary fears, leading to diminished expectations for aggressive ECB rate cuts.

Nevertheless, the manufacturing sector's PMI remains below the critical 50 threshold, signaling ongoing contraction. The ECB faces a tough task to balance between stimulating economic activity and managing inflation, and future policy decisions will hinge on how these dynamics evolve.

The Pound Sterling remains stable as attention turns to the Bank of England's policy meeting. A 25 basis point rate cut to 4.75% is widely anticipated, marking the second reduction this year. The move reflects concerns over slowing economic momentum and inflation rates below target levels.

Notably, internal divisions within the Monetary Policy Committee highlight differing views on the appropriate policy path. While a majority may favor easing to support growth, dissenting voices like Catherine Mann caution against premature cuts that could undermine long-term inflation targets.

From a technical perspective, the Pound remains confined between the support trendline and the 1.30 level, as market participants appear to be awaiting the outcome of the U.S. elections. A breakout in either direction is likely to determine the price trend over the short term, potentially lasting for several days:

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.


High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.