Risk Currencies Strengthen as Dollar Stabilizes Before Key US Inflation Report
The dollar index stabilized around 100.7 on Friday as traders prepared for the upcoming PCE price index report, the Federal Reserve’s preferred measure of inflation. On Thursday, the index faced pressure as the yuan and other risk currencies strengthened following China’s commitment to increase fiscal and monetary support. Additionally, recent data revealed that weekly jobless claims fell to a four-month low, indicating a robust labor market. GDP growth was confirmed at 3% for Q2, with Q1 figures revised higher, and full-year growth estimates for both 2023 and 2022 also increased. Furthermore, durable goods orders remained flat last month, defying expectations for a significant 2.6% decline. Markets are currently divided on whether the Fed will implement another 50 basis point rate cut in November or choose a more modest 25 basis point reduction.
In the EUR/USD pair, the initial resistance will be at 1.1220 followed by 1.1250 and 1.1300 if this level is surpassed. On the downside, the first support is at 1.1150, with subsequent supports at 1.1100 and 1.1050 below that.
Risk Currencies Gain While Markets Await Powell’s Speech and Key Inflation Data
The EUR/USD pair remained stable, trading around 1.1160 as traders anticipated German consumer inflation data and Federal Reserve Chair Jerome Powell’s speech for further direction. Meanwhile, the Japanese yen held steady near 142.3 after a strong rally following dovish comments from Japan’s new prime minister and stronger retail sales data. Gold hovered near $2,650 per ounce, supported by growing expectations of further interest rate cuts by the Federal Reserve, as well as rising geopolitical risks. The British pound traded higher at 1.3385, benefiting from speculation that the Bank of England may proceed with rate cuts more slowly than the Federal Reserve. Silver prices faced selling pressure around $31.55 as improved global risk sentiment and upcoming speeches from central bank officials, including Powell, fueled profit-taking.
EUR/USD Flat as Traders Await Powell’s Speech and German CPI
The EUR/USD pair is having difficulty building on Friday’s modest recovery from the 1.1125-1.1120 support zone, starting the week quietly around 1.1160, showing little change for the day. Traders are eagerly anticipating the release of German consumer inflation data and a speech from Federal Reserve Chair Jerome Powell for a new direction.
In the pair, the first support level is at 1.1150. If this level is breached, the next supports to watch will be 1.1100 and 1.1050. On the upside, the first resistance is at 1.1180; if this level is surpassed, the next targets will be 1.1200 and 1.1250.
Gold Holds Firm as Fed Rate Cut Speculation Boosts Demand
Gold was trading around $2,650 per ounce on Monday, poised for its largest quarterly increase since early 2016. This surge is fueled by a growing belief that the Federal Reserve may implement additional rate cuts. Last week, both the PCE and core PCE price indices rose slightly by 0.1%, with the core index increasing less than the anticipated 0.2%. Meanwhile, personal spending has slowed, and income growth has unexpectedly dipped. Fed fund futures indicate that the market sees a 54% likelihood of a 50 basis point rate cut in November. The potential for further rate reductions by the Fed, along with dovish stances from central banks worldwide, is boosting the attractiveness of holding non-yielding gold. Additionally, China’s new monetary stimulus and the increasing risk of broader conflict in the Middle East are further supporting this demand.
Technically, the first support level is at 2,650. If this level is breached, the next supports to watch will be 2,630 and 2,600. On the upside, the initial resistance is at 2,665; if this level is surpassed, the next targets will be 2,685 and 2,700.
Daily market analysis by zForex, 10.01.2024 - Euro Weakness, Yen Slide, Gold Rallies. The EUR/USD pair remains under pressure as it struggles to gain momentum, currently hovering around 1.1135-1.1140.
Traders are focused on upcoming Eurozone inflation data, which could shape expectations for the European Central Bank’s next moves. Meanwhile, the yen continues to weaken against the dollar following Fed Chair Jerome Powell’s comments, indicating a cautious approach to U.S. rate cuts.
Rising geopolitical tensions in the Middle East have boosted gold prices, while the GBP/USD pair faces downward pressure due to a stronger dollar and comments from the Bank of England. Silver breaks above $31.35, resuming its bullish momentum after a two-day losing streak. Investors are keeping an eye on key support and resistance levels across these assets to gauge future market direction.
The EUR/USD pair is struggling to gain traction after retreating from a 14-month peak just above 1.1200. Currently trading around 1.1135-1.1140, it remains largely unchanged as traders await Eurozone inflation data. The flash Consumer Price Index (CPI) for September is expected to show a drop below the European Central Bank’s (ECB) 2% target, particularly following a decline in Germany’s CPI to its lowest level since February 2021. A weaker Eurozone CPI would bolster expectations for a 25 basis point rate cut at the ECB’s upcoming meeting, while a stronger reading may have limited impact due to modest USD strength. Federal Reserve Chair Jerome Powell’s recent hawkish remarks indicate only two more 25 basis point cuts this year if the economy performs as expected, prompting a reassessment of aggressive easing by the Fed. Additionally, rising geopolitical tensions in the Middle East are supporting the safe-haven USD. Later in the North American session, traders will focus on the US ISM Manufacturing PMI and JOLTS Job Openings data, along with speeches from influential FOMC members, which may impact USD demand and provide direction for the EUR/USD pair. However, repeated failures to hold above the 1.1200 mark suggest caution for bullish traders.
In the pair, the first support level is at 1.1100. If this level is breached, the next supports to watch will be 1.1050 and 1.0990. On the upside, the first resistance is at 1.1160; if this level is surpassed, the next targets will be 1.1200 and 1.1250.
The GBP/USD pair is struggling to gain traction around 1.3370 during Tuesday’s Asian session, impacted by less dovish comments from Federal Reserve (Fed) Chair Jerome Powell, which have strengthened the dollar. Investors are now focused on the upcoming US ISM Manufacturing Purchasing Managers Index (PMI) data, as well as speeches from Fed officials Raphael Bostic and Lisa Cook. On the UK front, Bank of England (BoE) policymaker Megan Greene highlighted the risk of renewed inflation from a consumption-driven recovery but noted that further interest rate cuts are likely, as prices are “moving in the right direction.” Despite this, traders have recently reduced their expectations for a BoE rate cut in November.
For GBP/USD, the initial support lies at 1.3350, followed by 1.3300 and 1.3250 below. On the upside, the first resistance is at 1.3400, with subsequent levels at 1.3430 and 1.3450 if the pair breaks above this resistance.
Fed Rate Speculation Drives Currency and Commodity Markets
The EUR/USD pair experiences mild gains around 1.1070 as Middle East tensions weigh on risk assets, with eyes on US ADP Employment data and potential Fed rate cuts.
The Japanese yen remains steady amid policy uncertainty and improved consumer confidence, while gold hovers near $2,660 on safe-haven demand due to escalating conflict in the region. GBP/USD stays subdued after recent losses, influenced by geopolitical risks and Bank of England policy signals. Silver trades within a narrow range below mid-$31.00s, lacking momentum to break higher. Key support and resistance levels across assets reflect market caution amidst rising global tensions and mixed economic data.
The EUR/USD pair is seeing modest gains, trading around 1.1070 during Wednesday’s Asian session. However, rising geopolitical tensions in the Middle East may pressure risk-sensitive assets like the euro. Investors await the US ADP Employment Change data for September, due later today. Traders are also considering the possibility of a significant rate cut by the US Federal Reserve in November, particularly after Fed Chair Jerome Powell indicated a gradual approach to lowering rates. According to the CME FedWatch Tool, markets currently anticipate a 37.4% chance of a 50 basis point cut in November and a 62.6% chance of a 25 basis point reduction.
Weak US economic data has weighed on the dollar, with the ISM Manufacturing PMI staying flat at 47.2 in September, below the expected 47.5, indicating continued contraction in manufacturing. In Europe, September inflation in the Eurozone eased to 1.8% year-on-year, falling below the ECB’s target and marking its lowest since April 2021. Despite these favorable inflation figures, the Eurozone economy remains under pressure, leading the ECB to cut rates to 3.50%, hinting at potential further reductions. Geopolitical risks, such as Iran’s launch of over 200 ballistic missiles at Israel and Israel’s promise of retaliation, could put downward pressure on the euro and stimulate safe-haven assets like the US dollar.
For the EUR/USD pair, the first support level stands at 1.1050, followed by 1.1010 and 1.0990 if breached. On the upside, resistance is at 1.1100, with further targets at 1.1130 and 1.1200 if surpassed.
GBP/USD is trading around 1.3280 during Wednesday’s Asian session, remaining subdued after losses in the previous day. This decline is likely due to rising geopolitical tensions in the Middle East, which are weighing on the risk-sensitive Pound Sterling (GBP). In the UK, Bank of England (BoE) policymaker Megan Greene warned that a consumption-driven recovery could trigger a new wave of inflation. However, she indicated that further interest rate cuts are probable as prices are “moving in the right direction.” Greene also noted that the neutral interest rate has likely increased since the inflation shock, although she did not provide a specific figure. Traders are now looking forward to the US ADP Employment Change report and comments from Federal Reserve officials for additional insights, while the BoE’s Monetary Policy Report Hearings on Thursday will also be closely monitored.
For GBP/USD, the initial support lies at 1.3250, followed by 1.3200 and 1.3150 below. On the upside, the first resistance is at 1.3315, with subsequent levels at 1.3375 and 1.3425 if the pair breaks above this resistance.
Markets Weighed by Strong U.S. Labor Data and Geopolitical Tensions
The EUR/USD pair experienced selling pressure, dropping to a three-week low as investors reassessed their expectations for Fed rate cuts following strong U.S. labor market data and hawkish comments from Fed Chair Powell. Meanwhile, the euro is under pressure due to falling inflation in the Eurozone and increasing speculation that the ECB may lower rates.
In contrast, the yen weakened to a one-month low against the dollar as Japanese officials signaled caution on further rate hikes, while stronger-than-expected U.S. job data supported the dollar. Gold remained near record highs, benefiting from safe-haven demand amid rising Middle East tensions, though stronger U.S. labor data limited gains. The British pound continued to decline amid safe-haven flows and cautious BoE policy, while silver pulled back after strong U.S. labor data raised expectations for another Fed rate cut. Geopolitical risks in the Middle East, however, limited the downside for precious metals.
Gold Holds Near Record Highs as Middle East Tensions Escalate
On Thursday, gold was priced around $2,655 per ounce, staying near record highs amid escalating tensions in the Middle East, which boosted its appeal as a safe haven. Iran’s missile attack on Israel prompted increased Israeli military action and threats of retaliation. However, strong US labor data this week limited gold’s gains, as it suggests the Federal Reserve may not need to pursue a more accommodative monetary policy. The ADP report showed more private-sector jobs created in September than expected, reinforcing a stronger labor market than anticipated at the start of Q3. Currently, markets estimate a 66% likelihood that the Fed will implement a modest 25 basis point rate cut in November, which could lower the opportunity cost of holding gold, a non-interest-bearing asset.
Technically the first support level is at 2,650. If this level is breached, the next supports to watch will be 2,630 and 2,600. On the upside, the initial resistance is at 2,665; if this level is surpassed, the next targets will be 2,685 and 2,700.
GBP/USD Extends Losses Amid Safe Haven Flows and BoE Caution
The GBP/USD pair extended its losses for the third consecutive day, trading around 1.3200 during the Asian session on Thursday, as safe haven flows amid rising Middle East tensions exert downward pressure. The Bank of England (BoE) has been promoting a cautious approach to rate cuts, given persistent inflation in the services sector and strong economic growth. In its quarterly statement, the BoE’s Financial Policy Committee noted that risks to UK financial stability have remained largely unchanged since June. BoE policymaker Megan Greene cautioned that a consumption-driven recovery could lead to renewed inflation, although she acknowledged that further rate cuts are likely, as prices are moving in the right direction.
For GBP/USD, the initial support lies at 1.3170, followed by 1.3110 and 1.3070 below. On the upside, the first resistance is at 1.3220, with subsequent levels at 1.3250 and 1.3300 if the pair breaks above this resistance.
Euro Falls as ECB Rate Cut Looms, Geopolitical Uncertainty Lifts Dollar
The EUR/USD pair continued its decline, dropping to a three-week low as Eurozone inflation softened and expectations of an ECB rate cut grew.
Strong U.S. economic data, including higher ISM Services PMI and ADP Employment Change reports, bolstered the dollar, while geopolitical tensions in the Middle East provided safe haven demand for the USD. In Japan, the yen stabilized around 146.5, with officials cautioning against further rate hikes, while gold prices held steady near record highs due to ongoing geopolitical risks. The GBP/USD pair faced pressure ahead of the U.S. jobs report, while dovish BoE comments added to the bearish outlook. Silver prices neared $32.30, supported by strong buying momentum.
Euro Weakens as ECB Rate Cut Looms, US Data Boosts Dollar
The EUR/USD pair has extended its losses for the sixth consecutive session, trading around 1.1030 during the Asian hours on Friday. A lower inflation reading in the Eurozone has heightened expectations for a rate cut by the European Central Bank (ECB) in October, which would mark the central bank’s third reduction this year. Earlier this week, the Harmonized Index of Consumer Prices fell to 1.8% year-over-year in September, dipping below the ECB’s 2% target and marking its lowest level since April 2021. Markets are currently pricing in a 95% chance of a 25 basis point rate cut this month. The risk-sensitive euro may encounter challenges as escalating geopolitical tensions in the Middle East affect market risk appetite. US President Joe Biden noted that the United States is in discussions with Israel regarding potential strikes on Iran’s oil infrastructure. Israeli Prime Minister Benjamin Netanyahu has warned that Iran “will pay a heavy price” for its recent attack, which reportedly involved the launch of at least 180 ballistic missiles aimed at Israel, according to the BBC. The EUR/USD pair is depreciating as the US Dollar (USD) gains support from stronger-than-expected reports on US ISM Services PMI and ADP Employment Change, which undermine dovish expectations for Federal Reserve (Fed) monetary policy. The ISM Services PMI rose to 54.9 in September, up from 51.5 in August and exceeding market forecasts of 51.7. Meanwhile, the ADP US Employment Change report indicated an increase of 143,000 jobs in September, surpassing the anticipated 120,000.
In the pair, the first support level is at 1.1000. If this level is breached, the next supports to watch will be 1.0970 and 1.0940. On the upside, the first resistance is at 1.1050; if this level is surpassed, the next targets will be 1.1080 and 1.1100.
Gold Steady Amid Middle East Conflict, Strong US Data Limits Gains
Gold remained close to $2,660 per ounce on Friday, holding at record levels as its safe-haven appeal was heightened by escalating geopolitical tensions. Markets are closely watching developments in the Middle East, particularly after US President Biden refrained from explicitly condemning the possibility of Israel targeting Iran. Additionally, Tel Aviv has pledged to retaliate against Iran and has increased military activity in Beirut amid its ongoing conflict with Hezbollah. Despite gold’s strong performance, strong labor market data released earlier this week has limited its upward momentum, as it suggests less need for the Federal Reserve to adopt a more accommodative monetary policy. ISM data also revealed that US services activity grew at its fastest pace in over a year in September. Currently, markets estimate about a 65% chance that the Fed will choose to implement a modest 25 basis point rate cut in November. Investors are also awaiting the release of September jobs data later today for further insights.
Technically the first support level is at 2,660. If this level is breached, the next supports to watch will be 2,640 and 2,620. On the upside, the initial resistance is at 2,675; if this level is surpassed, the next targets will be 2,685 and 2,700.
Markets Lifted by Strong U.S. Jobs Data and Geopolitical Tensions
The dollar gained on solid U.S. labor data, with the nonfarm payrolls report showing 254,000 new jobs in September, reducing expectations of a major rate cut by the Federal Reserve in November.
As a result, the EUR/USD pair continued its decline, while the Japanese yen weakened amid cautious remarks from Japanese officials. Gold prices retreated as robust labor figures limited expectations of aggressive Fed rate cuts, though Middle East tensions may offer near-term support. The pound fell after Bank of England Governor Bailey’s comments fueled speculation of a rate cut, and silver rose, benefiting from safe-haven demand and China’s hard efforts.
Gold Retreats Amid Strong US Labor Data, Eyes on Fed Meeting and CPI
Gold prices dipped below $2,650 per ounce on Monday, continuing a retreat from recent record levels. This decline follows reports of a robust U.S. labor market, which diminishes the likelihood of the Federal Reserve pursuing aggressive interest rate cuts. In September, nonfarm payrolls rose by 254,000—far surpassing the anticipated 14,000—while the unemployment rate unexpectedly dropped to 4.1%. This data eases fears of a weakening job market, thereby limiting expectations for significant rate reductions in this cycle. Typically, lower interest rates lessen the opportunity cost associated with holding non-yielding assets like gold. Investors are now looking ahead to the Fed’s meeting minutes due Wednesday and the consumer price index report set for Thursday for further insights. Additionally, gold’s appeal as a safe-haven asset is bolstered by escalating violence in the Middle East, which may support prices in the near term.
In gold, the first support is at 2630, with subsequent levels at 2600 and 2550 below that. The initial resistance is at 2685, followed by 2700 and 2730 if this level is surpassed.
GBP/USD Weakens After Bailey’s Comments Fuel Rate Cut Speculation
The British pound weakened to $1.31, retreating from the March 2022 highs reached in late September, following comments from Bank of England Governor Andrew Bailey that heightened expectations for another rate cut in November. In an interview with the Guardian, Bailey suggested that the central bank might act more swiftly to lower interest rates if further positive inflation news emerges. As a result, markets are now anticipating a 25 basis point rate cut next month, with a 40% chance of a similar reduction in December. The Bank of England held interest rates steady at 5% in September after a quarter-point cut in August. The pound has also benefited from a general weakness in the dollar, as traders foresee a more aggressive monetary easing from the Federal Reserve compared to other major central banks, including the BoE. In September, the sterling appreciated by 1.9%.
In GBP/USD, the first support is at 1.3085, with subsequent levels at 1.3050 and 1.3000 below that. On the upside, the initial resistance is at 1.3160, followed by 1.3200 and 1.3250 if this level is surpassed.
Strong U.S. Jobs and Rising Yields Boost Dollar, Gold Falls
The U.S. dollar strengthened, supported by rising Treasury yields and diminishing expectations for significant rate cuts following strong September nonfarm payrolls.
The yen stabilized after earlier declines, while gold fell for the fifth consecutive session as markets await U.S. inflation data for further Fed guidance. Silver holds steady, with upcoming U.S. economic releases likely to shape its direction. The GBP/USD pair remains focused on external influences, primarily U.S. Fed remarks, amid limited UK economic updates.
