Daily Market Notes Tickmill UK

[Tickmill-News]

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.

[Tickmill-News]

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.

[Tickmill-News]

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.

[Tickmill-News]

EUR/USD Rebounds from Key Support; GBP/USD Defies Weak UK GDP

The EUR/USD pair staged a recovery on Friday, rebounding from the critical technical support level of 1.0500 reached the previous day. The Euro managed to erase Thursday’s losses, climbing back to the 1.0600 range after enduring a five-day losing streak against the Dollar. As anticipated in our earlier discussion, this pullback was a plausible scenario.

The recovery seems to be fueled primarily by profit-taking, as traders lock in gains following the Euro’s recent slide. Additionally, the market appears to have fully digested and priced in the key developments of recent weeks, including President-elect Trump’s victory, the “Red Wave” in U.S. politics, the CPI report, and Powell’s comments. This confluence of factors has contributed to a temporary stabilization in the pair:

Economic data from France contributed modestly to the Euro’s recovery. The Harmonized Consumer Price Index rose to 1.6% year-over-year in October, slightly higher than both the preliminary reading and market expectations. Despite this uptick, the increase is unlikely to prompt a shift in the ECB dovish monetary policy stance. The ECB is expected to proceed with a policy rate cut at its upcoming meeting in December, a move that could limit potential of Euro recovery in the medium-term.

In the United States, Federal Reserve Chairman Jerome Powell indicated a cautious approach toward additional rate cuts. While acknowledging the continued strength of the US economy and labor markets, he suggested that another rate cut in December is not a certainty. This tempered expectation has bolstered the US Dollar recently. However, markets are concerned about potential inflationary pressures resulting from President-elect Trump’s proposed fiscal stimulus measures and possible tariffs on China and Europe. Such policies could lead to higher inflation rates, which might compel the Fed to adjust its monetary policy outlook.

Interestingly, Powell’s comments triggered a notable drop in the implied odds of a December rate cut. Fed funds futures now reflect a 58.4% probability of a cut, down sharply from 72.2%. Despite this shift, the Dollar’s reaction has been surprisingly muted, or even contradictory, as its major peers gained ground today. This suggests that traders may have already factored in a recalibrated Fed rate path, influenced by the inflationary implications of President-elect Trump’s policy agenda:

The GBP/USD pair has defied expectations of a decline following disappointing economic data, trading in positive territory instead. This unexpected recovery comes despite weaker-than-anticipated UK GDP figures, which would typically weigh on the Pound. The UK economy contracted by 0.1% in September, while preliminary GDP growth for the third quarter was a subdued 0.1% quarter-over-quarter, falling short of the 0.2% forecast and marking a slowdown from the 0.5% expansion seen in the second quarter.

Under normal circumstances, such figures would prompt a sell-off in the Pound Sterling. However, the currency’s resilience suggests that market participants are shifting their focus toward evaluating the sustainability of the recent sharp rise in the US Dollar. This recalibration may reflect a reassessment of whether the Dollar’s bullish trend has become overheated, prompting traders to unwind positions and temper expectations for further parabolic gains in the Greenback.

Technically speaking, GBP/USD pair has reached a key support trendline, a level that’s likely to catch the attention of many traders given its prominence on the daily chart. The timing of this touch, right before the weekend close, could amplify the potential for a rebound as market participants prepare for the upcoming week. Despite weak UK GDP data, the Pound has shown resilience, suggesting that selling momentum may be waning. This setup increases the likelihood of a technical pullback toward the 1.28 level in the near term:

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]

USD Rally Stalls; EUR/USD Holds Firm Above 1.05

The U.S. Dollar’s recent rally has hit a pause, with the EUR/USD pair trading sideways just above the 1.0550 intraday support level. The Dollar Index hovers around the 106.50 support, searching for fresh catalysts to resume its upward momentum. Markets appear to be in a holding pattern, having already priced in significant risks and implications of expected Trump administration policies—particularly around US protectionism, tariffs, and trade deals. Investors now await further clarity to either validate these expectations or expose them as an overreaction to Trump’s reelection.

On the one hand, there are signals urging markets not to rush to conclusions and to wait for actual actions. For example, Fed officials are exercising caution in projecting the implications of President Trump’s policies on monetary strategy for the upcoming December meeting and into 2025. Fed Chair Jerome Powell emphasized the premature nature of making policy judgments at a recent Dallas event, noting, “It’s too early to reach conclusions.”

On the other hand, there is information fueling those concerns, suggesting that the risks priced in by the market are, on the whole, justified. For instance, Stephen Moore a senior economic advisor to President Trump, hinted at potential escalation of trade tensions between the Eurozone and the United States. Moore indicated that the US might deprioritize a free trade deal with Britain if it favors EU relations over American ties.

The EUR/USD pair is currently trading within a narrow range of 1.05 to 1.06, reflecting a market in a holding pattern. Last Friday’s attempt to rebound faced strong resistance around the 1.06 level, resulting in a daily candlestick that closed near its opening price, indicating the market’s reluctance to move higher. Today, upward pressure is building again. Given that a bearish breakout would require significant triggers, which are not anticipated this week, the market may be inclined to engage in a technical upward correction targeting the 1.0650 area:

The British Pound is edging higher, attempting to claw back losses from Friday’s sharp sell-off triggered by dismal economic data. The UK’s economy unexpectedly contracted by 0.1% in September, with minimal growth in the third quarter. This unexpected downturn could prompt the Bank of England to consider more aggressive rate cuts to stimulate growth. Such a policy pivot could significantly impact interest rate differentials and, consequently, GBP valuations against its peers.

From a technical analysis perspective, GBP/USD is trading near a key ascending support line, which intersects with the horizontal level at 1.26. Technical buy signals seem sufficient; however, the market is waiting for signs of a broader dollar pullback to increase long positions on the pair. Overall, the risks are tilted to the upside, and short-term downward movements are highly likely to be met with active buying:

The Canadian Dollar remains on the back foot as market participants anticipate a 50 basis point rate cut from the Bank of Canada in December. Investors are closely watching the upcoming Canadian CPI data, expected to show a month-on-month increase of 0.3% in October after a 0.4% deflation in September. A year-on-year inflation uptick to 1.9% from 1.6% could influence the BoC’s policy trajectory, forcing the central bank to slow down the pace of rate cuts or issue less dovish guidance.

The next significant move for the Australian Dollar is likely to be influenced by the release of the RBA minutes from its November 5 meeting. The RBA held its Official Cash Rate steady at 4.35%, with Governor Michelle Bullock delivering a hawkish outlook amid concerns over upside risks to inflationary pressures. The minutes could provide deeper insights into the central bank’s thinking, affecting interest rate expectations and currency valuations.

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.