USD/CAD Price Analysis – Oct 08, 2024
Daily Price Outlook
During Tuesday's European session, the USD/CAD pair maintained its upward trend, trading bullish around the 1.3638 level and reaching an intra-day high of 1.364. This strength comes as the Canadian Dollar weakens amid uncertainty ahead of the September employment data. Although a stronger job addition of 28K may initially support the CAD, the anticipated rise in the unemployment rate to 6.7% could stoke speculation about further interest rate cuts by the Bank of Canada, thereby weakening the CAD against other currencies.
Meanwhile, the US dollar is struggling to extend its gains as investors focus on the upcoming US Consumer Price Index (CPI) data for September, set to be released on Thursday. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, remains steady near 102.50.
Impact of US Inflation Data and Fed Rate Decisions on the USD/CAD Pair
On the US front, the US dollar is having trouble gaining traction as investors focus on the upcoming Consumer Price Index (CPI) data for September, set to be released on Thursday. The US Dollar Index (DXY), which measures the Greenback's strength against six major currencies, hovers around 102.50. This inflation data is crucial as it will influence expectations for the Federal Reserve's (Fed) interest rate decisions. Currently, market participants anticipate a smaller rate cut of 25 basis points in November, despite earlier expectations for a more significant reduction.
Recent comments from Fed Governor Adriana Kugler suggest that further rate cuts could be necessary if inflation continues to decline as expected. This shift highlights a strong labor market, which has led investors to reduce their bets on major interest rate cuts. According to the CME's FedWatch tool, there is an 85% chance of a 25 basis point cut at the Fed's November meeting.
Federal Reserve officials are now more concerned about rising unemployment than high inflation, prompting caution among traders as they await key inflation data, including the CPI and Producer Price Index (PPI), along with minutes from the recent Federal Open Market Committee (FOMC) meeting.
Therefore, the uncertainty surrounding US inflation data and potential Fed rate cuts may create volatility in the USD/CAD pair. A weaker USD due to disappointing CPI results could allow the CAD to strengthen, impacting the pair's direction amid fluctuating market sentiment.
Canadian Dollar Strength Amid Anticipation of Employment Data and Potential Rate Cuts
On the CAD front, the Canadian Dollar (CAD) is showing some strength despite recent weaknesses in its performance. Investors are eagerly anticipating the employment data set to be released on Friday. This report is expected to reveal that Canada added 28,000 jobs in September, an increase from the 22,100 jobs added in August. However, analysts predict that the unemployment rate will rise to 6.7% during the same period, which could indicate ongoing challenges in the labor market.
If the job data shows more signs of trouble, it could lead to speculation about further interest rate cuts from the Bank of Canada (BoC). This year, the BoC has already lowered interest rates by 75 basis points to 4.25% in response to returning inflation at the bank's target of 2% and a shaky economic outlook.
If Canada's employment data shows weaker-than-expected job growth or a rising unemployment rate, it could increase speculation about further interest rate cuts by the Bank of Canada. This scenario may lead to a weaker CAD, strengthening the USD/CAD pair.
USD/CAD - Technical Analysis
USD/CAD is trading at 1.36216, maintaining a neutral stance in a narrow range just above its pivot point at 1.36129. The pair is showing resilience as it struggles to break above the immediate resistance level at 1.36390. A sustained move above this level could signal a continuation of the recent bullish trend, with further resistance targets at 1.36612 and 1.36833.
The pair’s Relative Strength Index (RSI) is currently at 61, indicating mild bullish momentum. This suggests that there is still some room for upside movement before USD/CAD enters overbought territory. Supporting this view, the 50-day Exponential Moving Average (EMA) is positioned at 1.35891, providing a key support level that has been consistently holding up in recent sessions.
On the downside, the immediate support at 1.35905 is crucial for maintaining the short-term bullish bias. If prices fall below this support, the pair could see further declines towards 1.35686 and potentially down to 1.35461, where stronger buying interest may emerge.
Given the current technical setup, a break above 1.36390 could pave the way for further gains, targeting the 1.36612 level in the short term. Conversely, a fall below 1.35905 may trigger a bearish reversal. For now, maintaining a cautious long position above 1.36127 with a take-profit target at 1.36523 and a stop-loss at 1.35964 is advised.
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- GOLD Price Analysis – Oct 08, 2024
GOLD Price Analysis – Oct 08, 2024
Daily Price Outlook
Gold price (XAU/USD) is unable to stop its downward trend and remains under pressure, nearing the $2,630 support level. The main reason for this decline is Friday's strong US jobs report, which showed a resilient labor market. This data has led investors to scale back expectations for a major interest rate cut by the Federal Reserve, reducing the appeal of non-yielding assets like gold.
Despite this, a slight drop in the US Dollar and concerns over escalating tensions in the Middle East could still support gold. Traders are cautious ahead of key events this week, including the release of the FOMC minutes on Wednesday and US inflation data (CPI and PPI) later in the week, which could impact gold’s direction further.
US Economic Indicators and Geopolitical Tensions Influencing Gold Prices
On the US front, the broad-based US Dollar weakened slightly, but a strong US jobs report from September has reduced expectations for an aggressive rate cut by the Federal Reserve. The report highlighted a strong labor market, causing investors to scale back their bets on significant interest rate cuts, which has hurt demand for gold, a non-yielding asset. According to the CME's FedWatch tool, there is now an 85% chance of a 25 basis points rate cut at the next Fed meeting in November.
Meanwhile, Fed officials, like Minneapolis President Neel Kashkari, indicated that risks have shifted from high inflation to potential rising unemployment. St. Louis Fed President Alberto Musalem also supported further interest rate cuts depending on economic performance. Traders are also cautious ahead of key US inflation data (CPI and PPI) and the FOMC meeting minutes, both due this week, which could further influence gold prices.
Therefore, the US jobs report and shifting Fed policy expectations have weakened gold demand due to reduced interest rate cut bets. However, rising geopolitical tensions may provide some support for gold as a safe-haven asset amid uncertainty in the market.
Escalating Geopolitical Tensions and Economic Concerns Impacting Gold Prices
On the geopolitical front, tensions are escalating as Hezbollah launched rockets at Israel’s Haifa port and a military base near Tel Aviv, prompting Israel to respond with airstrikes on buildings in southern Beirut. Investors are worried that these conflicts could spread, which may boost gold's appeal as a safe-haven asset and help limit further losses in its price.
In addition, China's National Development and Reform Commission (NDRC) warned of increasing downward pressure on the Chinese economy. Traders are now focused on upcoming economic data, starting with the release of the FOMC meeting minutes on Wednesday. This will be followed by key US inflation figures on Thursday and Friday, which could significantly impact market sentiment and influence gold prices.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is trading at $2,641.84, slightly down by 0.04% in the current session. After encountering strong resistance at $2,651—marked by the 50-day Exponential Moving Average (EMA)—the yellow metal has struggled to gain momentum. Price action remains within a tight range, as traders look for catalysts to determine the next direction.
On the 4-hour chart, gold is hovering just below the pivot point at $2,645, indicating a lack of clear directional bias. Immediate resistance lies at $2,656, followed by $2,663 and $2,670. Breaking above these levels could trigger a short-term bullish trend. However, with the Relative Strength Index (RSI) sitting at 46, there’s limited bullish momentum, and gold could remain under pressure in the short term.
Conversely, if prices break below immediate support at $2,631, gold could see further declines, with subsequent support levels at $2,624 and $2,617. The market remains sensitive to macroeconomic indicators, with the upcoming U.S. Consumer Price Index (CPI) report likely to have a significant impact on gold prices.
Traders are advised to monitor key price levels closely. A move below $2,631 may signal a deeper correction, while a sustained break above $2,656 could pave the way for a potential recovery.
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EUR/USD Price Analysis – Oct 07, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair continued its downward trend, remaining under pressure around the 1.0968 level and hitting an intra-day low of 1.0955. This decline can be attributed to a bullish US dollar, which is holding gains near a fresh seven-week high, driven by unexpectedly strong labor market data from the United States for September.
Moreover, the uncertainty surrounding the euro's outlook has further weighed on the pair. Speculation is growing that the European Central Bank (ECB) may consider cutting interest rates again during its monetary policy meeting on October 17. Investors are keenly awaiting the US Consumer Price Index (CPI) data for September, set to be released on Thursday, for more insight into the interest rate outlook.
Strong US Dollar and Labor Data Weigh on EUR/USD Outlook
On the US front, the broad-based US dollar (USD) remains strong, holding onto gains near a fresh seven-week high, thanks to unexpectedly positive labor market data released on Friday. The employment report indicated robust labor demand and solid wage growth, revealing that the economy added 254,000 non-farm jobs in September—significantly higher than the expected 140,000.
Additionally, the unemployment rate fell to 4.1%, down from the anticipated rate and August’s figure of 4.2%. This upbeat employment data has led traders to revise their expectations regarding interest rate cuts from the Federal Reserve (Fed). After a larger-than-usual cut of 50 basis points in September, market bets for another cut in November have diminished.
Moreover, concerns about persistent inflation grew after the release of the hotter-than-expected Average Hourly Earnings for September, which rose to 4.0% year-over-year, surpassing expectations. Month-on-month wage growth also increased by 0.4%, further reducing speculation about significant rate cuts by the Fed.
Therefore, the strong US dollar and positive labor data have put downward pressure on the EUR/USD pair, as traders reassess interest rate cut expectations from the Federal Reserve. This dynamic strengthens the dollar against the euro, leading to further declines in the currency pair.
EUR/USD Faces Downward Pressure Amid Strong US Dollar and ECB Rate Cut Speculation
Conversely, the growing uncertainty regarding the euro's outlook and increasing speculation that the European Central Bank (ECB) may cut interest rates again during its monetary policy meeting on October 17 have emerged as significant factors keeping the EUR/USD pair under pressure. Large bets on a dovish ECB are fueled by concerns that inflation in the Eurozone may stabilize below the bank's 2% target. According to flash estimates, the annual Eurozone Harmonized Index of Consumer Prices (HICP) slowed to 1.8% in September, falling short of expectations.
However, the economic outlook for Germany, the largest economy in the Eurozone, also appears weak due to soft demand. Reports indicate that the German economy is expected to shrink by 0.2% this year, as stated by the ministry led by Robert Habeck of the Green Party. In the meantime, ECB policymaker and French Central Bank Chief François Villeroy de Galhau highlighted the need for another interest rate cut in an interview over the weekend.
He cautioned about the risk of undershooting the inflation target due to weak growth and prolonged restrictive monetary policy. Meanwhile, Eurozone Retail Sales grew by 0.8% annually in August but fell short of the expected 1% increase.
Therefore, the combination of a strong US dollar and uncertainty over the Eurozone's economic outlook has increased downward pressure on the EUR/USD pair. Speculation of further ECB interest rate cuts may continue to weaken the euro, leading to potential declines in the currency pair.
EUR/USD - Technical Analysis
The EUR/USD pair is displaying subdued price action, lingering near the 1.0966 mark. The Euro's slight dip against the Dollar reflects an overall lack of momentum, with the pair trading below its 50-day Exponential Moving Average (EMA) at 1.1036.
Currently, the Relative Strength Index (RSI) stands at 29, suggesting that the pair is in oversold territory and might be ripe for a corrective bounce. However, any upside movement faces immediate resistance at 1.0999, followed by stronger barriers at 1.1016 and 1.1036.
The technical outlook remains bearish as long as EUR/USD stays below the pivot point of 1.0983. A break below the immediate support level at 1.0951 could pave the way for further declines toward 1.0938 and potentially 1.0923.
This bearish sentiment is reinforced by the continued strength of the U.S. dollar amid expectations that the Federal Reserve may delay any further rate cuts due to strong U.S. economic data.
In conclusion, the EUR/USD is likely to remain under pressure unless it can break and sustain above the 1.0983 pivot point. Traders should monitor upcoming U.S. inflation data closely, as it could significantly impact the pair’s direction.
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- GOLD Price Analysis – Oct 07, 2024
GOLD Price Analysis – Oct 07, 2024
Daily Price Outlook
Gold prices (XAU/USD) remain under pressure, trading within the range of 2,639 to 2,653 as a result of several key factors. Investors are increasingly reducing their expectations for aggressive policy easing by the Federal Reserve, particularly following the release of strong US jobs data on Friday. This shift in sentiment has bolstered the US Dollar, pushing it to a seven-week high and contributing to the ongoing decline in gold prices.
Conversely, easing concerns about a US economic slowdown, combined with optimism regarding China's stimulus measures, is boosting market sentiment, which is putting additional pressure on gold prices. Whereas, the escalating geopolitical tensions in the Middle East offer some support for gold, as investors typically flock to this safe-haven asset during periods of uncertainty.
Strong US Economic Data Strengthens Dollar and Pressures Gold Prices
On the US front, the broad-based US dollar has gained strength, hitting a seven-week high around 102.380 as investors lower their expectations for aggressive rate cuts from the Federal Reserve. This shift followed the release of robust US jobs data on Friday, which revealed that the economy added 254,000 jobs in September, significantly exceeding expectations.
Furthermore, the unemployment rate unexpectedly dipped to 4.1%, indicating a resilient labor market. The data also showed that an additional 72,000 jobs were created in July and August than previously reported, suggesting that the economy is in better shape than anticipated.
As a result, market expectations for the Federal Reserve to implement aggressive policy easing have diminished. According to the CME Group's FedWatch Tool, there is now a 95% chance that the Fed will only lower rates by 25 basis points at its November meeting. This outlook has put additional pressure on gold prices (XAU/USD).
Market Sentiment and Geopolitical Tensions Impact Gold Prices
On the flip side, easing concerns about a US economic slowdown and positive sentiment surrounding China's stimulus measures are boosting the market mood, which is not good for safe-haven assets like gold. Although, rising geopolitical tensions in the Middle East, particularly following Israel's recent airstrikes in Gaza and Lebanon, could bolster gold's status as a safe-haven asset.
Therefore, the easing concerns about a US economic slowdown and positive sentiment from China's stimulus measures weaken gold prices. However, rising geopolitical tensions in the Middle East could increase demand for gold as a safe-haven asset, supporting its price.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) continues to trade under pressure, declining 0.22% to hover around 2,643.68. The yellow metal’s current price action reflects indecisiveness as it remains within a tight consolidation range between 2,638.72 and 2,658.54. This neutral stance is a direct result of stronger-than-expected U.S. payroll data, which has boosted the dollar and U.S. Treasury yields, consequently putting downward pressure on gold.
Technical Overview: On the 4-hour chart, gold is trading slightly below its 50-day Exponential Moving Average (EMA) of 2,653.37, indicating a lack of bullish momentum. The Relative Strength Index (RSI) sits at 43, suggesting moderate bearish sentiment but with room for a potential rebound.
If gold prices break below immediate support at 2,638.72, it could pave the way for further declines towards 2,632.38 and possibly 2,624.84. Conversely, holding above 2,643.68 could encourage a retest of the 2,652.40 pivot point, followed by resistance levels at 2,658.54 and 2,666.35.
Conclusion: Given the bearish undertone, selling below 2,649 seems prudent, with a take profit target set at 2,635 and a stop loss at 2,656. Traders should monitor price action around the key support level of 2,638.72, as a sustained move below this level could trigger a more substantial sell-off.
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- GBP/USD Price Analysis – Oct 07, 2024
GBP/USD Price Analysis – Oct 07, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair failed to stop its bearish trend and remained well offered around the 1.3068 level, hitting an intraday low of 1.3062. However, the reason behind its current downfall could be the bullish US dollar, which gained traction on the back of robust growth in the United States (US) Nonfarm Payrolls (NFP) for September.
The surprisingly positive labor market figures prompted traders to reassess their positions, leading to a reduction in bets on a 50 basis point rate cut by the Federal Reserve (Fed) in November. This shift has supported the US dollar and contributed to the GBP/USD pair's losses. Meanwhile, growing expectations of another interest rate cut by the Bank of England (BoE) in November have further weighed on the GBP/USD currency pair.
Looking ahead, investors will closely monitor the US Consumer Price Index (CPI) data for September, set to be released on Thursday. This inflation data will offer critical insights into the Federal Reserve’s potential interest rate decisions for November.
US Dollar Strengthens on Robust Labor Data, Pressuring GBP/USD
On the US front, the US dollar maintained its upward trend and remain well bid near a seven-week high, thanks to strong Nonfarm Payrolls (NFP) data for September, which showed that the US economy added 254,000 jobs, the highest since March. The unemployment rate also dropped to 4.1%, and wage growth was strong at 4% year-over-year.
However, the strong labor market data has reduced expectations for a large Federal Reserve rate cut in November. Initially, traders were expecting a 50 basis point (bps) rate cut, but now that probability has been wiped out. Instead, a smaller 25 bps cut is anticipated. Chicago Fed Bank President Austan Goolsbee praised the report, saying it was "superb" and expressed confidence that if similar reports continue, the US is nearing full employment.
This strong US labor data and reduced expectations for a large Fed rate cut have pressured the GBP/USD pair, boosting the US Dollar and causing the British Pound to weaken further.
Pound Sterling Weakness Pressures GBP/USD Amid Geopolitical Tensions and Rate Cut Expectations
On the other hand, the Pound Sterling is starting the week on the bearish note against its major peers. This is mainly due to rising tensions between Iran and Israel, which have worsened market sentiment. Israel increased strikes in Beirut after its Prime Minister vowed to win, and these tensions have raised concerns about disruptions in oil supplies, pushing energy prices higher. This could result in increased foreign outflows from oil-importing countries, putting more pressure on the cable currency.
Moreover, the increasing expectations of Bank of England (BoE) interest rate cut in November are weighing on the GBP and contributed to the GBP/USD pair losses. Last week, BoE Governor Andrew Bailey hinted that the bank might act more aggressively to cut rates if inflation continues to fall.
However, BoE Chief Economist Huw Pill urged caution, suggesting that rate cuts should be gradual to avoid cutting too far or too fast. This week, key economic data such as the monthly GDP and factory data for August, set to be released on Friday, will be crucial for the Pound Sterling’s performance.
Therefore, the Pound Sterling's weakness, driven by geopolitical tensions and expectations of a Bank of England rate cut, is likely to put further downward pressure on the GBP/USD pair, making the US Dollar stronger as market sentiment remains cautious.
GBP/USD - Technical Analysis
The GBP/USD pair has shown marginal gains, trading at 1.31157, up 0.03% in the 4-hour timeframe. The pair remains in a consolidation phase as it struggles to sustain any significant momentum above the 1.3135 pivot point. Despite modest gains, the technical picture remains skewed towards the downside, with the British Pound under pressure amid a stronger U.S. dollar and concerns over the UK’s economic outlook.
On the technical front, the 50-day Exponential Moving Average (EMA) at 1.3205 acts as a critical resistance level, with the Relative Strength Index (RSI) reading at 39, signaling bearish sentiment. Immediate resistance for the pair is seen at 1.3174, followed by 1.3216 and 1.3251. If the pair manages to break above these levels, it may signal a reversal in trend. However, with the RSI below 50, a continuation of the downtrend is more likely.
On the downside, immediate support sits at 1.3071, followed by stronger support levels at 1.3037 and 1.3003. A break below the 1.3071 mark could accelerate bearish momentum and open the door for further declines towards the 1.3000 psychological level.
Conclusion: With the RSI signaling a bearish bias and the pair trading below the 50 EMA, a sell-off below 1.31350 is recommended. The take-profit target is set at 1.30700, while a stop loss at 1.31750 limits risk.
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- GOLD Price Analysis – Oct 07, 2024
GOLD Price Analysis – Oct 04, 2024
Daily Price Outlook
Gold (XAU/USD) is currently stuck in a tight trading range between $2,654 and $2,667, despite rising geopolitical tensions in the Middle East. This consolidation suggests that investors are cautious, perhaps waiting for clearer signals before making their next move.
The stronger US dollar plays a significant role in gold's bearish trend, primarily driven by fading expectations of aggressive policy easing from the Federal Reserve.
However, if tensions in the Middle East continue to escalate or if the risk of a wider conflict increases, we could see renewed interest in gold as a safe-haven asset.
Such developments might help support its price and limit further losses, highlighting gold's enduring appeal in uncertain times.
Looking ahead, traders seem to be adopting a cautious approach, choosing to hold off on making moves in the gold market until the release of the highly anticipated US monthly employment report.
The Nonfarm Payrolls (NFP) report is expected to play a crucial role in shaping expectations around the Federal Reserve's rate-cutting timeline.
US Dollar Strengthens Amid Positive Labor Market Indicators and Fed Policy Outlook
On the US front, the broad-based US Dollar (USD) has been gaining strength, trading close to a one-month high, thanks to reduced expectations for aggressive policy easing from the Federal Reserve (Fed).
In a recent report, the US Department of Labor noted a slight uptick in unemployment benefit claims, which rose to 225,000 for the week ending September 28, compared to 218,000 the previous week.
This increase follows a larger-than-expected rise in private-sector employment and an unexpected boost in job openings from August, indicating a stable and resilient labor market.
Moreover, the Institute for Supply Management (ISM) noted that its Non-Manufacturing PMI rose to 54.9 in September, the highest level since February 2023, suggesting a solid economic foundation in the third quarter.
Traders are now turning their attention to the upcoming Nonfarm Payrolls (NFP) report, which is expected to reveal an addition of 140,000 jobs in September, a slight dip from the previous figure of 142,000. Meanwhile, the unemployment rate is projected to hold steady at 4.2%.
This combination of encouraging labor market indicators is dampening expectations for substantial interest rate cuts by the Federal Reserve (Fed). As a result, the US Dollar is gaining strength, creating challenges for non-yielding assets like gold (XAU/USD).
Escalating Middle East Tensions Drive Investors to Safe-Haven Gold
Moreover, the ongoing tensions in the Middle East are pushing investors towards safe-haven assets like Gold (XAU/USD).
Recently, Hezbollah launched about 230 projectiles from Lebanon into Israel, leading to Israeli airstrikes on Hezbollah's intelligence headquarters in Beirut.
The Israeli military has warned residents to evacuate areas in southern Lebanon outside a U.N.-declared buffer zone, indicating a potential expansion of its ground operations against Hezbollah.
Israeli forces have already targeted around 200 Hezbollah sites across Lebanon, including weapons storage and observation posts, with explosions shaking Beirut's southern suburbs overnight.
As the conflict escalates, nearly 1.2 million people in Lebanon have been displaced from their homes. At least nine Israeli soldiers have died in clashes with Hezbollah, marking the beginning of what Israel describes as a limited ground incursion.
The situation is further complicated by reports that Israel is planning a significant retaliation against Iran, which recently launched nearly 200 ballistic missiles.
These developments increase the risk of a broader conflict, driving traders to seek safety in Gold. The uncertainty surrounding the region continues to support gold prices as investors look for secure investments amid rising tensions.
GOLD (XAU/USD) - Technical Analysis
Gold is currently trading at $2,662.35, gaining 0.27% and staying just below its pivot point of $2,663.15.
This minor upward movement indicates a cautious optimism among traders as they await the upcoming Non-Farm Payrolls (NFP) data, which could significantly impact the metal's short-term trajectory.
Immediate resistance is noted at $2,671.80, and a break above this level could push prices towards the next resistance points at $2,678.07 and $2,685.66.
On the downside, the $2,651.14 support level is pivotal, backed by the 50-day EMA at $2,651.08. If gold breaks below this level, it may extend its losses to $2,642.23 and possibly even $2,634.48.
The RSI is currently at 58, suggesting moderate bullish momentum but with room to rise further before approaching overbought territory.
For traders looking to capitalize on short-term opportunities, a buy entry above $2,665 is recommended, targeting a take-profit level at $2,677, while maintaining a stop-loss at $2,654.
This setup aligns with the expectation of bullish continuation if prices sustain above the pivot point. A successful breach above $2,671.80 would add to the bullish case, attracting more buyers and pushing gold toward the upper resistance levels.
However, if the NFP data surprises on the upside, a stronger US dollar could weigh on gold, driving it back toward support levels.
For now, gold’s short-term outlook remains cautiously bullish above $2,665, with potential for further gains if technical conditions align favorably.
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EUR/USD Price Analysis – Oct 04, 2024
Daily Price Outlook
During Friday's European session, the EUR/USD currency pair continued its downward trend, turning bearish as it faced selling pressure around the 1.1030 mark, reaching an intraday low of 1.1020. The pair has edged lower, with the US Dollar (USD) maintaining its strength ahead of the upcoming Nonfarm Payrolls (NFP) report for September, scheduled for release at 12:30 GMT.
Investors are closely monitoring the NFP report, as it is expected to significantly influence the pace of the Federal Reserve's policy adjustments for the remainder of the year. Economists project that US employers added 140,000 new jobs in September, a slight decrease from 142,000 in August. Meanwhile, the unemployment rate is anticipated to remain stable at 4.2%.
Strong US Dollar and Inflation Concerns Weigh on EUR/USD Pair
On the US front, the US Dollar (USD) remains strong as traders await the Nonfarm Payrolls (NFP) report for September, set to be released at 12:30 GMT. The US Dollar Index (DXY), which measures the value of the dollar against six major currencies, is holding steady around 102.00 after a successful four-day streak. Traders have started to adjust their expectations for interest rate cuts by the Federal Reserve in November.
Recent data indicates that the likelihood of a 50 basis point rate cut has dropped from 53% to 33% in just a week. This shift comes after positive reports on employment from the ADP Employment Change and JOLTS Job Openings for August.
Moreover, concerns about persistent inflation are causing traders to reduce their bets on significant rate cuts by the Fed. The ISM Services PMI report for September revealed that input costs, measured by the Prices Paid component, unexpectedly rose to 59.4, indicating increasing inflationary pressures.
The overall Services PMI, which reflects activities in the service sector that makes up two-thirds of the economy, grew robustly to 54.9, surpassing estimates of 51.7 and the previous month’s figure of 51.5. These developments suggest that inflation may remain a key concern for the Fed moving forward.
This news has put additional pressure on the EUR/USD pair, as the strong US Dollar and reduced expectations for Fed rate cuts, combined with persistent inflation concerns, weigh on the euro, pushing the pair lower in the short term.
Euro Faces Pressure Amid Middle East Tensions and ECB Rate Cut Speculation
On the EUR front, the euro is under pressure due to worsening market sentiment, largely driven by escalating conflict in the Middle East. However, the tensions between Iran and Israel intensified after the killing of Hezbollah leader Hassan Nasrallah, which led to Tehran retaliating with ballistic missile attacks on military bases in Tel Aviv. This growing instability is weighing on risk-sensitive assets like the euro, adding to its recent decline.
At the same time, speculation about the European Central Bank (ECB) cutting interest rates at its upcoming meeting on October 17 is pushing the euro further down. In the meantime, the concerns about slower economic growth in the Eurozone and a drop in inflation, with the Harmonized Index of Consumer Prices (HICP) falling below the ECB's 2% target in September, are fueling these rate cut expectations.
ECB board member Isabel Schnabel, who has typically supported higher rates, acknowledged risks to economic growth in a recent speech. However, she remains optimistic that inflation will continue to drop toward the ECB's target, supported by weakening labor demand and progress in reducing price pressures.
This news is likely to exert downward pressure on the EUR/USD pair, as escalating geopolitical tensions and increasing speculation of ECB rate cuts contribute to a negative outlook for the euro, making the currency less attractive to investors.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.10275, a slight dip of 0.02%, as the euro struggles to find direction amid a stronger US dollar. The pair is hovering just below its pivot point of $1.1039, signaling potential weakness ahead. Immediate resistance is seen at $1.1055, followed by $1.1066 and $1.1083. A break above these levels could trigger a bullish recovery, but the broader trend remains cautious as the 50-day Exponential Moving Average (EMA) at $1.1082 continues to cap upside momentum.
On the downside, immediate support is noted at $1.1017, followed by $1.1002 and $1.0984. A breach below $1.1017 could accelerate selling pressure, with the next target at $1.1002. The RSI stands at 38, suggesting a bearish bias, though not yet in oversold territory, indicating the pair still has room for further declines.
Traders might consider a sell entry below $1.10387, targeting $1.10072, with a stop-loss placed at $1.10550. This setup aligns with the ongoing bearish momentum, as the pair remains below key moving averages and continues to test lower support levels. A sustained move below $1.1017 would confirm further downside potential, possibly pushing the pair toward $1.0984.
In the near term, the outlook for EUR/USD is tilted to the downside unless we see a significant break above $1.1055, which could negate the bearish scenario and attract new buyers.
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S&P500 (SPX) Price Analysis – Oct 4, 2024
Daily Price Outlook
Global market sentiment has been flashing red since the start of the day, and the week is set to conclude on a bearish note.
This is evident from the poor performance of U.S. stock indices, which began the session on a downbeat trajectory as investors grappled with rising geopolitical tensions and mixed economic data.
The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite are all on track for weekly losses. Currently, the S&P 500 is trading around 5,699.94, having reached an intraday low of 5,677.37.
Geopolitical Tensions and Market Uncertainty Drag S&P 500 Lower
As we mentioned above, the global market has been pressured by ongoing geopolitical tensions, particularly in the Middle East, which are weighing on investor sentiment and contributing to the bearish performance of the S&P 500.
Recently, the conflict between Israel and Hezbollah has escalated, with Israeli forces expanding their military operations and targeting key Hezbollah sites. This intensifying conflict, along with fears of a broader regional war, is causing significant market uncertainty.
Therefore, the combination of rising geopolitical risks and mixed economic data is making investors cautious.
The S&P 500 has been tracking losses throughout the week, reflecting the growing concerns over global instability. The market, which had shown strong performance in the first nine months of the year, is now under pressure as these tensions continue to escalate, leading investors to move away from riskier assets.
This has contributed to the S&P 500’s recent dip, with further downside expected if the situation remains unresolved.
US Dollar Strength and Solid Labor Market Data Weigh on S&P 500
On the US front, the broad-based US Dollar (USD) has been gaining strength, trading close to a one-month high. This increase is due to reduced expectations for aggressive policy easing from the Federal Reserve (Fed). Recently, the US Department of Labor reported a slight rise in unemployment benefit claims, which increased to 225,000 for the week ending September 28, up from 218,000 the previous week. This uptick follows a larger-than-expected rise in private-sector employment and an unexpected increase in job openings for August, suggesting a stable labor market.
Besides this, the Institute for Supply Management (ISM) reported that its Non-Manufacturing PMI rose to 54.9 in September, the highest level since February 2023. This positive economic data is leading traders to focus on the upcoming Nonfarm Payrolls (NFP) report, expected to show an addition of 140,000 jobs in September, slightly down from 142,000.
In the meantime, the unemployment rate is projected to remain steady at 4.2%. These encouraging labor market indicators are dampening expectations for significant interest rate cuts by the Fed, which is creating challenges for the S&P 500 as investors reassess their risk exposure amid rising uncertainty.
S&P 500 - Technical Analysis
The S&P 500 (SPX) is trading at $5,699.95, a slight decline of 0.17% for the session, as market sentiment remains cautious ahead of key economic data. The index is hovering just above its pivot point at $5,677.51, signaling indecision among traders.
A breakout above immediate resistance at $5,730.39 could provide a bullish confirmation, with potential targets set at $5,763.04 and $5,792.65. This movement would suggest a recovery from the recent consolidation phase and could attract more buyers to the market.
On the downside, strong support is positioned at $5,648.18, followed by lower levels at $5,617.74 and $5,583.62. A break below these levels could trigger a bearish momentum, potentially pushing the index further down to retest these support zones.
The 50-day Exponential Moving Average (EMA) at $5,709.35 is currently acting as an overhead resistance, limiting upward momentum in the near term.
The Relative Strength Index (RSI) stands at 46, indicating a neutral market position. This suggests that neither bulls nor bears have the upper hand, leaving the index in a wait-and-see mode.
For traders, a buy entry is recommended above $5,676, with a take-profit target at $5,737 and a stop-loss set at $5,647.
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AUD/USD Price Analysis – Oct 03, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair has extended its downward trend, currently hovering around 0.6843 and hitting an intra-day low of 0.6841.
This decline is largely driven by the bullish performance of the US Dollar (USD), influenced by key economic data released on Thursday.
Moreover, a risk-off sentiment in the market has added to the downward pressure on the AUD/USD pair, as rising geopolitical tensions in the Middle East have shaken investor confidence.
According to the Israeli Broadcasting Authority (IBA), Israel's security cabinet has decided to take decisive action in response to a recent Iranian attack. On Tuesday night, Iran launched over 200 ballistic missiles and drones targeting Israel, escalating tensions in the region.
Despite these challenges, the downside risk for the AUD could be limited due to the hawkish stance of the Reserve Bank of Australia (RBA).
Recent data showed stronger-than-expected retail sales growth for August, reducing the chances of an early rate cut by the RBA.
Besides this, the AUD is receiving some support from stimulus measures implemented by China, Australia’s largest trading partner, which have helped boost commodity prices.
Impact of Strong US Labor Market Data on AUD/USD Pair
On the US front, the broad-based US dollar is gaining strength as recent economic data highlights a resilient labor market. This has led to tempered expectations for aggressive interest rate cuts by the Federal Reserve (Fed).
According to the CME FedWatch Tool, there’s a 65.4% chance of a 25 basis point rate cut in November, while the likelihood of a 50 basis point cut is at 34.6%, down from 57.4% just a week ago.
Tom Barkin, President of the Federal Reserve Bank of Richmond, emphasized that the fight against inflation isn’t over, noting that while a 50 basis point cut in September was justified, risks still exist.
Recent reports show positive employment trends, with the ADP Employment Change report revealing an increase of 143,000 jobs in September, exceeding the forecast of 120,000. Annual pay also rose by 4.7%.
However, the AiG Industry Index improved slightly but still indicates contraction for the 29th month in a row. The AiG Manufacturing PMI continued to decline, reaching its lowest level since the series began.
Meanwhile, Fed Chairman Jerome Powell stated that the central bank is not rushing to cut rates further, indicating that any future rate changes are likely to be more modest.
Therefore, the strengthening US dollar, driven by positive labor market data and tempered rate cut expectations, is likely to put further downward pressure on the AUD/USD pair, as investors may favor the USD over the Australian dollar in the current environment.
Positive Economic Indicators Support Australian Dollar Amid Global Uncertainties
Moreover, the downside risk for the Australian dollar (AUD) could be limited due to the hawkish outlook of the Reserve Bank of Australia (RBA). Recent data revealed stronger-than-expected retail sales growth of 0.7% month-over-month in August, surpassing forecasts of a 0.4% increase.
This growth has lowered the chances of an early rate cut by the RBA, with markets almost fully discounting a rate cut in November. In the meantime, stimulus measures from China, Australia’s largest trading partner, have boosted commodity prices, providing further support to the AUD.
In terms of trade balance, Australia recorded a surplus of 5,644 million in August, exceeding market expectations of 5,500 million and slightly higher than July’s surplus of 5,636 million.
However, both exports and imports saw a decline of 0.2% month-over-month during this period. The Judo Bank Services Purchasing Managers' Index (PMI) stood at 50.5 in September, down from 52.5 in August, indicating continued growth in services activity but at a slower pace.
Meanwhile, the Composite PMI dipped slightly to 49.6 in September from 49.8 the previous month, suggesting a slight contraction in overall economic activity.
Therefore, the hawkish stance of the Reserve Bank of Australia, supported by strong retail sales growth and a positive trade balance, bolster the AUD against the USD, mitigating some downward pressure on the AUD/USD pair amid global uncertainties.
AUD/USD - Technical Analysis
The Australian Dollar (AUD) is losing ground against the U.S. Dollar (USD), currently trading at $0.68622, down 0.33% for the session.
The bearish pressure comes amid heightened risk aversion, as investors digest mixed U.S. economic data and concerns over China’s economic slowdown, which is weighing on commodity-linked currencies like the AUD.
The 4-hour chart shows that the AUD/USD pair is struggling to hold above its pivot point at $0.68873, indicating sellers are dominating the market. Immediate support is found at $0.68423, with subsequent support levels at $0.68211 and $0.67994.
The technical indicators reinforce a cautious outlook. The 50-day Exponential Moving Average (EMA) hovers at $0.69022, well above the current price, underscoring the bearish momentum.
Meanwhile, the Relative Strength Index (RSI) is at 37, approaching oversold territory but not yet signaling a reversal. Traders should remain vigilant as a break below $0.68423 could see the AUD/USD pair testing deeper support levels.
Immediate resistance stands at $0.69160, and for any significant recovery, the pair would need to surpass this barrier, targeting $0.69403 and $0.69622 as next upside objectives.
The short-term outlook remains bearish, particularly if the pair continues to trade below its 50 EMA, which could open doors for further declines.
Conclusion: Traders might consider entering short positions below $0.6878, aiming for a take profit around $0.68426, while maintaining a stop-loss at $0.69051 to manage risk effectively.
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USD/JPY Price Analysis – Oct 03, 2024
USD/JPY Price Analysis – Oct 03, 2024
Daily Price Outlook
During the Asian trading session, the USD/JPY currency pair maintained its upward trend, remaining well-bid around the 146.72 level and hitting an intraday high of 147.24.
The upward movement can be attributed to dovish comments from Prime Minister Ishiba, along with uncertainty surrounding the Bank of Japan's monetary policy, which has weakened the Japanese Yen (JPY).
Consequently, the USD/JPY pair is likely to experience upward momentum, reflecting increased demand for the US Dollar amid growing market uncertainty.
Moreover, the US dollar has received support from safe-haven flows due to rising geopolitical tensions in the Middle East, further boosting the USD/JPY pair.
Strengthening US Dollar and Its Impact on the USD/JPY Pair
On the US front, the US dollar is gaining strength as recent economic data shows a resilient labor market. This has led to lower expectations for aggressive interest rate cuts by the Federal Reserve (Fed).
According to the CME FedWatch Tool, there is a 65.4% chance of a 25 basis point rate cut in November, while the likelihood of a 50 basis point cut has dropped to 34.6%, down from 57.4% a week ago.
Tom Barkin, President of the Federal Reserve Bank of Richmond, emphasized that the fight against inflation isn’t over. He noted that while a 50 basis point cut in September was justified, risks still exist.
Positive employment trends, such as a reported increase of 143,000 jobs in September, have also contributed to the dollar's strength.
However, while the AiG Industry Index shows slight improvement, it still indicates contraction for the 29th consecutive month, and the AiG Manufacturing PMI has reached its lowest level.
Fed Chairman Jerome Powell mentioned that the central bank is not rushing to cut rates further, suggesting that any future rate changes will be modest.
As a result, the strengthening US dollar, supported by solid labor market data and tempered rate cut expectations, is likely to apply further upward pressure on the USD/JPY pair.
Impact of Japan's Dovish Monetary Policy on the USD/JPY Pair
On the other side, Japan's new Prime Minister, Shigeru Ishiba, has made clear comments about the country's monetary policy after meeting with Bank of Japan (BoJ) Governor Kazuo Ueda.
Ishiba stated, "I do not believe that we are in an environment that would require us to raise interest rates further," which has raised concerns among investors.
Following his remarks, the Japanese Yen (JPY) fell nearly 2% against the US Dollar (USD), marking its biggest drop since February last year.
Japan’s Chief Cabinet Secretary, Yoshimasa Hayashi, clarified that Ishiba did not ask Ueda for specific monetary policy details during their meeting, indicating a cautious approach.
Furthermore, Japan's Economic Revitalization Minister, Ryosei Akazawa, mentioned that Ishiba expects the BoJ to conduct thorough economic assessments before considering any interest rate hikes. Market futures show less than a 50% chance that the BoJ will raise rates by 10 basis points by December.
Meanwhile, projections suggest that interest rates will only reach 0.5% by the end of next year, up from the current 0.25%.
This lack of urgency regarding interest rate increases is likely to continue putting downward pressure on the yen as investors seek stronger returns elsewhere.
Therefore, the dovish comments from Japan’s Prime Minister Shigeru Ishiba, coupled with reduced expectations for interest rate hikes, are likely to weaken the Japanese Yen (JPY).
This scenario is expected to support the USD/JPY pair, driving it higher as investors favor the US Dollar (USD).
USD/JPY - Technical Analysis
The U.S. Dollar (USD) is maintaining its upward trajectory against the Japanese Yen (JPY), currently trading at 146.768, up 0.22% for the session.
The pair’s strength can be attributed to a combination of favorable U.S. economic data and continued monetary policy divergence between the Federal Reserve and the Bank of Japan.
The 4-hour chart shows USD/JPY trading above its pivot point of 146.231, with bullish momentum pushing the price towards the immediate resistance level at 147.248. Further resistance is noted at 147.866 and 148.567, where a breakout could spark another leg higher.
Technical indicators reveal a mixed outlook. The Relative Strength Index (RSI) has surged to 70, suggesting that the pair is now approaching overbought territory.
This could result in a short-term pullback or consolidation phase as traders look to lock in profits. On the support side, the 50-day Exponential Moving Average (EMA) is positioned at 144.045, providing a solid floor that could limit any downward movement.
Immediate support stands at 145.585, followed by additional support levels at 145.104 and 144.609.
A break below 145.585 could see the pair testing the 50 EMA near 144.045, though the overall uptrend remains intact as long as prices hold above the pivot point at 146.231.
Conclusion: With the pair nearing overbought conditions, traders may consider short positions if the price drops below 147.255, targeting 145.620, while placing a stop-loss at 148.227 to limit potential losses.
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