Currency Pairs Market Analysis

Market Trends: Navigating Equity Dips and Economic Signals

Last week, European and US stock markets kept falling, marking six weeks of losses. The main worries were about companies' earnings not being as good as hoped and their future outlooks seeming less positive as we move into the year's last quarter. In the US, the markets also dipped, hitting their lowest point since May, showing they're not as strong as they were earlier in the year.

On Friday, the prices of oil and gold jumped suddenly. This happened when the news came out about Israeli forces moving into Gaza, which made gold prices go over $2,000 an ounce for the first time since May. Even though Brent crude oil's price went up past $90 a barrel, it ended the week lower.

The hope is that the careful steps taken in Gaza will increase pressure on Hamas without causing more trouble along Israel's northern border. European markets, which had closed by the time of the Gaza events on Friday, are expected to start a bit stronger, considering the military actions have been limited so far.

It's easy to think the drop in stock markets last week was just because of the uncertain situation in the Middle East. But it was also because of companies not doing as well as expected and lowering their future earnings outlooks, which led to some big drops in their stock prices. This pattern might keep up this week, with all eyes on updates from big companies like HSBC, BP, Shell, and Apple.

Meanwhile, economic reports from Europe and the UK didn't show much good news, but the US did better, with people waiting to see if central banks will change their plans based on recent data. The US Federal Reserve probably won't ease up on its policies soon, and another interest rate increase by the end of the year is still possible. But the Bank of England seems done raising rates for now, with people guessing when the next rate cut might happen in 2024.

In the UK, the number of approved mortgages and other spending data for September might show that people are still careful about spending. And in Germany, after the European Central Bank decided not to change interest rates, inflation is expected to go down in October, and the economy might shrink a bit in the third quarter.​
 
EURJPY Technical Analysis
EURJPY is testing the Ichimoku cloud, a key resistance. Our analysis suggests a bullish market, with a strategy to go long. Currently, it's trading in a bearish channel below the 158.6 pivot. A close above the pivot will confirm bullishness.

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If it remains below the pivot, the short-term target is S1 support. Read the full article here. ​
 
EURGBP

The EURGBP pair has broken the bearish trendline on the daily chart, indicating a bullish bias. The 4H chart shows it trading above the Ichimoku cloud and weekly pivot, suggesting potential gains.

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However, a close below S1 support (0.869) would negate this bullish scenario. (source)​
 

EURAUD


The EURAUD pair is currently navigating within a daily bullish channel and is testing the monthly pivot point at 1.6555. If the bulls maintain their position above this pivot point and within the bullish channel, it's plausible that the EURAUD could ascend to the mid-line of the bullish channel, which is near the R2 support level at 1.712.

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However, if the bears manage to close below the pivot point, it would invalidate the bullish scenario. It's important to note that a closure below the pivot point does not necessarily signal a trend reversal. The support level is at 1.621, and a breach of this level would be required to indicate a trend reversal.​
 

USD/JPY Market Sentiment: Bullish Post-BoJ, Eyes on Fed

Tuesday's trading session saw the USD/JPY currency pair surge, reclaiming territory above the pivotal 150.00 mark. This upswing effectively diminishes the losses witnessed in the preceding two days. The yen displayed a broad weakening, a direct response to the Bank of Japan's reaffirmation of its ultra-easy monetary policy aimed at bolstering the domestic economy. In a notable policy adjustment, the BoJ subtly altered its stance on yield curve control, now referencing the 1% cap on the 10-year Japanese government bond yield as a guiding figure rather than a strict limit.

Inflation Projections and Economic Data Weigh on Yen

The BoJ's upward revision of inflation forecasts for the fiscal years 2024 and 2025 hints at a gradual setup for exiting its loose monetary policy. However, this adjustment has not been enough to rally support for the yen, especially against a backdrop of disappointing Japanese industrial and retail data for September.

US Dollar Demand and Fed Expectations Fuel Rally

On the other side of the pair, the US dollar is finding robust support, spurred by the market's belief in the Federal Reserve's commitment to its tight monetary policy, including the possibility of further rate hikes in 2023. Remarks from Fed Chair Jerome Powell about persistently high inflation and the potential for additional rate increases have kept US bond yields near the 5.0% mark, underpinning the dollar's strength.

Caution Ahead of FOMC Meeting

Despite the bullish momentum, there's caution in the air as speculation about potential Japanese intervention to curb yen depreciation persists. Traders are also adopting a wait-and-see approach in anticipation of the Federal Open Market Committee's (FOMC) meeting. The Fed's decision, due on Wednesday, is expected to hold steady, but any signals on future rate adjustments will be pivotal for the currency pair.

Bullish Indicators and Resistance Challenges

From a technical standpoint, the USD/JPY's resilience below the 200-period Simple Moving Average on the 4-hour chart has set a bullish tone. Daily chart oscillators are gaining positive momentum, suggesting room for further upside. However, traders should watch for resistance near the daily highs around 150.35-150.40, with the year-to-date peak and the 151.00 mark as key levels to breach for continued ascent.

Support Levels to Monitor on Pullbacks

Conversely, a retreat below 150.00 could find solid ground near the 100-period SMA on the 4-hour chart at approximately 149.60-149.55. A decisive drop below this could open the path to 149.00 and potentially challenge the bullish outlook. Should selling pressure intensify, the pair may test the monthly low around 147.30-147.25, recorded on October 3, which would tilt the market sentiment towards the bears.

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GBPUSD Technical Analysis


On Tuesday, the FTSE 100 index saw a modest uptick, hovering around the 7,340 mark. Investors were busy digesting a mix of company reports and economic figures, all while waiting for the upcoming policy decisions from the Federal Reserve and the Bank of England.


Corporate Highlights

Leading the charge in the corporate arena was Rolls-Royce, which stood out as the star performer of the FTSE 100. The company's shares jumped by 4.1% following a favorable update from Barclays analysts, who upgraded their stance on the aerospace titan to "overweight" and increased their price target from 230p to 270p.


Energy Sector Struggles

In contrast to Rolls-Royce's success, energy stocks faced headwinds, particularly after BP's earnings fell short of the mark. The oil behemoth reported a profit of $3.3 billion, which didn't meet the $4 billion forecasted by experts. This shortfall came amidst a significant year-over-year decline in energy prices. Additionally, Vodafone's stock dipped by 1.5%, as the news of its Spanish division sale did not sway investor sentiment. The telecom heavyweight is in the midst of reshuffling its business portfolio to focus on regions with higher growth potential.


GBPUSD Technical Analysis

Let's delve into a more detailed GBPUSD technical analysis, which is currently navigating through a bearish channel. In the latest trading session, there has been a notable shift in momentum as the bulls have successfully pushed the closing price above the pivotal 1.216 mark.
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The Relative Strength Index (RSI), a key momentum indicator, is sustaining above the 50 threshold, which traditionally indicates a shift from a bearish to a more neutral or bullish sentiment among traders. This is an encouraging sign for buyers, as the RSI above 50 often precedes upward price movements.

Given the current position of the RSI, coupled with the bullish closure above the pivot point, there is a heightened probability that the GBPUSD pair may continue its ascent towards the upper boundary of the bearish channel. The next key level to watch is the R1 resistance at 1.225. If the price action can maintain its upward trajectory and reach this resistance level, it could signal a potential reversal of the current bearish trend or at least a significant retracement. (source)​
 

GBPJPY


The GBPJPY pair has broken through the bearish channel on the daily chart and is currently trading above the pivot point of 182.9. The Relative Strength Index (RSI) indicator is hovering above the 50 level, suggesting that the bulls have regained control.

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Looking closer at the GBPJPY 4-hour chart, we can see that the bulls are facing a barrier at 183.7. If the GBPJPY price can break this level, it will clear the path towards R2.

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However, if the price fails to breach this resistance, it could result in the GBPJPY price returning to the bearish channel depicted on the daily chart. (source)​
 

GBPAUD


The GBPAUD currency pair has demonstrated a robust breakout from its previous bearish trendline during today's trading session. This pivotal movement has not only captured the attention of traders but has also signaled a potential shift in the underlying market dynamics. The currency pair's ability to sustain a close above the critical pivot point of 1.917 further boosts the case for a bullish outlook.

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The Relative Strength Index (RSI) confrims this bullish sentiment. Currently, the RSI is indicating upward momentum, suggesting that the buying pressure is outpacing selling pressure. This technical alignment could very well pave the way for the GBPAUD price to ascend towards the next notable resistance level at 1.931.​
 

Market Update: Anticipation Before Fed Announcement


As the financial community awaits the Federal Reserve's upcoming decision on interest rates, a sense of anticipation builds. The general consensus is that there won't be a change to the current rates. Investors are keenly waiting to hear from Fed Chair Jerome Powell for hints about future monetary policies. Meanwhile, there's buzz around Advanced Micro Devices (AMD) as it reveals long-term sales goals for its AI-focused processors.

Federal Reserve's Decision in Focus


The Federal Reserve in Washington is poised to announce its latest stance on interest rates. It's predicted that the rates will remain between 5.25% and 5.50%. The market's attention will pivot to the Fed's statement and Powell's press conference for any forward-looking statements. The Fed is balancing efforts to manage inflation without stalling the economy. There's curiosity about how long the heightened rates will persist, especially with recent surges in Treasury yields affecting the stock market. Analysts are suggesting the Fed might pause to evaluate the effectiveness of its current policies in curbing inflation.

Market Movements Before the Fed's Update


Stock futures indicate a slight dip as traders anticipate the Fed's announcement. Key stock indices like the Dow, S&P 500, and Nasdaq showed downward movements in early trading. This follows a slight rally that capped off a turbulent October, which saw declines across major stock indices.

Spotlight on AMD's Revenue Forecast


AMD's shares saw mixed reactions after-hours due to its revenue forecast for the upcoming quarter and its first sales projection for the MI300 chip. While the forecast was below expectations, there's optimism about its potential in the AI market. This news comes alongside earnings announcements from other major players in the tech and consumer goods sectors.

China's Manufacturing Downturn


In China, manufacturing activity has seen a downturn, according to the latest Caixin data. This contraction reflects weaker domestic and international demand, with a continued decrease in export orders due to challenging economic conditions in key markets.

Oil Prices on the Rise Amidst Fed Expectations


In the commodities market, oil prices have marginally increased. Traders are exercising caution as they await the Fed's decision. There's also attention on geopolitical tensions that could impact oil supply and prices.​
 
GBPAUD

The GBPAUD couldn't hold above the weekly pivot (1.917) in the 4H chart, and the pair slumped to the significant support at 1.9. Moreover, the GBPAUD formed a bullish long wick candlestick pattern in the daily chart, and the RSI indicator shows divergence. These signals can be interpreted as a trend reversal or an imminent correction in the price.

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S1 provides support to the bullish scenario. As long as the price holds above 1.899, it is likely for the GBPAUD price to rise and test the weekly pivot again.

On the other hand, if bears close below S1, the bullish scenario is invalidated and the path to S2 will be cleared. (source)​
 

GBPAUD

The GBPAUD has broken out of the bearish channel, and the bears are currently testing the 1.895 support level. The market bias remains bearish as the pair is trading below the Ichimoku cloud.

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Zooming in on the 4-hour GBPAUD chart provides a detailed insight into the forecast. The decline has approached the lower boundary of the bearish channel on the 4H chart. With the RSI indicator nearing the oversold territory, a pullback to the channel's median line could be anticipated. Additionally, given the current selling pressure, the next target would likely be the 1.884 support level. (source)

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Conversely, the 1.917 level acts as the pivot. The bearish scenario would be negated if the price breaks above this pivot or the upper line of the channel.​
 
EURUSD Technical Analysis

The EURUSD currency pair has been trading in a range from 1.051 to 1.068 since October 23. The pair formed a hammer candlestick pattern on the daily chart and is currently trading above the monthly pivot. Since the pair hovers below the Ichimoku cloud, we will be looking for selling opportunities.

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The RSI indicator crossed above the level of 50, indicating that the price of EURUSD might increase to R1 (1.067 resistance). This level offers a decent price to enter short, especially if the market forms a long wick candlestick, a doji, or a bearish engulfing pattern.

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Another scenario for short trading in EURUSD is to wait for the pair to break S1 (1.049 support). In this case, the pace of decline in the pair would increase and the next target would be S2 (1.042), followed by S3 (1.032). source
 
EURJPY Technical Analysis

The EURJPY currency pair is trading within a daily bullish channel and it tested the middle line of the channel in the previous day's candle. Today, the EURJPY had a pullback to the pivot. With the RSI indicator hovering above the 50 level, it is likely that the bulls will push the EURJPY price to R1 (162.7), followed by the upper line of the channel or R2 (165.0).

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The main support for our bullish EURJPY forecast is S1 (156.28). If this level breaks, the uptrend is likely to end and we might see a trend reversal. However, this is unlikely due to the Bank of Japan's current interest policy. (source)​
 
EURAUD Forecast

The EURAUD pair is trading within a weekly bullish channel and above the Ichimoku cloud. This indicates that the trend is bullish, and we should look for buying opportunities in this currency pair.

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When we zoom into the EURAUD 4H chart, we see that the bulls added buying pressure when the pair's decline reached the 1.6455 resistance level. Currently, it is testing the 1.6563 resistance level. With the RSI indicator increasing in value and the Awesome Oscillator showing a green bar, if the pair can close above 1.6563, it will pave the way for EURAUD to reach 1.6700. This level aligns with the upper band of the young bearish channel.

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The 1.6455 level serves as support for this bullish scenario. If it breaks, the bullish scenario becomes invalid. (source)​
 
EURNZD Outlook: Downward Momentum Gains Traction

The EURNZD currency pair is currently facing a challenge at the 1.798 pivot point, having already descended below the Kernel line on the daily chart. The RSI's crossing of the middle line signals an intensifying bearish outlook for the EURNZD.

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Detailed Analysis on the 4-hour Chart

For a more detailed view, we shift our focus to the 4-hour chart. Here, the market trend is clearly bearish, with EURNZD trading under the Ichimoku cloud. The pair is currently challenging the 0.382 Fibonacci retracement level. If it falls below this level, we might witness the fall extend to the 50% and subsequently the 61% Fibonacci retracement levels.

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The Ichimoku cloud poses a resistance. To counter the bearish forecast, EURNZD bulls would have to achieve a close above the cloud.​
 

EURCHF Forecast​

The EURCHF pair is trading in a bearish channel. The bulls are testing the upper line of this channel, which is considered strong resistance. This bearish channel hasn't been breached since January 2023. Given the impact of this channel, we suggest looking for selling opportunities.

Please note that even if the price breaks the bearish channel, it must close above the horizontal resistance at 0.9691 to invalidate the bearish sentiment on the currency pair.

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Zooming into the 4H chart provides a better insight into the EURCHF forecast. The bullish bias prevails in the 4H chart; however, the RSI indicator shows divergence, signaling a potential trend reversal or price correction. Considering the EURNZD price in the daily chart, it is suggested to wait for the pair to close below the Kernel channel. If the price closes below the Kernel line, it is likely for the pair to continue its main bearish trend.

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0.9691 serves as the main resistance for the bearish scenario. The bulls must close above this level to invalidate the bearish scenario. (source)​
 
EURUSD

The EURUSD has made a significant move, breaking out of the range trading box during the recent currency session. This development was anticipated as the pair had previously exited the bearish channel on the daily chart, forming a hammer candlestick pattern in the process. This pattern emerged near the 1.0493 support level in the daily timeframe, signaling a potential shift in momentum.

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If the EURUSD can maintain its position above the pivot point, it could indicate a bullish trend. The next target for the EURUSD bulls is the R2 level at 1.082. This could be a key resistance level to watch for traders following the EURUSD.​
 
Market Response to Federal Reserve Policy

Currencies around the world held steady early in the week. People were waiting to see if the U.S. dollar would keep falling. This comes after the Federal Reserve seemed less strict than before. The dollar measure fell a little to 104.99. The euro was up a bit at $1.0738. Last week, the dollar fell over 1%, its biggest drop since mid-July, hitting a six-week low. Stocks around the world did well too, having their best week in a year. This is because people think the Federal Reserve won't raise interest rates anymore.

Other Economic Signs
Weak job numbers in the U.S., not-so-strong manufacturing globally, and lower interest rates for long-term U.S. government bonds also made the dollar weaker. At the same time, the British pound, the Australian dollar, and the Japanese yen got stronger. A market analyst named Tina Teng mentioned that usually, when there's bad news, it ends up being good for the markets. She thinks this could mean the Federal Reserve and other central banks might stop raising interest rates sooner.
Teng believes the dollar could stay weak throughout November.

A Cautious Note from Analysts
But, some analysts, like those at J.P.Morgan, say people should not get too excited about the dollar getting weaker. They think the reasons why the dollar was strong are less now, but they haven't gone away completely. They might come back and make the dollar strong again. They also say that for the dollar to keep getting weaker, other places like Europe and China need to show they are doing better, which is not quite certain yet.

Interest Rates and Predictions
Interest rates the government pays for borrowing money fell last week. This was after the job and manufacturing data weren't great, and the head of the Federal Reserve talked about 'balanced' risks. The interest rates for 2-year notes have gone down a lot in two weeks, while 10-year rates are near a five-week low. Betting markets now really think the Federal Reserve is done with raising rates. They also think the Federal Reserve might start to lower rates as soon as June.

Global Central Bank Movements
People think that the European Central Bank will lower rates by April, and the Bank of England will do so by August. The Japanese yen went down a little to 149.48 per dollar. Tina Teng thinks that with the dollar's direction changing and the yen getting stronger from last week, Japan might not need to step in to help its currency.
The British pound is stable at $1.2373. There is important information about Britain's economy coming this week. Even though the pound went up last week, it's still lost about 6% in four months.

Gold and Cryptocurrency
The weaker dollar and interest rates have helped gold prices stay high, close to a five-month high. In cryptocurrencies, Bitcoin stayed at $34,847. The end of the Federal Reserve raising rates has helped it. People are also watching to see if new types of Bitcoin funds for investors will come out. No new funds have been approved yet, but several companies have asked to start them. (source)​
 

Asian Currencies Climb as US Dollar Falls


Asian currencies are doing better, with the US dollar reaching a low not seen in six weeks. This is because recent reports show that America's job growth is slow, and the US Federal Reserve might stop increasing interest rates.


Important Economic Updates Ahead


Everyone is now looking at new economic information coming from China and what the Reserve Bank of Australia will decide. These will tell us more about how economies in Asia are doing.


Good Vibes in the Market


People are feeling good about investing after finding out that the US added fewer jobs than expected last month. This slowdown in job growth could mean the US Federal Reserve won't raise interest rates again. Investors are starting to put their money into Asian markets, which are usually seen as riskier. The Korean won and the Thai baht went up a little. The biggest winner was the Malaysian ringgit, which went up the most among the Southeast Asian currencies.


Japanese Yen's Standing


The Japanese yen went down a bit, staying below 150 against the dollar. This is even though Japan's service sector did better than people thought it would in October. Still, the yen might not do well because the Bank of Japan wants to keep its policies very loose, and the bank's boss said they're not changing this approach anytime soon.


Dollar Weakness and What the Fed Might Do Next


After dropping to a low last seen in late September, the dollar got a bit better in Asia. Investors don't think the US Federal Reserve will raise rates anymore this year. The pause in rate hikes is good for Asian currencies, but the Fed is expected to keep rates up for a while, which could slow down the growth of these currencies.


Yuan and Aussie Dollar Get Stronger


The Chinese yuan got a bit better, helped by the dollar's weakness and China's central bank setting a good rate for it. People are waiting for China's trade and inflation numbers, which will give us a clearer picture of how China's economy is doing. The Australian dollar is also strong, with everyone thinking the Australian central bank will raise rates because of higher prices and strong sales in stores. The bank has stopped raising rates since May, but they might increase them again if prices keep going up. (source)​
 
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EURHKD Forecast

The EURHKD currency has broken out of the bearish channel. The pair is currently testing the 38.2% level of Fibonacci retracement, while the RSI indicator is approaching the overbought area and signaling divergence. This suggests that there might be a correction, or the continuation of the bearish trend is likely. Therefore, we should be cautious about going long on the currency pair.

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Zooming into the EURHKD 4H chart provides a better insight into the price action. The trend is bullish in the 4H chart, and the price has broken out of the bullish channel and is trading in the overbought area. The RSI indicator is also in the overbought area. Please note that the pair has room to rise and test R1 (8.46). The Kernel line and the 8.3 pivot support the bullish scenario. If these levels are breached, the bullish scenario will be invalidated. (Source)

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