EUR/USD Back below the 0.9800 figure on US hot PCE and solid US dollar

•EUR/USD trips down ahead of the end of the week, month and Q3. •US Fed officials continued with their “restrictive policy” rhetoric, agreeing that further hikes are coming. •US Core PCE surpassed analysts’ expectations, paving the way for another 75 bps Fed hike. •EU’s inflation jumped above the 10% threshold, and money market futures expect another 0.75% increase. The EUR/USD retraces from daily highs of around 0.9853 due to Fed officials expressing the necessity of higher rates for longer, as the US central bank battles elevated inflationary pressures above the 6% threshold, as shown by the Fed’s preferred gauge of inflation, on Friday. At the time of writing, the EUR/USD is trading at 0.9788, below its opening price by 0.29%. A bunch of Fed policymakers crossing news wires, led by Vice-Chair Lael Brainard, expressed that the Fed needs to keep interest rates higher-for-longer, so the bank can attain its goal. She added that the Fed would not pull back prematurely while echoing other colleagues’ expression of not knowing where rates would peak. Later in the same tone, San Francisco’s Mary Daly commented that further hikes were coming and that the Fed is “resolute” in taming inflation. At the time of typing, Richmond’s Fed President Thomas Barkin said that he’s “comfortable” with the pace of rates, adding that it’s uncertain how much the Fed will have to do to lower demand to reach its inflation target. Aside from this, the US Commerce Department revealed that the US Federal Reserve’s favorite measure of inflation, known as the PCE, increased more than estimated in August, at a 0.3% MoM pace, 6.2% YoY, while core PCE, which excludes volatile items, accelerated at a 0.6% MoM, up 4.9% YoY. Of late, the University of Michigan Consumer Confidence Final reading was 58.6, less than previously reported. In the same report, inflation expectations for one year jumped to 4.7% from 4.6%, while for five years, it decelerated to 2.7% from 2.8% previously. Given US economic data revealed in the week, even though it’s not outstanding, showed resilience. With Fed policymaker’s hawkish rhetoric, the US central bank might be headed for the fourth-consecutive 75 bps rate hike in November. Across the pond, the EU reported inflation data surpassing the 10% threshold, headwinds for the economy of the block. Analysts are expecting another large hike by the ECB and coupled with factors like the escalation of the Russia-Ukraine conflict, with Vladimir Putin’s signing of a decree to annex four Ukrainian regions, will exert extra pressure on the euro

Gold Price Forecast: XAU/USD has a smooth run towards $1,680 – Confluence Detector

Gold price grinds higher during four-day uptrend, eyes first weekly gain in three. •DXY pullback, quarter-end positioning favor XAU/USD buyers despite fears of recession. •Failure to cross the $1,680 hurdle, backed by upbeat US Core PCE Inflation, could recall gold sellers. Gold price (XAU/USD) remains on the front foot for the fourth consecutive day while cheering the pullback in the US dollar. That said, the quarter positioning and hopes of stimulus from China, Japan and the UK, are some extra catalysts that could have underpinned the yellow metal corrective bounce off the yearly low, teasing $1,667 by the press time. However, the firmer yields and fears of global economic slowdown, not to forget the geopolitical woes surrounding Russia and China, keeps XAU/USD buyers on dicey grounds. Furthermore, upbeat US data and hawkish central banks are likely to keep the metal prices down. As a result, today’s US Core Personal Consumption Expenditure (PCE) Price Index for August, expected 4.7% YoY versus 4.6% prior, mostly known as the Fed’s preferred inflation gauge, will be important for clear directions. Also read: Gold Price Forecast: XAU/USD needs to make it through $1,674-75 hurdle to confirm a bottom Gold Price: Key levels to watch The Technical Confluence Detector shows that the gold price approaches short-term key hurdles to the north while staying beyond the $1,660-58 strong support zone, comprising Fibonacci 38.2% on one week and SMA10 on one day. That said, the $1,671 level comprising the Pivot Point one day R1 and Fibonacci 61.8% on weekly, appears immediate challenge for the XAU/USD buyers. Following that, multiple levels between $1,678-80 could test the metal buyers. The resistance zone includes the previous yearly bottom, SMA100 on 4H, Pivot Point one week R1 and Pivot Point one month S1. In a case where the gold price rally beyond $1,680, the bulls can aim for the $1,700 threshold. On the flip side, a sustained trading below $1,658 becomes necessary to recall the gold sellers. Failing to do so can quickly fetch the quote to $1,650 support, SMA50 one hour and 23.6% on one week. If at all the XAU/USD prices remain weak past $1,650, the $1,645 level encompassing Pivot Point one-month S2 could act as the last defense of the buyers.

USD/JPY struggles for a firm direction, stuck in a range around mid-144.00s

•USD/JPY continues with its struggle to gain any meaningful traction on the last day of the week. •Retreating US bond yields drags the USD to the weekly low and acts as a headwind for the pair. •The Fed-BoJ policy divergence continues to lend support to the major and favours bullish traders. The USD/JPY pair prolongs its consolidative price move on Friday and remains confined in a four-day-old trading range through the early European session. The pair is currently placed just below mid-144.00s, down less than 0.10% for the day, and is influenced by a combination of diverging forces. The US dollar surrenders its modest intraday gains and languishes near the weekly low amid a further pullback in the US Treasury bond yields, which, in turn, acts as a headwind for the USD/JPY pair. The UK debt market seems to have stabilized following the Bank of England's intervention for the second day on Thursday. The spillover effect drags the benchmark 10-year US Treasury note away from a 12-year high set earlier this week and weighs on the greenback. The Japanese yen, on the other hand, draws support from mostly upbeat macro releases. In fact, official data showed that Industrial Production rose 2.7% in August from the prior month, surpassing estimates. A separate reading revealed that Japanese retail sales grew more than anticipated during the reported month. Furthermore, the unemployment in Japan edged down to 2.5% from the 2.6% previous, matching expectations and underpinning the domestic currency. That said, a modest recovery in the risk sentiment - as depicted by a turnaround in the US equity futures - acts as a headwind for the safe-haven JPY. This, along with a big divergence in the monetary policy stance adopted by the Bank of Japan (dovish) and other major central banks, including the Federal Reserve, supports prospects for the emergence of fresh buying around the USD/JPY pair. Hence, any downtick could still be seen as a buying opportunity. Market participants now look forward to the release of the Fed's preferred inflation gauge - the US Personal Consumption Expenditures (PCE). Friday's US economic docket also features the Chicago PMI and revised Michigan Consumer Sentiment Index. This, along with the US bond yields, will influence the USD price dynamics and provide a fresh impetus to the USD/JPY pair.

GBP/USD CLINGS TO GAINS NEAR WEEKLY HIGH, BULLS AWAIT SUSTAINED MOVE BEYOND 1.1200 MARK

    GBP/USD gains traction for the fourth successive day and climbs to a one-week high on Friday.

• The BoE's intervention in the markets, an upward revision of the UK GDP underpins sterling.
• Retreating US bond yields, a positive risk tone weighs on the USD and offers additional support.

The GBP/USD pair reverses an intraday dip to the 1.1070 area and climbs back closer to a one-week high touched earlier this Friday. The pair sticks to its positive bias for the fourth successive day, with bulls now awaiting a sustained move beyond the 1.1200 round-figure mark.

The Bank of England's intervention for the second day on Thursday restores stability in the UK debt market. Furthermore, an upward revision of the UK GDP print underpins the British pound and acts as a tailwind for the GBP/USD pair. The UK Office for National Statistics reported this Friday that the economy expanded by 0.2% during the second quarter against a modest 0.1% contraction estimates and eased recession fears.

The US dollar, on the other hand, languished near the weekly low and turns out to be another factor offering support to the GBP/USD pair. The spill-over effect of the UK central bank's move to calm the markets drags the benchmark 10-year US Treasury not away from a 12-year high touched earlier this week. Apart from this, a goodish recovery in the global risk sentiment is seen weighing on the safe-haven greenback.

With the latest leg up, the GBP/USD pair has now rallied over 850 pips from an all-time low set on Monday. It, however, remains to be seen if bulls can capitalize on the move amid worries that the new UK government's historic tax cuts could stretch Britain's finances to their limits. Furthermore, the fiscal package threatens to derail the BoE's efforts to contain inflation and create additional economic headwinds.

Nevertheless, the GBP/USD pair remains on track to snap a two-week losing streak. Traders now look forward to the US Personal Consumption Expenditures (PCE) - the Fed's preferred inflation gauge. The US economic docket also features the release of the Chicago PMI and the revised Michigan Consumer Sentiment Index, which might influence the USD and provide some impetus to the GBP/USD pair later during the early North American session.

USD/CNH SEEMS TO HAVE MOVED INTO A CONSOLIDATIVE PHASE – UOB

      FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang now see USD/CNH navigating within the 7.0500-7.2200 range in the next few weeks.

Key Quotes

24-hour view: "We stated yesterday that 'further volatility is not ruled out but USD is likely to trade within a narrower range of 7.1450/7.2250'. Our view was incorrect as USD rose to 7.2144 before staging a sharp and swift sell-off (low has been 7.0890). The sharp and rapid decline appears to be overdone and USD is unlikely to weaken much further. For today, USD is more likely to trade between 7.0800 and 7.1500."

Next 1-3 weeks: "We have expected USD to strengthen for more than 2 weeks now. After USD surged to 7.2668 and retreated, we indicated yesterday (29 Sep, spot at 7.1800) that the odds of USD rising to 7.3000 have diminished. However, we did not expect the subsequent sharp sell-off as USD plunged to a low of 7.0890. The breach of our 'strong support' at 7.1400 indicates that the USD rally from more than 2 weeks ago has topped for now. The current movement is likely the early stages of a consolidation phase. In view of the recent high volatility, USD could trade within a broad range of 7.0500/7.2200 for a period of time."

AUD/USD HOLDS ABOVE 0.6500 AMID SOFTER USD, EYES US PCE FOR FRESH IMPETUS

    AUD/USD reverses an intraday dip on Friday and climbs back closer to the weekly high.

• Retreating US bond yields, a positive risk tone undermines the USD and offers support.
• Recession fears, aggressive Fed rate hike bets to limit the USD losses and cap the major.

The AUD/USD pair attracts some dip-buying around the 0.6475 area on Friday and climbs to a fresh daily high during the early European session. The pair is now placed above the 0.6500 psychological mark, though lacks bullish conviction.

A combination of factors drags the US dollar lower for the third successive day and offers some support to the AUD/USD pair. The spill-over effect of the UK central bank's move to calm the markets drags the benchmark 10-year US Treasury not away from a 12-year high touched earlier this week. Apart from this, a goodish recovery in the global risk sentiment weighs on the safe-haven greenback and drives some flows towards the perceived riskier aussie.

Despite the supporting factors, the AUD/USD pair struggles to gain meaningful traction. Mixed business activity data from China adds to worries about a deeper global economic downturn and should keep a lid on any optimism in the markets. Furthermore, hawkish Fed expectations could revive the USD demand and cap the AUD/USD pair, warranting caution before positioning for an extension of this week's bounce from the lowest level since April 2020.

Investors seem convinced that the US central bank will continue to hike interest rates at a faster pace to curb persistently high inflation. Hence, the focus remains glued to the release of the US Personal Consumption Expenditures (PCE) - the Fed's preferred inflation gauge. The data, along with the US bond yields and the broader risk sentiment, will influence the USD and provide a fresh impetus to the AUD/USD pair later during the early North American session.

Friday's US economic docket also features the release of the Chicago PMI and the revised Michigan Consumer Sentiment Index. This could further allow traders to grab short-term opportunities around the AUD/USD pair on the last day of the week.

GBP/USD: BULLISH BIAS STAYS INTACT, 1.13 IN THE CROSSHAIRS

GBP/USD has gathered further bullish momentum. Pound bulls eye 1.1300 next, FXSTreet's Eren Sengezer reports.

Buyers retain control of cable's action

"On the upside, 1.1300 (Fibonacci 61.8% retracement of the latest downtrend, 100-period SMA) aligns as the next target. In case buyers flip that level into support, the pair could continue to push higher toward 1.1400 (static level) and 1.1500 (200-period SMA)."

"First support is located at 1.1130 (Fibonacci 50% retracement) before 1.1100 (psychological level) and 1.1000 (psychological level, 50-period SMA, Fibonacci 38.2% retracement)."

EUR/GBP RECOVERS A FEW PIPS FROM WEEKLY LOW POST-EUROZONE CPI, KEEPS THE RED BELOW 0.8800

      EUR/GBP cross extends its recent corrective slide from a two-year high for the fourth straight day.

• The BoE's intervention, an upward revision of the UK GDP underpins sterling and exerts pressure.
• Weaker USD, hotter-than-expected Eurozone CPI offer support to the euro and helps limit losses.

The EUR/GBP cross extends this week's sharp retracement slide from a two-year peak and remains under some selling pressure for the fourth straight day on Friday. The steady downfall remains uninterrupted through the first half of the European session and drags spot prices to mid-0.8700s or a fresh weekly low.

The British pound's relative outperformance comes on the back of the Bank of England's intervention in the UK debt market for the second day on Thursday. This, along with an upward revision of the UK Q2 GDP print, further underpins sterling on Friday and continues exerting downward pressure on the EUR/GBP cross. In fact, the UK Office for National Statistics reported this Friday that the economy expanded by 0.2% during the second quarter against a modest 0.1% contraction estimate, easing recession fears.

That said, a combination of factors assists the EUR/GBP cross to find some support at lower levels. Investors remain worried that the new UK government's historic tax cuts could stretch Britain's finances to their limits. This, in turn, threatens to derail the BoE's efforts to contain inflation and create additional economic headwinds. The shared currency, on the other hand, draws support from the weaker US dollar and hotter-than-expected Eurozone CPI, which, in turn, limits the downside for the cross.

According to the official data released by Eurostat on Friday, inflation in the euro area, as measured by the Harmonised Index of Consumer Prices (HICP), climbed to 10% on a yearly basis in September. This marks a notable rise from 9.1% in August and was also higher than market expectations for a reading of 9.7%. This reaffirms markets bets for another jumbo interest rate hike by the European Central Bank and could lend some support to the EUR/GBP cross, warranting caution for aggressive bearish traders.

EUR/NOK to hit 11 as krone could even weaken further towards year-end – Nordea

Norges Bank just announced that they will raise their NOK selling to 4.3bn from 3.5bn NOK per day. This change points toward an even weaker krone ahead, economists at Nordea report.

Norges Bank steps up the ante

"Norges Bank just announced that they will sell 4.3bn NOK/day in October from 3.5bn today. The higher NOK selling from Norges Bank combined with lower NOK purchases from oil companies and continued uncertainty in financial markets means that the NOK could weaken even further towards year-end, with EUR/NOK up to 11 and USD/NOK around 11.50."

"For the NOK to fare better than we expect, we need risk sentiment to improve markedly in the coming months, which is unlikely given central bank's fight against inflation."

EUR/USD: QUARTER-END FLOWS COULD HELP THE EURO END THE WEEK ON A FIRM FOOTING

EUR/USD has gone into a consolidation phase above 0.9800. Quarter-end flows could help the pair extend its rebound ahead of the weekend, FXStreet's Eren Sengezer reports.

0.9850 aligns as initial resistance

"In case the risk rally stays intact, the dollar is likely to continue to lose interest ahead of the weekend. Profit-taking on the last trading day of the third quarter could also help EUR/USD preserve its bullish momentum."

"On the upside, 0.9850 (Fibonacci 61.8% retracement of the latest downtrend) aligns as initial resistance. With a four-hour close above that level, the pair could target 0.9900 (psychological level, 100-period SMA) and 0.9950 (200-period SMA)."

"Supports are located at 0.9800 (Fibonacci 50% retracement), 0.9750 (Fibonacci 38.2% retracement, 50-period SMA) and 0.9700 (psychological level, 20-period SMA)."

AUD/USD: RISK-AVERSION, SOFTER AUSSIE INFLATION DIRECTS BEARS TO SUB-0.6500 ZONE AHEAD OF US GDP

• AUD/USD remains pressured around intraday low, drops back towards two-year bottom.
• Australia's first ever monthly CPI suggests easing inflation pressure.
• Yields pare the biggest daily fall in six months as geopolitical tension remain intact.
• China's plans to issue government bonds probe sellers, final readings of Q2 US GDP eyed.

AUD/USD pares intraday losses around 0.6490, recently bouncing off daily lows, as traders await fresh clues to defend the latest pullback moves.

That said, downbeat prints of Australia's monthly Consumer Price Index (CPI) joined the risk-off mood to weigh on the Aussie pair during early Thursday. The same joined firmer US Treasury yields to consolidate the previous day's rebound from the two-year low.

As per the first monthly CPI data from the Australian Bureau of Statistics (ABS), the headline price pressure eased in August to 6.8% from 7.0% in July. The same joins the Reserve Bank of Australia's (RBA) recently cautious statements to challenge the AUD/USD buyers after the data release.

Elsewhere, Wednesday's risk-on mood and China's efforts to propel the domestic markets in an attempt to overcome slowdown fears seem to favor the recent rebound in the US Treasury yields, as well as the US dollar. On the same line could be the People's Bank of China's (PBOC) first increase in the onshore yuan fix in nine days and plans to issue 2.5 trillion yuan in government bonds in Q4.

It should be noted, however, that the the markets' doubts about the Bank of England's (BOE) capacity to restore the British economic performance while keeping the recently criticized fiscal plan weigh on the sentiment, as well as the AUD/USD prices. Additionally, the hawkish commentary from the global central bankers, including those from Europe and the US, joins the looming energy crisis in Europe and Russia's hesitance to respect the Western pressure to exert additional downside pressure on the major currency pair.

Amid these plays, the US 10-year Treasury bond yields pare the biggest daily loss in six months and allow the US Dollar Index (DXY) to jump back towards the 20-year high marked the previous day. It's worth noting that the S&P 500 Futures print mild losses and fades bounce off a 21-month low of late.

Moving on, the final readings of the US Q2 Gross Domestic Product (GDP), expected to confirm -0.6% annualized figure, could entertain AUD/USD traders. However, risk catalysts are more important and hence the Fedspeak, as well as headlines from China may direct short-term pair moves clearly.

Technical analysis

A sustained reversal from a the two-week-old resistance line, near 0.6530 at the latest, redirects AUD/USD towards the 78.6% Fibonacci Expansion (FE) of the AUD/USD pair's April-August moves, around 0.6355.

GBP/USD TURNS SIDEWAYS AROUND 1.0800, FOCUS SHIFTS TO US/UK GDP DATA

• GBP/USD is expected to resume its upside journey after concluding its correction to near 1.0800.
• To revive UK's financial stability, the BOE announced a bond-buying program worth GBP 65 billion.
• Does BOE really not have the stomach to fight inflation while simultaneously keeping financial stability?

The GBP/USD pair is displaying a lackluster performance in the Tokyo session. The asset has turned sideways in a narrow range of 1.0782-1.0800 after dropping from the critical hurdle of 1.0900. A failed attempt of overstepping the barricades at 1.0900 brought a correction in the cable, however, a bullish impulsive move after the conclusion of a pullback cannot be ruled out.

The surprise move of the bond-purchase program by the Bank of England (BOE) to bring stability to the financial markets has started displaying its consequences. It is worth mentioning that risk-sensitive currencies are performing now as the US dollar index (DXY) has recorded an intermittent top of around 115.00. However, the sterling gains are poor in comparison with other currencies.

The BOJ will purchase GBP five billion worth of long-dated bonds consecutively for 13 days to safeguard the economy from the financial turmoil. In times, when households in the UK are facing the headwinds of higher price pressures and BOE policymakers are already putting their blood and sweat to tame inflation, sheer liquidity infusion could offset a significant impact.

Does it state that the BOE really does not have the stomach to fight inflation while simultaneously keeping financial markets stable? Well, it will be consequences of minting more money which will display the capacity later.

On the economic data front, Friday's Gross Domestic Product (GDP) data will be keenly watched. The annual and quarterly data is expected to remain steady at 2.9% and -0.1% respectively.

Meanwhile, the DXY is expected to remain sideways further as investors are awaiting the release of the US GDP data. As per the market consensus, the annualized US GDP will continue its de-growth pattern for this quarter by 0.6%.

USD/CNH Price Analysis: Fades bounces off weekly support below 7.2000

      USD/CNH Price Analysis: Fades bounces off weekly support below 7.2000

• USD/CNH struggles to defend the recovery moves, retreats from intraday high.
• Steady RSI suggests further grinding towards the north.
• 12-day-old ascending trend line, 50-SMA adds to the downside filters.
• Bullish bias remains intact beyond 7.1000, buyers aim for a fresh all-time high.

USD/CNH reverses the previous day's pullback from the record high during early Thursday morning in Europe, despite recent inaction around 7.1880.

In doing so, the offshore Chinese yuan (CNH) pair bounces off a horizontal area comprising multiple lows marked since Monday amid a steady RSI (14). However, bearish MACD signals and the buyer's inability to keep the reins beyond the 7.2000 psychological magnet challenge the pair's upside momentum.

It should be noted, however, that the pair's pullback moves below the aforementioned immediate support near 7.1460-50 are likely to be challenged by an upward sloping support line from September 13, close to 7.1280 by the press time.

Also acting as a downside filter is the 50-SMA level surrounding 7.1125.

Even if the quote drops below 7.1125, the September 22 swing high near 7.1060 and the 7.1000 psychological magnet could act as the last defenses for the USD/CNH buyers.

Alternatively, recovery moves need to stay beyond the 1.2000 mark to convince buyers to aim for the multiple hurdles near 1.2500.

Following that, the recently flashed record high near 7.2600 and the 7.3000 psychological magnet will be in focus.

EUR/USD: STILL SCOPE FOR A TEST OF 0.9500 – UOB

      USD/CNH Price Analysis: Fades bounces off weekly support below 7.2000

• USD/CNH struggles to defend the recovery moves, retreats from intraday high.
• Steady RSI suggests further grinding towards the north.
• 12-day-old ascending trend line, 50-SMA adds to the downside filters.
• Bullish bias remains intact beyond 7.1000, buyers aim for a fresh all-time high.

USD/CNH reverses the previous day's pullback from the record high during early Thursday morning in Europe, despite recent inaction around 7.1880.

In doing so, the offshore Chinese yuan (CNH) pair bounces off a horizontal area comprising multiple lows marked since Monday amid a steady RSI (14). However, bearish MACD signals and the buyer's inability to keep the reins beyond the 7.2000 psychological magnet challenge the pair's upside momentum.

It should be noted, however, that the pair's pullback moves below the aforementioned immediate support near 7.1460-50 are likely to be challenged by an upward sloping support line from September 13, close to 7.1280 by the press time.

Also acting as a downside filter is the 50-SMA level surrounding 7.1125.

Even if the quote drops below 7.1125, the September 22 swing high near 7.1060 and the 7.1000 psychological magnet could act as the last defenses for the USD/CNH buyers.

Alternatively, recovery moves need to stay beyond the 1.2000 mark to convince buyers to aim for the multiple hurdles near 1.2500.

Following that, the recently flashed record high near 7.2600 and the 7.3000 psychological magnet will be in focus.

EUR/USD: STILL SCOPE FOR A TEST OF 0.9500 – UOB

 

FX Strategists at UOB Group Quek Ser Leang and Peter Chia suggest EUR/USD could still visit the 0.9500 region in the next weeks.

Key Quotes

24-hour view: "We highlighted yesterday that 'the bias for EUR is tilted to the downside but a clear break below 0.9530 is unlikely'. While our view was not wrong as EUR subsequently dipped to a low of 0.9534, we did not expect the lift-off from the low that sent EUR surging to a high of 0.9750. The sharp and rapid rise appears to be overdone and EUR is unlikely to advance much further. For today, we expect EUR to trade sideways between 0.9620 and 0.9750."

Next 1-3 weeks: "We have held a negative EUR for more than 2 weeks now. In our latest narrative from Monday (26 Sep, spot at 0.9630), we held the view that EUR 'could continue to weaken, possibly to 0.9500'. Yesterday (28 Sep), EUR dropped to 0.9534 before jumping to test our 'strong resistance' level at 0.9750. As the 'strong resistance' is not clearly breached, there is still a chance (albeit a slim one) for EUR to drop to 0.9500. Looking ahead, a breach of 0.9750 would indicate that EUR could trade sideways within a broad range for a period of time."