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."

EUR/USD climbs towards 1.0765 four-week highs but fails to reclaim the 50-DMA, retrace to 1.0730s

EUR/USD climbs towards 1.0765 four-week highs but fails to reclaim the 50-DMA, retrace to 1.0730s •The shared currency is about to finish the week with 1.66%. •US Core PCE rose by 4.9% YoY, lower than March’s 5.1% reading; will the Fed diminish the speed of rate hikes? •EUR/USD Price Forecast: Its long-term bias remains bearish, but a rally towards 1.0800 in the near term is on the cards. The EUR/USD reached a fresh four-week high, around 1.0765, but in the last hour, retreated some 30 pips, as the New York session wanes, on an upbeat trading session, courtesy of positive US data. At 1.0735, the EUR/USD is set to record weekly gains of 1.66% amidst a week full of ECB officials’ hawkish commentary and mixed US economic data. US inflation eases some, and further ECB hawkish commentary lifts the EUR/USD On Friday, the US Commerce Department unveiled inflation figures for the country. The Fed’s favorite gauge, the Core PCE for April, increased by 4.9% YoY, aligned with forecasts but lower than the March reading. That easied investors’ worries regarding an aggressive US central bank, with some of its members, like St. Louis Fed President James Bullard, expecting rates to finish in the 3.25-3.50% range. In fact, during the week, Atlanta’s Fed President Raphael Bostic, usually a hawk, commented that once the Fed is done with 50 bps increases in the June and July meeting, it might pause as they assess the economy’s reaction. In the meantime, the EUR/USD jumped on the release, towards 1.0750, though retraced the move, dipping towards 1.0700. However, in the middle of the North American session, the EUR/USD recovered some ground and settled above April’s 2020 lows of 1.0727. Meanwhile, during the European session, the Bundesbank President and ECB member Joachim Nagel said that he believes the first-rate raise move should come in July, with more to follow in the second half of 2022. He added that inflation would not fall overnight, and it could take some time. Next week, the Eurozone macroeconomic docket will feature Headline Inflation for Germany and the Euro area. Both headline figures are expected to rise to new highs, but core EU inflation is foreseen to fall to 3.4%. Another event triggering EUR/USD traders’ reaction would be the EU Council Meeting. On the US front, the docket will reveal the May ISM Manufacturing and the Business related PMIs, Fed speakers, and employment data on the US front. EUR/USD Price Forecast: Technical outlook The EUR/USD advanced in the day and pierced the 50-day moving average (DMA) at 1.0746, pushing towards 1.0765 (new weekly highs). However, EUR/USD bulls’ failure to sustain the rally dragged spot prices below the abovementioned. However, they could remain hopeful as the Relative Strength Index (RSI) at 56 persists in bullish territory, aiming higher. That said, the EUR/USD’s first resistance would be the 50-DMA. A break above would expose the March 7 low-turned-resistance at 1.0805, followed by April’s 21 high at 1.0936.