. Daily FX Analysis - Middle East Conflict Sparks Currency Market Volatility

Daily FX Analysis – Middle East Conflict Sparks Currency Market Volatility

Daily FX Analysis – Middle East Conflict Sparks Currency Market Volatility

10 Oct 2023

Introduction:

In the dynamic world of currency markets, several major pairs are in focus. NZD/USD is on an upward trajectory, aiming for 0.6050, propelled by a weakening US Dollar amidst receding tensions in the Middle East. Similarly, USD/CAD is grappling with losses near 1.3570 due to surging oil prices driven by ongoing geopolitical conflicts and dovish signals from the Federal Reserve. Meanwhile, USD/CHF is rebounding from a three-week low around 0.9050 as the US Dollar seeks recovery, while the Swiss Franc benefits from its safe-haven status amid global uncertainty. Lastly, EUR/GBP is making a comeback from a two-week low near 0.8630, driven by pre-speech repositioning ahead of ECB President Christine Lagarde address, offering a glimpse of the intricate interplay between currencies and geopolitics.

NZD/USD:

NZD/USD looks to approach 0.6050 due to weaker US Dollar.

NZD/USD trades higher as a result of the US Dollar’s decline. The Mid-East conflict appears to be passing quickly, which lessens the appeal of the greenback as a haven.

NZD/USD traded in the green near 0.6030 during Tuesday’s Early Asian session, carrying on the winning streak that started on Wednesday. The US Dollar (USD), which is still moving downward, is providing support for the upward movement of the pair. Additionally, investors downplayed the likelihood of further rate hikes because of the Federal Reserve (Fed) policymakers’ comments made overnight, which caused a further decline in US bond yields. As a result, this news is interpreted as weakening the US dollar and supporting the NZD/USD pair.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 0.6004 | Positive Crossover | Bullish
  • MA 20: 0.5969 | Positive Crossover | Bullish
  • MA 50: 0.5953 | Positive Crossover | Bullish

Simple:

  • MA 5: 0.6001 | Positive Crossover | Bullish
  • MA 20: 0.5954 | Positive Crossover | Bullish
  • MA 50: 0.5949 | Positive Crossover | Bullish

RSI (Relative Strength Index): 61.23 | Buy Zone | Bullish

Stochastic Oscillator: 96.79| Buy Zone | Positive

Resistance And Support Levels:

  • R1: 0.6025| R2: 0.6107
  • S1: 0.5963 | S2: 0.5887

Overall Sentiment: Bullish | Market Direction: Buy

Trade Suggestion: Stop Buy: 0.6048 | Take Profit: 0.6107 | Stop Loss: 0.6006

USD/CAD:

USD/CAD extends losses near 1.3570 on higher oil prices.

As a result of rising crude oil prices, USD/CAD keeps falling. The Middle East conflict continues, which supports the oil prices. Following the dovish comments made by Fed officials, investors discount the chance of more rate hikes.

While trading down in the early Asian session on Tuesday, USD/CAD extended its losing skid to a fourth straight day. The two are facing difficulties as a result of a sharp increase in oil costs, a development that may be related to the armed confrontation occurring near the Gaza Strip.

The minutes of the upcoming FOMC meeting, slated for Wednesday, will likely be closely watched by investors. The impact of this announcement on expectations for the Federal Reserve’s next course of action is the subject of speculation, which may have an impact on demand for the dollar.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 1.3614| Negative Crossover | Bearish
  • MA 20: 1.3638 | Negative Crossover | Bearish
  • MA 50: 1.3597 | Negative Crossover | Bearish

Simple:

  • MA 5: 1.3615 | Negative Crossover | Bearish
  • MA 20: 1.3675 | Negative Crossover | Bearish
  • MA 50: 1.3558 | Positive Crossover | Bullish

RSI (Relative Strength Index): 44.32| Neutral Zone | Neutral

Stochastic Oscillator: 1.76 | Sell Zone | Neutral

Resistance And Support Levels:

  • R1: 1.3653| R2: 1.3761
  • S1: 1.3581| S2: 1.3462

Overall Sentiment: Bearish | Market Direction: Sell

Trade Suggestion: Stop Sell 1.3545| Take Profit: 1.3462 | Stop Loss: 1.3615

USD/CHF:

USD/CHF rebounds from three-week low near 0.9050 on US dollar recovery.

As the US Dollar tries to end its losing skid, USD/CHF recovers from its three-week low. Due to its status as a safe haven during the Middle East war, the Swiss Franc enjoys buying support.

The dovish comments made by Fed officials reduce the likelihood of policy rate increases.

As of Tuesday’s Asian, session, USD/CHF was trading lower around 0.9070, continuing its losing trend for a fifth straight day. The US Dollar (USD) tries to end its losing trend, nevertheless, as the pair recovers from its three-week low. Additionally, the military crisis between Palestine and Israel is exerting negative pressure on the USD/CHF pair, while the Swiss Franc (CHF) enjoys purchasing support because of its standing as a safe haven currency.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 0.9072 | Negative Crossover | Bearish
  • MA 20: 0.9116| Negative Crossover | Bearish
  • MA 50: 0.9087 | Negative Crossover | Bearish

Simple:

  • MA 5: 0.9071 | Negative Crossover | Bearish
  • MA 20: 0.9141 | Negative Crossover | Bearish
  • MA 50: 0.9101| Negative Crossover | Bearish

RSI (Relative Strength Index): 36.78 | Sell Zone | Bearish

Stochastic Oscillator: 0.00| Sell Zone| Negative

Resistance And Support Levels:

  • R1: 0.9121 | R2: 0.9226
  • S1: 0.9037 | S2: 0.8935

Overall Sentiment: Bearish | Market Direction: Sell

Trade Suggestion: Stop Sell: 0.9001 | Take Profit: 0.8935 | Stop Loss: 0.9056

EUR/GBP:

EUR/GBP rebounds from near two-week low, jumps to mid –0.8600s ahead of ECB Lagarde.

Near the 0.8630 support area, or a nearly two-week low, EUR/GBP draws new buyers. Support comes from some repositioning trading before President Christine Lagarde’s address. Before preparing for additional gains, exercise cautious given the unstable fundamental backdrop.

Once more finding support near 0.8630, the EUR/GBP cross makes a modest intraday recovery from an almost two-week low hit on Tuesday. Spot prices continue their upward trend throughout the early hours of the European session and reach a new daily high in the last hour, rising to the mid-0.8600s.

The relative outperformance of the common currency versus the pound sterling may be ascribed to some repositioning trading before the speech by Christine Lagarde, president of the European Central Bank (ECB), later today.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 0.8644 | Positive Crossover | Bullish
  • MA 20: 0.8653| Negative Crossover | Bearish
  • MA 50: 0.8647| Positive Crossover | Bullish

Simple:

  • MA 5: 0.8643 | Positive Crossover | Bullish
  • MA 20: 0.8657| Negative Crossover | Bearish
  • MA 50: 0.8658| Negative Crossover | Bearish

RSI (Relative Strength Index): 46.99| Buy Zone | Bullish

Stochastic Oscillator: 24.24| Sell | Negative Zone

Resistance And Support Levels:

  • R1: 0.8667 | R2: 0.8705
  • S1: 0.8637 | S2: 0.8588

Overall Sentiment: Bearish | Market Direction: Sell

Trade Suggestion: Stop Sell: 0.8624 | Take Profit: 0.8588 | Stop Loss: 0.8650

Elsewhere in the Forex Market

GBPUSD up 0.23% to 1.2265. The EUR/USD up 0.29% to 1.0598. The AUD/USD up 0.17% at 0.6422. USD/JPY up 0.02% at 148.81, CAD/JPY up 0.26% at 109.56, The USD/CNY down 0.00% at 7.2909, AUD/SEK down 0.35% at 7.0054, at the time of writing.

Key Economic Events & Data Release Today:

(GBP) BoE MPC Member Mann Speaks at 01:30.

(AUD) NAB Business Confidence (Sep) Actual 1, Previous 2 at 06:00.

(AUD) Building Approvals (MoM) Actual 7.0%, Forecast 7.0%, Previous –8.1% at 06:00.

(EUR) ECB President Lagarde Speaks at 17:30.

(USD) FOMC Member Bostic Speaks at 19:00.