. Daily FX Analysis-Middle East Tensions Roil Forex Markets

Daily FX Analysis – Middle East Tensions Roil Forex Markets

Daily FX Analysis – Middle East Tensions Roil Forex Markets

09 Oct 2023

Introduction:

In the midst of escalating Middle East conflicts and shifting global dynamics, major currency pairs face unique challenges. GBP/USD grapples with risk aversion, while EUR/USD maintains vulnerability amid geopolitical tensions. AUD/USD feels the pressure amidst risk-aversion, and USD/JPY treads cautiously as the Israeli-Palestinian conflict influences market sentiment. Amidst these uncertainties, the currency markets await crucial developments, including the US September jobs report and geopolitical shifts that could impact these currency pairs in the days ahead.

GBP/USD:

GBP/USD struggles near 1.2200 as Middle East conflict weighs on risk.

GBP/USD is struggling against 1.2200 early on Monday due to risk aversion. Rising Middle East geopolitical tensions and hawkish Fed wagers benefit the US dollar. The weight on the pair is also increased by higher oil prices.

GBP/USD closed in positive territory on Wednesday and Thursday before edging up to the 1.2200 region on Friday. The pair appears to have additional upside potential in the immediate term, but investors should hold off on any US Dollar (USD) weakening until the September jobs report is less than expected.

In the US, it is expected that nonfarm payrolls (NFP) would increase by 170,000 in September. The USD may come under fresh adverse pressure if the NFP comes in below 150,000 and confirms tightening labour market conditions. In such case, dovish Federal Reserve expectations could cause risk flows to take centre stage on the financial markets, giving the GBP/USD exchange rate a further boost.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 1.2182 | Negative Crossover | Bearish
  • MA 20: 1.2168 | Positive Crossover | Bullish
  • MA 50: 1.2239 | Negative Crossover | Bearish

Simple:

  • MA 5: 1.2180 | Negative Crossover | Bearish
  • MA 20: 1.2153 | Positive Crossover | Bullish
  • MA 50: 1.2229 | Negative Crossover | Bearish

RSI (Relative Strength Index): 50.34 | Buy Zone | Bullish

Stochastic Oscillator: 88.45| Buy Zone | Neutral

Resistance And Support Levels:

  • R1: 1.2301 | R2: 1.2539
  • S1: 1.2319 | S2: 1.1920

Overall Sentiment: Bearish | Market Direction: Sell

Trade Suggestion: Stop Sell: 1.2075 | Take Profit: 1.1920 | Stop Loss: 1.2210

EUR/USD:

EUR/USD stays vulnerable near 1.0550 amid geopolitical tensions.

With a tiny bearish gap to start the new week, the EUR/USD is maintaining its bearish potential around 1.0550 on Monday morning in Europe. As Middle East conflict increases, risk-off movements predominate, supporting demand for the US Dollar as a safe haven.

After recording advances for two straight days, the EUR/USD pair stabilised near 1.0550 on Friday. A higher stretch for the pair ahead of the weekend is possible if the US September jobs report confirms loosening labour market conditions.

The activity on Wall Street will be closely watched by market participants as well. The EUR/USD is likely to close the week in a bullish trend if risk flows take over the financial markets in response to a dismal NFP reading and a weekend stock rise in the US.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 1.0535| Negative Crossover | Bearish
  • MA 20: 1.0534 | Negative Crossover | Bearish
  • MA 50: 1.0584 | Negative Crossover | Bearish

Simple:

  • MA 5: 1.0538 | Negative Crossover | Bearish
  • MA 20: 1.0524 | Negative Crossover | Bearish
  • MA 50: 1.0585 | Negative Crossover | Bearish

RSI (Relative Strength Index): 44.71| Neutral Zone | Neutral

Stochastic Oscillator: 82.04 | Buy Zone | Neutral

Resistance And Support Levels:

  • R1: 1.0631| R2: 1.0758
  • S1: 1.0504| S2: 1.0328

Overall Sentiment: Bearish | Market Direction: Sell

Trade Suggestion: Stop Sell 1.0443| Take Profit: 1.0328 | Stop Loss: 1.0525

AUD/USD:

AUD/USD stays pressured near 0.6350 amid risk-aversion on Middle East conflict.

After a modest recovery into early Europe on Monday, the AUD/USD exchange rate is still under pressure close to 0.6350. In the midst of a violent war between Israel and Palestine, risk aversion is still the dominant trend, which supports the safe-haven US Dollar. 

The AUD/USD has risen above 0.6350 and continued its rebound from monthly lows. This movement was sparked by a little improvement in risk sentiment, a drop in US Treasury yields, and the US Dollar’s continuous depreciation. However, incoming US data will determine the pair’s course.

The Financial Stability Review, which evaluates the current state of the financial system and any potential risks to financial stability, will be made public by the Reserve Bank of Australia (RBA) on Friday. This report is not likely to provide any surprises.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 0.6354 | Positive Crossover | Bullish
  • MA 20: 0.6362| Positive Crossover | Bullish
  • MA 50: 0.6387 | Positive Crossover | Bullish

Simple:

  • MA 5: 0.6355 | Positive Crossover | Bullish
  • MA 20: 0.6364 | Positive Crossover | Bullish
  • MA 50: 0.6440| Positive Crossover | Bullish

RSI (Relative Strength Index): 47.56 | Buy Zone | Bullish

Stochastic Oscillator: 82.28| Buy Zone| Positive

Resistance And Support Levels:

  • R1: 0.6361 | R2: 0.6488
  • S1: 0.6282 | S2: 0.6192

Overall Sentiment: Bullish | Market Direction: Buy

Trade Suggestion: Stop Buy: 0.6395 | Take Profit: 0.6488 | Stop Loss: 0.6333

USD/JPY:

The USD/JPY holds above 149.00-mark, upside remains capped on Israeli-Palestinian conflict.

On the opening day of a new week, the USD/JPY pair opens with a somewhat bearish gap as it fails to build on Friday’s bullish movement. But while failing to follow through after growing geopolitical concerns in the Middle East, which typically favour the safe-haven Japanese Yen (JPY), spot prices do manage to recover a few pips from sub-149.00 levels, or the daily low.

Following an intraday decline to the 148.25 area on Thursday, the USD/JPY pair draws some dip buying and rises to the top of its daily range during the first half of the European session. Spot prices are currently trading near the 149.00 level but lack momentum due to rumours that the Japanese government will intervene in the FX market to support the domestic currency.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 149.12 | Positive Crossover | Bullish
  • MA 20: 149.08| Positive Crossover | Bullish
  • MA 50: 148.62| Positive Crossover | Bullish

Simple:

  • MA 5: 149.14 | Positive Crossover | Bullish
  • MA 20: 149.23| Negative Crossover | Bearish
  • MA 50: 148.69| Positive Crossover | Bullish

RSI (Relative Strength Index): 51.96| Buy Zone | Bullish

Stochastic Oscillator: 37.86| Sell | Positive Zone

Resistance And Support Levels:

  • R1: 149.35 | R2: 151.76
  • S1: 147.80 | S2: 145.81

Overall Sentiment: Bullish | Market Direction: Buy

Trade Suggestion: Stop Buy: 149.95 | Take Profit: 151.76 | Stop Loss: 148.75

Elsewhere in the Forex Market

NZDUSD down 0.02% to 0.5976. The USD/CAD up 0.07% to 1.3670. The EUR/GBP up 0.03% at 0.8643. USD/CHF up 0.16% at 0.9110, CAD/JPY down 0.09% at 109.09, The USD/CNY down 0.08% at 7.2947, AUD/SEK up 0.19% at 7.0138, at the time of writing.

Key Economic Events & Data Release Today:

(EUR) German Industrial Production (MoM) (Aug) Actual –0.2%, Forecast –0.1%, Previous –0.8% at 11:30

(EUR) ECB’s Enria Speaks at 14:45.