. Weekly FX Analysis: Global Currencies Hold Steady, Key Levels.

Weekly FX Analysis: Global Currencies Hold Steady, Key Levels.

Weekly FX Analysis: Global Currencies Hold Steady, Key Levels.

21 Oct 2023

Introduction:

In the dynamic world of foreign exchange markets, let’s delve into the latest developments for some of the key currency pairs. GBP/USD struggles to maintain its position above 1.2150, while EUR/USD faces headwinds around 1.05. AUD/USD hits weekly lows amidst a risk-off sentiment and mixed US data, while USD/JPY retraces due to dovish Fed remarks and declining US yields. These market movements reflect the influence of various factors, from geopolitical tensions to economic data and central bank statements.

GBP/USD:

GBP/USD stabilized above 1.2100 following an earlier decline.

The GBP/USD pair initially dipped to around 1.2100 following disappointing UK data earlier in the day. However, it managed to make a partial recovery, reaching approximately 1.2150. The overall market sentiment remains negative as investors continue to focus on developments related to the Israel-Hamas conflict before the weekend.

GBP/USD faced renewed downward pressure, dropping to the 1.2100 level before seeing a modest rebound during the European trading session. Short-term technical indicators suggest that the bearish trend remains in place.

In the meantime, Bank of England Governor Andrew Bailey mentioned in an interview with the Belfast Telegraph that he anticipates a significant drop in inflation in the coming month. These remarks made it challenging for GBP/USD to gain traction for a recovery.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 1.2164 | Positive Crossover | Bullish
  • MA 20: 1.2217 | Negative Crossover | Bearish
  • MA 50: 1.2359 | Negative Crossover | Bearish

Simple:

  • MA 5: 1.2167 | Positive Crossover | Bullish
  • MA 20: 2.2179 | Negative Crossover | Bearish
  • MA 50: 1.2406 | Negative Crossover | Bearish

    RSI (Relative Strength Index): 41.88 | Neutral Zone | Neutral

Stochastic Oscillator: 64.98 | Buying Zone | Negative

Resistance And Support Levels:

  • R1: 1.2303 | R2: 1.2540
  • S1: 1.2130 | S2: 1.1904

Overall Sentiment: Bearish | Market Direction: Sell

Trade Suggestion: Stop Sell: 1.2060 | Take Profit: 1.1904 | Stop Loss: 1.2182

EUR/USD:

EUR/USD stays in the daily range below 1.0600.

On Friday, the EUR/USD pair remained within a narrow trading range below 1.0600. With no significant data releases to influence the market, the cautious sentiment among traders is supporting the US Dollar, making it challenging for the pair to gain momentum.

Despite market risk aversion, the EUR/USD managed to climb higher on Thursday, aiming for its highest daily close in over a week, thanks to a weakened US dollar. Nevertheless, the pair struggled to sustain levels above 1.0600, highlighting the presence of potential obstacles on the path to further gains.

Federal Reserve Chair Jerome Powell hinted at his preference for the central bank to maintain current interest rates in the near term. He also emphasized that inflation remains a concern. This message aligns with recent statements from the Fed, indicating a commitment to keeping rates steady if inflation continues to decelerate and the economy does not exhibit significant improvement.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 1.0571 | Positive Crossover | Bullish
  • MA 20: 1.0581 | Positive Crossover | Bullish
  • MA 50: 1.0672 | Negative Crossover | Bearish

Simple:

  • MA 5: 1.0568 | Positive Crossover | Bullish
  • MA 20: 1.0552 | Positive Crossover | Bullish
  • MA 50: 1.0688 | Negative Crossover | Bearish

  • RSI (Relative Strength Index): 48.79| Buy Zone | Bullish

Stochastic Oscillator: 89.85 | Buying Zone | Positive

Resistance And Support Levels:

  • R1: 1.0601 | R2: 1.0760
  • S1: 1.0475 | S2: 1.0335

Overall Sentiment: Bullish | Market Direction: Buy

Trade Suggestion: Stop Buy: 1.0634 | Take Profit: 1.0760 | Stop Loss: 1.0550

AUD/USD:

AUD/USD extends losses towards a major level amid the Middle East conflict.

The Australian Dollar (AUD) continues its decline due to increasing concerns related to the Israel-Gaza conflict. Notably, Australia’s Unemployment Rate performed better than expected, standing at 3.6%. The People’s Bank of China (PBoC) decided to keep the Loan Prime Rates (LPR) unchanged, maintaining them at 3.45% for the one-year and 4.20% for the five-year. In the US, Jobless Claims fell to 198K, the lowest level since January. Federal Reserve Chair Powell’s remarks suggested that the central bank has no immediate plans to raise interest rates.

The AUD/USD pair is facing its third consecutive day of losses, likely influenced by the prevailing risk-off sentiment. However, the pair received some support from a weakening US Dollar (USD), following comments by Federal Reserve (Fed) Chairman Jerome Powell on Thursday. Powell’s statement indicating that the central bank does not intend to raise interest rates in the short term provided a boost to the pair.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 0.6333| Negative Crossover | Bearish
  • MA 20: 0.6364 | Negative Crossover | Bearish
  • MA 50: 0.6423 | Negative Crossover | Bearish

Simple:

  • MA 5: 0.6335 | Negative Crossover | Bearish
  • MA 20: 0.6365 | Negative Crossover | Bearish
  • MA 50: 0.6404 | Negative Crossover | Bearish
  • RSI (Relative Strength Index): 41.37| Neutral zone| Neutral

Stochastic Oscillator: 45.04 | Buy Zone | Negative

Resistance And Support Levels:

  • R1: 0.6395 | R2: 0.6499
  • S1: 0.6299 | S2: 0.6196

Overall Sentiment: Bearish | Market Direction: Sell

Trade Suggestion: Stop Sell: 0.6268 | Take Profit: 0.6196 | Stop Loss: 0.6327

USD/JPY:

USD/JPY flirts with a multi-week high, just below the 150 possible intervention level.

On Friday, the USD/JPY pair resumed its upward movement, approaching a multi-week high. The main driving force behind this rise is the contrasting policy perspectives of the Bank of Japan (BoJ) and the Federal Reserve (Fed). However, the prevailing risk-averse sentiment might support the safe-haven Japanese Yen (JPY) and potentially limit the gains due to concerns about potential interventions.

On Friday, Bank of Japan (BoJ) Governor Kazuo Ueda restated the central bank’s commitment to achieving a 2% inflation target in a stable and sustainable manner. This goal will be pursued alongside wage growth, and it will be achieved by maintaining the current accommodative monetary policy patiently. This stance represents a significant contrast when compared to the Federal Reserve’s (Fed) more aggressive outlook, which, in turn, is considered a significant driver of the Japanese Yen’s (JPY) relatively weaker performance and serves as a supportive factor for the USD/JPY pair.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 149.73 | Positive Crossover | Bullish
  • MA 20: 149.13 | Positive Crossover | Bullish
  • MA 50: 147.51 | Positive Crossover | Bullish

Simple:

  • MA 5: 149.75 | Positive Crossover | Bullish
  • MA 20: 149.31 | Positive Crossover | Bullish
  • MA 50: 147.74 | Positive Crossover | Bullish

    RSI (Relative Strength Index): 60.63| Buying Zone | Bullish

Stochastic Oscillator: 63.64| Buy zone | Positive

Resistance And Support Levels:

  • R1: 150.04 | R2: 152.02
  • S1: 148.49 | S2: 146.50

Overall Sentiment: Bullish | Market Direction: Buy

Trade Suggestion: Stop Buy: 150.38| Take Profit: 152.02 | Stop Loss: 149.35

Elsewhere in the Forex Market

NZD/USD down 0.39% to 0.5825. The EUR/JPY up 0.19% to 158.73. The USDCHF is up 0.13% at 0.8921. USD/CAD is down 0.03% at 1.3715, and EUR/GBP is down 0.13% at 0.8702. The USD/CNY is up 0.05% at 7.3163, AUD/SEK up 0.45% at 6.9672, and CHF/SGD down 0.27% at 1.5375 at the time of writing.

Key Economic Events & Data Release for Upcoming Week:

(EUR) German Manufacturing PMI (Oct) (Tuesday).

(GBP) Manufacturing PMI (Tuesday).

(AUD) CPI (QoQ) (Q3) (Wednesday)

(USD) Building Permits (Wednesday).

(USD) New Home Sales (Sep) (Wednesday).

(CAD) BoC Interest Rate Decision (Wednesday).

(USD) Fed Chair Powell Speaks (Thursday)

(EUR) ECB Interest Rate Decision (Oct) (Thursday).

(USD) GDP (QoQ) (Q3) (Thursday)

(USD) Initial Jobless Claims (Thursday)

(EUR) ECB Press Conference (Thursday)