The main culprit for the US
Dollar strength lately has been the rally in long term Treasury yields. The
yield curve has been bear-flattening which is what you would expect with higher
growth and potentially higher inflation expectations.

There’s a good argument
that the markets have been already positioning for a Trump’s victory which is
expected to strengthen the higher growth and less rate cuts expectations.

As previously mentioned,
this is the trend for now and it’s generally a bad idea to fight such trends
without a strong catalyst. The US Dollar will likely remain supported unless
Harris wins the US elections and we get a correction in Treasury yields.

On the NZD side, the latest
New Zealand Q3 CPI missed expectations solidifying the
market’s view for another 50 bps cut at the upcoming meeting and even pricing 22%
chance of a 75 bps move. In 2025, the market expects four more 25 bps cuts.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that NZDUSD broke below the key 0.6050 support zone and extended the drop into new lows. From
a risk management perspective, the sellers will have a better risk to reward
setup around the support
turned resistance, while the buyers will want to see the price breaking
higher to start targeting the 0.6217 resistance next.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a downward trendline defining the current bearish
momentum. The sellers will likely lean on it to position for new lows, while
the buyers will look for a break higher to increase the bullish bets into new
highs.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price broke above another minor trendline that was defining the
bearish momentum on this timeframe. The rally stalled at the most recent swing high
around the 0.60 handle.

The buyers will want to see
the price breaking above this level to increase the bullish bets into the major
trendline, while the sellers will likely step in around this level to position
for new lows. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US ADP and the US GDP. Tomorrow, we have the US PCE, the US
Jobless Claims and the US Employment Cost Index. Finally, on Friday, we
conclude the week with the US NFP and the US ISM Manufacturing PMI.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• 10-year Treasury yields stay in retreat after brief brush above 4.30% yesterday
• Euro pushes higher on German Q3 GDP beat, higher state inflation readings
• Germany Q3 preliminary GDP +0.2% vs -0.1% q/q expected
• Bavaria October CPI +2.4% vs +1.9% y/y prior
• UK budget preview: What to expect this time around?
• Eurozone Q3 preliminary GDP +0.4% vs +0.2% q/q expected
• France Q3 preliminary GDP +0.4% vs +0.3% q/q expected
• Italy Q3 preliminary GDP 0.0% vs +0.2% q/q expected
• Spain Q3 preliminary GDP +0.8% vs +0.6% q/q expected
• Spain October preliminary CPI +1.8% vs +1.8% y/y expected
• Germany October unemployment change 27k vs 15k expected
• Switzerland October KOF leading indicator index 99.5 vs 105.0 expected
• US MBA mortgage applications w.e. 25 October -0.1% vs -6.7% prior
• SNB chairman Schlegel: Ready to intervene in currency markets as necessary

Markets:

• JPY leads, GBP lags on the day
• European equities lower; S&P 500 futures up 0.1%
• US 10-year yields down 5.2 bps to 4.220%
• Gold up 0.2% to $2,780.24
• WTI crude up 1.2% to $68.00
• Bitcoin down 0.2% to $72,167

It was a packed session with plenty of economic data releases to work through. But ultimately, they didn’t do much to shake up the market landscape on the day.

With month-end approaching, that alongside upcoming US data releases continue to be key focus points in impacting trading sentiment on the week.

We got stronger inflation numbers from Spain and Germany for October but the ECB had already warned about that previously. Then, there was a surprise in German Q3 GDP as well. And put together, that saw EUR/USD nudge up slightly from 1.0835 to 1.0859 briefly.

However, large option expiries and the fact that one month’s worth of numbers are not enough to change the ECB outlook saw the pair retreat back to 1.0830 currently.

Instead, the dollar is weaker at the balance but it owes to a continued retreat in Treasury yields after the highs yesterday. 10-year yields briefly touched a high of 4.32% yesterday but are now down by roughly 10 bps to 4.22%. Month-end shenanigans in play?

In any case, that is weighing on USD/JPY, with the pair down 0.3% to 152.90 currently. Meanwhile, AUD/USD and NZD/USD are both up 0.2% to 0.6575 and 0.5985 respectively as well.

Elsewhere, the pound is the laggard as traders are positioning more negatively ahead of the UK budget announcement later. The fear is that chancellor Rachel Reeves might announce a budget that is deemed „fiscally irresponsible“ and that could weigh on the currency and upset the gilts market. So, there is a potential for a sterling recovery if she manages to thread the needle. But it’s definitely a fine line to work that out.

In other markets, European indices are selling off while US futures are marginally higher. The latter is feeling optimistic after Alphabet’s earnings beat with four more of the Magnificent 7 still to report this week. In the commodities space, gold continues to shine as it closes in on $2,800 in the bigger picture as the ascend continues.

This article was written by Justin Low at www.forexlive.com.

• Prior -6.7%
• Market index 214.5 vs 214.8 prior
• Purchase index 137.8 vs 131.3 prior
• Refinancing index 630.0 vs 672.6 prior
• 30-year mortgage rate 6.73% vs 6.52% prior

After a sharp fall in mortgage applications in the previous two weeks, the latest reading is little changed but it’s important to look at the details. Refinancing activity took yet another sharp plunge as higher rates once again weighed on that particular component. The drop was only offset by a modest jump in purchases activity in the past week. The refinancing index is now at the lowest since the end of July.

This article was written by Justin Low at www.forexlive.com.

The main culprit for the US
Dollar strength lately has been the rally in long term Treasury yields. The
yield curve has been bear-flattening which is what you would expect with higher
growth and potentially higher inflation expectations.

There’s a good argument
that the markets have been already positioning for a Trump’s victory which is
expected to strengthen the higher growth and less rate cuts expectations.

As previously mentioned,
this is the trend for now and it’s generally a bad idea to fight such trends
without a strong catalyst. The US Dollar will likely remain supported unless
Harris wins the US elections and we get a correction in Treasury yields.

On the AUD side, the latest
data has been pretty strong with the Australian labour market report last week beating expectations by a
big margin and today’s underlying
inflation figures remaining high. Although the data didn’t change much in
terms of interest rate expectations, it supports the RBA’s hawkish stance.

AUDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that AUDUSD broke through the 0.6622 level and extended the drop into new
lows. From a risk management perspective, the sellers will have a better risk
to reward setup around the 0.6622 level to position for further downside. The
buyers, on the other hand, will want to see the price breaking higher to start
targeting the 0.68 handle.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a downward trendline defining the current bearish
momentum. The sellers will likely keep on leaning on it to position for new
lows, while the buyers will want to see the price breaking higher to pile in
for a rally into new highs.

AUDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much more we can add as the sellers will look to lean on the trendline,
while the buyers will want to see the price breaking higher. The red lines
define the average daily range for today.

Upcoming
Catalysts

Today we get the US ADP and the US GDP. Tomorrow, we have the US PCE, the US
Jobless Claims and the US Employment Cost Index. Finally, on Friday, we
conclude the week with the US NFP and the US ISM Manufacturing PMI.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

There’s no clear catalyst for the roughly 10 bps drop in yields from the highs yesterday. Perhaps month-end rebalancing flows are at play here? That’s definitely a consideration alongside the slew of US data for the week, which kicked off yesterday via the JOLTS job openings and consumer confidence data.

Coming up later, we’ll have the ADP employment change and Q3 advance GDP data to get through. And then tomorrow, there’s the PCE price index and weekly jobless claims. All that before the non-farm payrolls report on Friday.

Going back to yields, the 4.30% mark is a key threshold highlighted by Goldman Sachs here. So, perhaps that added some intrigue to the level in trading this week. But for now, yields are keeping above the 200-day moving average (blue line) still, seen at 4.183%. So, that’s one other key line in the sand to be mindful of.

I want to say that the fall in yields today have some part to do with month-end flows but we’ll only get a better sense of that come next week. And of course, depending on how the US data plays out in the days ahead.

But as yields are lower on the day, it is putting a stop to the recent dollar gains. USD/JPY especially is down 0.3% to 152.90 currently, with the antipodeans also sitting a little higher against the greenback now.

The pound is the main laggard on the day though but it owes to some nervous feels ahead of the UK budget announcement later. If the budget manages to avoid being fiscally irresponsible, that might trigger a relief rally for the quid. So, that’s something to look out for.

This article was written by Justin Low at www.forexlive.com.