<p style=““ class=“text-align-justify“>After a bit of a whipsaw on the initial announcement from the BOE, the pound is now settling lower as traders digest the situation. Cable rose to a high of 1.0838 amid the whipsaw but has fallen down by 1.5% to 1.0570 as the dust begins to settle.</p><p style=““ class=“text-align-justify“>10-year gilt yields have also come back up now to 4.30% after having been down to 4.10% earlier, though still lower by 20 bps on the day.</p><p style=““ class=“text-align-justify“>Going back to the pound, what exactly does the BOE announcement entail for the currency?</p><p style=““ class=“text-align-justify“>A return to QE (well, sort of) isn’t exactly ideal at a time when we are seeing an <a target=“_blank“ href=“https://www.forexlive.com/terms/i/inflation/“ target=“_blank“ id=“ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_1″ class=“terms__main-term“>inflation</a> shock in the economy. Ultimately, I believe traders are that simple with their conviction. As much as this provides some level of calm and financial stability – which is supposed to be the benchmark for any developed market, it is no game changer to the overall situation in the UK economy.</p><p style=““ class=“text-align-justify“>Add that to the fact that the dollar continues to be on a rampage, it’s hard to imagine this being a pick-me-up for cable. The downside pressure will continue so long as the Fed and BOE are at odds in terms of their policy convictions. I’ve repeated that for many months now.</p><p style=““ class=“text-align-justify“>If anything, the BOE announcement today just adds more scrutiny for the pound and that will put it firmly in the crosshairs of traders waiting to capitalise on another rout in the gilt market.</p>

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

<ul><li>Prior +3.8%</li><li>Market index 254.8 vs 264.7 prior</li><li>Purchase index 199.3 vs 200.1 prior</li><li>Refinancing index 524.1 vs 588.1 prior</li><li>30-year mortgage rate 6.52% vs 6.25% prior</li></ul><p style=““ class=“text-align-justify“>The average interest rate on the most popular US home loan climbed further in the past week to 6.52%, its highest level since August 2008. The rise in mortgage rates is continuing to take a heavy toll on activity and the housing sector as purchases and refinancing both fell as well with the latter index sliding to a 22-year low.</p>

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

<p style=““ class=“text-align-justify“>10-year gilt yields have tumbled significantly since the announcement, down 40 bps on the day now to 4.10%:</p><p style=““ class=“text-align-justify“>The BOE has backed down from QT and then some in their latest announcement, offering to buy government bonds „temporarily“ in order to try restore order and function in the gilt market. And so now, we have rate hikes and QE (well, sort of) at the same time with the UK now joining Europe and the ECB.</p><p style=““ class=“text-align-justify“>In any case, the takeaway from the past week is essentially policy incoherence from the UK and this just adds to that. Sure, there were signs of dislocation and dysfunction with the gilt market and the BOE action today will help with that. However, is it really a be-all, end-all solution?</p><p style=““ class=“text-align-justify“>I want to say that I’m on the fence but in all honesty, I’m leaning towards a hard no.</p><p style=““ class=“text-align-justify“>I mean, when a central bank has to step in with major intervention in the bond market as a result of government policy and not some of external shock, something is deeply rotten at the core. That of sort of dynamic in itself is dysfunctional.</p><p style=““ class=“text-align-justify“>This is essentially a band aid solution in trying to restore confidence in the gilt market but unless it is accompanied by some change or backing down on the fiscal side, it is hard to see this as being a turning point for UK assets.</p><p style=““ class=“text-align-justify“>If Kwarteng is going to keep doing Kwarteng things and the BOE has to come out to put out the fire in every instance, it’s not exactly a picturesque graphic of the UK economy – especially when you have to consider that the central bank has to run against its own policy resolve in trying to fight high inflation pressures.</p>

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

<p style=““ class=“text-align-justify“>There might not be much in terms of monetary policy remarks from Powell today as the topic that the panel is speaking about is more related to digital finance and DeFi. You can watch the discussion here:</p><p>Or at this link <a target=“_blank“ href=“https://www.youtube.com/watch?v=r_9GrgvNkxY“ target=“_blank“ rel=“nofollow“>here</a>, in case the video above isn’t working.</p>

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

<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/broader-market-sentiment-is-holding-up-so-far-today-20220927/“>Broader market sentiment is holding up so far today</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/feds-evans-getting-inflation-under-control-is-the-priority-20220927/“>Fed’s Evans: Getting inflation under control is the priority</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/feds-evans-says-expects-to-raise-rates-further-and-hold-stance-for-quite-a-while-20220927/“>Fed’s Evans says expects to raise rates further and hold stance for quite a while</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-centeno-rate-hike-cycle-will-continue-20220927/“>ECB’s Centeno: Rate hike cycle will continue</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/nord-stream-operator-says-three-offshore-pipelines-have-sustained-unprecedented-damages-20220927/“>Nord Stream operator says three offshore pipelines have sustained „unprecedented“ damages</a></li></ul><p>Markets:</p><ul><li>NZD leads, USD lags on the day</li><li>European equities higher; S&P 500 futures up 1.3%</li><li>US 10-year yields down 7 bps to 3.811%</li><li>Gold up 1.1% to $1,639.73</li><li>WTI crude up 1.2% to $77.65</li><li>Bitcoin up 5.8% to $20,215</li></ul><p style=““ class=“text-align-justify“>We’re seeing a bit of a breather in markets as the broad selling everywhere hits pause for a bit of a correction. The dollar is lower as it retraces a small part of its recent gains and the pound capitalised on that, with GBP/USD climbing up over 1% on the day as the rout in gilts also encounter a pause. That said, cable is still only settling just above 1.0800 at the moment. Pain. 🤕</p><p style=““ class=“text-align-justify“>EUR/USD is up 0.4% to 0.9645 with the high earlier touching 0.9670 but the gains aren’t anything to shout about as the single currency is still reeling after having hit a 20-year low against the dollar. Meanwhile, USD/JPY is down 0.3% to 144.30 but buyers are still in a good spot to try and contest the 145.00 mark again – where the BOJ/MOF intervened last week.</p><p style=““ class=“text-align-justify“>Commodity currencies are holding higher as the more positive risk mood today is also helping. That said, the moves pale in comparison to the recent selling with USD/CAD at 1.3675 even though down 0.4% and AUD/USD near 0.6500 even with a 0.6% advance. NZD/USD is a decent mover, up 1.2% to 0.5705 but that comes after having hit its lowest levels since the early days of the pandemic yesterday.</p><p style=““ class=“text-align-justify“>Equities are finding some relief from the recent selloff but I would say a lot of this can be attributed to calmer tones in the bond market as the heavy rout stalls for the time being. 10-year gilt yields are down 12 bps to 4.13% while 10-year Treasury yields are down 7 bps to 3.81% and that is providing broader markets with some reprieve – at least for now.</p><p style=““ class=“text-align-justify“>European indices and US futures are showing a modest bounce but it doesn’t take away from the downside pressure in recent weeks. And as is the case in familiar times such as these, it doesn’t take much for sentiment to go cowering again.</p>

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

<ul><li>There is no de-anchoring of inflation expectations in Europe</li></ul><p style=““ class=“text-align-justify“>We already know that the ECB will at least hike again in October but the question is how much? There’s still a debate between 50 bps and 75 bps that needs to be settled.</p>

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

<ul><li>DAX is an equity market index that tracks the performance of the 40 most important blue chip businesses based in Germany that trade on the Frankfurt Stock Exchange.</li><li>Some traders follow the DAX as a „tell“ and signal for US equities, as well, among other primary signals.</li><li>In the following DAX technical analysis video, and trade idea, I show an anticipation for a low probablity but high reward vs risk potential trade, whereby a support that many others (mainly trading algos) are watching.</li><li>When a support is broken, new bears start taking shorts, and previous bulls get stopped out. All of this means more selling. But when they sell, they need to sell their contracts to another participant. So who is buying? Mostly institutional firms, many of which see the retail traders as fish and themselves as sharks that want to eat them. The big sharks are even <a target=“_blank“ href=“https://www.investopedia.com/terms/p/paymentoforderflow.asp“>buying order flow data</a> from platforms like <a target=“_blank“ href=“https://robinhood.com/us/en/“ target=“_blank“>RobinHood</a></li><li>When most retailer traders see a support broken, they go short. many of the others that held on to their Long, sell and exit. This means that we can assume that new sell orders will be accumilating by the herd. Now, they may be right, and the might be wrong. No one really knows, and I do not know, either. But what we can assume is that those sharks have a temptation to take the chips from the fish, and, thus, are motivated to manipulate the price to the other direction. That other direction means to be a contrarian.</li><li>But do not get the wrong idea, this concept still goes against the trend. If buying pressure was so strong for a variety of reasons, then buyers would not wait for price to cross down the support. Buyers would be rushing in to buy, beforehand.</li><li>Accordingly, going against this trend implies that the probablity of winning in this trade is lower than 50%. Sometimes, much lower. How low? Nobody knows. This is where trading becomes a mix of an art and science rather than just art or science.</li><li>If a trade presents a relatively low probablity, then it must demonstrate a relatively high reward vs risk ratio. Otherwise, why take it?</li><li>Here is a situation, IMHO, that merits this concept, as I aim for a 4 to 1 reward vs risk</li><li>This DAX trade idea still allows a healthy room for the stop, as the following DAX technical analysis video shows</li></ul><p>Trade the DAX at your own risk and follow ForexLive.com for additional ideas and perspectives in <a target=“_blank“ href=“https://www.forexlive.com/technical-analysis“>technical analysis</a>. Last but not least, let me know what you think of the DAX or this trade idea in the comment section below, where possible updates to this technical analysis may be provided in the near future. Thank you.</p>

This article was written by Itai Levitan at forexlive.com.

<ul><li style=““ class=“text-align-justify“>My outlook is roughly in line with Fed median assessment of rates at 4.25% to 4.50% at year-end</li><li style=““ class=“text-align-justify“>At some point, it will be appropriate to slow the pace of rate increases and hold rates for a while to assess the impact on the economy</li><li style=““ class=“text-align-justify“>Our actions will result in below-trend growth and softening of labour market</li><li style=““ class=“text-align-justify“>But fialing to restore price stability would result in far greater costs</li><li style=““ class=“text-align-justify“>Many of the risks to the Fed’s outlook appear to be on the downside</li><li style=““ class=“text-align-justify“>Expects <a target=“_blank“ href=“https://www.forexlive.com/terms/i/inflation/“ target=“_blank“ id=“ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_1″ class=“terms__main-term“>inflation</a> to cool substantially over the next couple of years</li><li style=““ class=“text-align-justify“><a target=“_blank“ href=“https://www.chicagofed.org/publications/speeches/2022/september-27-omfif“ target=“_blank“ rel=“nofollow“>Full speech</a></li></ul><p style=““ class=“text-align-justify“>All of this isn’t anything new and with Evans saying that his view is more or less in line with the general FOMC outlook, there isn’t much to really look too much into the remarks above. The only thing perhaps is the soft landing versus hard landing debate but then again, the Fed is in a much, much better position to avoid that argument for now as compared to the likes of Europe and the UK at least.</p>

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

<p class=“MsoNormal“>Bitcoin is down 4.1% over the past week,
ending near $18,900. Ethereum lost 5.8% to $1290. Other leading altcoins in the
top 10 showed mixed dynamics, ranging from a 3.7% decline (Cardano) to a 27% increase
(XRP). </p><p class=“MsoNormal“>
Total crypto market capitalisation, according to CoinMarketCap, declined by
2.4% over the week to $928bn. Cryptocurrency Fear & Greed Index fell by 3
points over the week to 24 („extreme fear“).</p><p class=“MsoNormal“>
Meanwhile, the cryptocurrency market became a safe haven compared to the
collapse of major currencies and stock indices.</p><p class=“MsoNormal“>
The beginning of the week raises the question, what is behind the relative
resilience of cryptos? This market could be forgotten for a while, as all the
attention and capital flows are on flagship assets. Alternatively, it could
manifest traders‘ inner confidence that peak fear is near and cryptocurrencies
are already cheap enough for long-term investors.</p><p class=“MsoNormal“>News background</p><p class=“MsoNormal“>Former MicroStrategy CEO Michael Saylor said
that bitcoin would surpass the $69K reached in November 2021 in the next four
years. BTC could trade as high as $500K in the next decade if its market
capitalisation equals that of gold. Judging by bitcoin’s simple four-year
moving average, its bottom is at $20K, Sailor suggested.

Bitcoin’s bear market has yet to reach its final stage, and investors should
prepare for further declines. Some participants expressed this opinion in a
Cointelegraph poll on Twitter.</p><p class=“MsoNormal“>
Ethereum co-founder Vitalik Buterin said all cryptocurrencies should switch to
the Proof-of-Stake (PoS) algorithm. He believes that over the next 18 months,
ETH will become much more scalable, which will significantly reduce transaction
fees.</p><p class=“MsoNormal“>Ripple CEO Brad Garlinghouse disagreed with the SEC that Ethereum could be
considered unregistered security after the move to PoS.</p>

This article was written by ForexLive at forexlive.com.

<p>From the news statement:</p><p>“A statement is expected from the Bank of England today, Sky News understands. It comes after a morning of unprecedented turbulence for the pound, which has fallen to historic lows. There are concerns that this could fuel inflation, something the Bank of England is tasked with keeping under control.“</p><p style=““ class=“text-align-justify“>Keep your eyes and ears peeled. GBP/USD is now down 0.8% on the day to 1.0770, very much steadier after having plunged to a record low earlier in Asia trading of 1.0357.</p>

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