US

• The Fed left interest rates unchanged as
  expected at the last meeting.
• The macroeconomic projections were revised higher,
  and the Dot Plot showed that the FOMC still expects another rate hike by the
  end of the year with less rate cuts projected in 2024.
• Fed Chair Powell
  reaffirmed their data dependency but added that they will proceed carefully.
• The US Core PCE last
  week came in line with expectations, so the market’s pricing barely changed.
• The labour market remains
  pretty resilient but we are starting to see some weakness as Continuing Claims missed
  expectations once again last week pointing to an upward trend.
• The US Retail Sales recently
  beat expectations by a big margin with positive revisions to the prior figures,
  suggesting the consumers’ spending remains solid.
• The recent US PMIs showed
  that the economy now looks more balanced.
• Fed Chair Powelland other FOMC members continue
  to highlight
  the rise in long term yields as doing the job for the Fed and therefore they
  are expected to keep rates steady this week.
• The market doesn’t expect the Fed to hike anymore.

EU

• The ECB left interest rates unchanged as
  expected as the central bank has ended its tightening cycle.
• President Lagarde highlighted
  the weakness in the Eurozone economy and reaffirmed that rates will make a
  substantial contribution to curbing inflation.
• The Eurozone CPI today missed
  expectations on the headline figures but the Core measure remained unchanged.
  This won’t change the ECB’s stance anyway.
• The labour market remains
  very tight with the unemployment rate hovering at record low levels.
• The recent Eurozone PMIs missed
  across the board as the economy continues to struggle.
• Overall, the economic data has been showing signs
  of fast deterioration, which gives the ECB a good reason to keep rates steady.
• The market doesn’t expect the ECB to hike anymore.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the EURUSD pair
bounced around the key 1.05 support and
avoided a breakout of the bear flag. This
might have been also a “break and retest” pattern following the breakout of the
major downward trendline, so the
buyers might have more conviction to target new highs. The moving averages are now
crossed to the upside and the price continues to print higher highs and higher
lows. These are early bullish signs.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price broke
through the resistance zone around the 1.0620 level with the buyers now eyeing
the upper bound of the channel. That’s where we can expect the sellers to step
in again with a defined risk above the trendline to position for another drop
into the lower bound of the channel and aiming for a breakout. The buyers, on
the other hand, will want to see the price breaking above the upper bound of
the channel to extend the rally into the 1.08 handle.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
had a divergence with
the MACD right
when the price was approaching the lower bound of the flag pattern, the broken
downward trendline and the key 1.05 support zone. This is generally a sign of
weakening momentum often followed by pullbacks or reversals. In this case, we
got a reversal, and the odds are now in favour of a rally into the upper bound
of the channel.

From a risk management perspective, the
buyers would be better off to lean on the resistance turned support around the
1.0620 level where we can also find the confluence with
the trendline, the red 21 moving average and the Fibonacci
retracement levels. If the price breaks below the
trendline, the bullish setup would be invalidated, and the sellers will pile in
to target a breakout of the bear flag.

Upcoming Events

This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Today, we have the US
Employment Cost Index and the Consumer Confidence report. Tomorrow, it will be
the time for the US ADP, the ISM Manufacturing PMI, the Job Openings data and
the FOMC rate decision. On Thursday we will get the US Jobless Claims data,
while on Friday we conclude the week with the Eurozone Unemployment Rate, the
US NFP report and the ISM Services PMI.

This article was written by FL Contributors at www.forexlive.com.

• The BOJ underdelivers once again
• BOJ governor Ueda: Will patiently continue monetary easing with decided new measures
• Ueda: Don’t think long-term rates will come under pressure to exceed 1%
• Ueda: Next spring’s wage negotiations will be an important factor
• Japan did not spend on FX intervention in the four weeks to 27 October
• EUR/JPY on the move, climbs to highest level since 2008
• Japanese yen falls further as Tokyo seen on the sidelines

Other headlines:

• Treasury yields fall further ahead of the main event tomorrow
• Eurozone October preliminary CPI +2.9% vs +3.1% y/y expected
• France October preliminary CPI +4.0% vs +4.0% y/y expected
• Eurozone Q3 preliminary GDP -0.1% vs 0.0% q/q expected
• France Q3 preliminary GDP +0.1% vs +0.1% q/q expected
• Italy Q3 preliminary GDP 0.0% vs +0.1% q/q expected
• Germany September retail sales -0.8% vs +0.5% m/m expected
• Germany September import price index +1.6% vs +0.7% m/m expected

Markets:

• EUR leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields down 4.4 bps to 4.832%
• Gold up 0.1% to $1,998.93
• WTI crude up 0.6% to $82.85
• Bitcoin up 0.3% to $34,525

The spotlight today is on the Japanese yen as it capitulated following a less hawkish than expected BOJ earlier in the day.

The central bank made a minor tweak on its yield curve control policy but markets were expecting more, as BOJ governor Ueda then delivered rather dovish remarks in the aftermath. USD/JPY nudged up to 150.00 at the end of Asia trading before extending higher to 150.40 at the start of European trading.

Then, we got confirmation by Tokyo that they didn’t spend a dime in intervening in the FX market during the month. That is a sort of green light and took the yen even lower on the session, with USD/JPY moving up to 150.75.

The dollar isn’t the best gauge of the yen’s plight though, as the greenback itself is slightly softer amid a push lower in Treasury yields. The bond market is a focus point ahead of the Treasury refunding tomorrow, which I would argue is the main event in the day ahead – not the Fed.

Instead, it was the euro that is shining the brightest as we saw softer inflation figures and a sluggish picture in the economy in Q3. The single currency gained traction as equities also reversed losses on the day. EUR/USD moved up from around 1.0600 to 1.0670 before holding just under that for now.

EUR/JPY is the standout as it breaks above the 160.00 mark to 160.50 levels currently – its highest since August 2008.

Other than that, the rest of the major currencies bloc remain more muted although commodity currencies have recovered a bit of ground against the dollar after a slower start.

That comes as stocks also rebounded with S&P 500 futures now up 0.3%, after having been down 0.3% earlier in the day. Month-end flows will be a consideration, so just be wary of that in the session ahead.

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

US

• The Fed left interest rates unchanged as
  expected at the last meeting.
• The macroeconomic projections were revised higher,
  and the Dot Plot showed that the FOMC still expects another rate hike by the
  end of the year with less rate cuts projected in 2024.
• Fed Chair Powell
  reaffirmed their data dependency but added that they will proceed carefully.
• The US Core PCE last
  week came in line with expectations, so the market’s pricing barely changed.
• The labour market remains
  pretty resilient but we are starting to see some weakness as Continuing Claims missed
  expectations once again last week pointing to an upward trend.
• The US Retail Sales
  recently beat expectations by a big margin with positive revisions to the prior
  figures, suggesting the consumers’ spending remains solid.
• The recent US PMIs showed
  that the economy now looks more balanced.
• Fed Chair Powelland other FOMC members continue
  to highlight
  the rise in long term yields as doing the job for the Fed and therefore they
  are expected to keep rates steady this week.
• The market doesn’t expect the Fed to hike anymore.

Australia

• The
  RBA kept interest rates unchanged as expected as they are seeing inflation
  returning to target with the current level of interest rates.
• The
  CPI report last week surprised to the upside
  prompting the market to price in a higher chance of another rate hike from the
  RBA in November.
• The
  labour market continues to weaken as seen also
  recently with the miss in the employment change and the losses in full-time
  employment.
• The
  RBA Governor Bullock downplayed the beat in the CPI data
  and made the market to pare back the rate hike bets.
• The
  Australian Manufacturing PMI fell further into contraction with
  the Services PMI plummeting back into contraction as well.
• The
  recent RBA Minutes were surprisingly hawkish but as we
  have seen last week, the RBA needs more data before deciding on another rate
  hike.
• The
  market expects the RBA to hold rates steady at the next meeting.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the AUDUSD pair
has been diverging with the
MACD for a
long time as the bearish momentum continues to weaken amid a prolonged
consolidation. Yesterday, the price broke above the upper bound of the triangle pattern, and
it’s now testing the key resistance zone
around the 0.6380 level. This is where the sellers are likely to step in and
defend the level as a further extension to the upside might trigger a rally
back to the 0.65 handle.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely the
recent breakout with the price retesting the broken trendline and
continuing higher. Here’s where the battle is going to be more tough, but the
odds are now skewed towards the upside unless we see the AUDUSD pair falling
back below the trendline leaving behind a fakeout.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
are starting to see a divergence with the MACD right around the resistance
zone. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, we might see another push to the upside
into the 0.64 handle where the price will complete the rising expanding wedge
pattern. This is a reversal pattern, so the sellers will want to wait around
the highs to position for another drop with a great risk to reward setup. If
the price were to break to the upside anyway though, the bearish setup would be
invalidated and the buyers will have a free road to target the 0.65 handle.

Upcoming Events

This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Today, we have the US
Employment Cost Index and the Consumer Confidence report. Tomorrow, it will be
the time for the US ADP, the ISM Manufacturing PMI, the Job Openings data and
the FOMC rate decision. On Thursday we will have the US Jobless Claims data,
while on Friday we conclude the week with the US NFP report and the ISM Services PMI.

This article was written by FL Contributors at www.forexlive.com.

• Need to be cautious in coming months after the many rate hikes
• Demand seen further contained due to delayed impact of rate hikes
• Need to avoid excessive tightening of monetary, credit conditions
• Fears of a wage-price spiral have sharply diminished

It’s pretty much just acknowledging the trend and I’m sure for some countries, they’d be glad that the rate hikes have stopped. But in the overall fight against inflation, it’s still too early to declare victory just yet. The trend is encouraging but price pressures could still end up being stickier than anticipated next year.

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

10-year yields are now down 6 bps to 4.818% as lower yields are also pinning the dollar down in European morning trade thus far. It’s a mix of moods in markets, with the Japanese yen also sliding amid a less hawkish than anticipated BOJ and then the announcement that there was no Tokyo intervention this month. Meanwhile, equities are able to claw its way back into positive territory with S&P 500 futures now up 0.2% on the day.

It’s still all to play for this week and in the case of the bond market, it’s all about the main event tomorrow. And no, it’s not the Fed.

Instead, the focus will be on the quarterly refunding announcement by the US Treasury in which they will unveil the details of their planning in terms of funding a widening budget deficit. In other words, bond traders will be looking to if they are going to step up sales of longer-term debt in relation to that. It’s all about the supply game.

This will then impact the upcoming auctions in November where we will see ones for 3-year notes (7 November), 10-year notes (8 November), and 30-year notes (9 November).

Watch this space. This is where the reverberations to broader markets will start from.

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