<p style=““ class=“text-align-justify“>How quickly things can change. As we got into Friday trading last week, the dollar was in a firm position all before some dovish Fed talk came in and things swung back the other way around. Fast forward to today and that reversal momentum has intensified with the dollar technicals falling apart against the major currencies.</p><p style=““ class=“text-align-justify“>EUR/USD has moved up to 1.0035 and above parity for the first time in five weeks as noted <a target=“_blank“ href=“https://www.forexlive.com/news/eurusd-hits-parity-for-the-first-time-in-five-weeks-20221026/“ target=“_blank“>here</a> while GBP/USD is up over 100 pips on the day as it comes up for air in a push to 1.1580. I pointed out some technical considerations for the latter <a target=“_blank“ href=“https://www.forexlive.com/news/cable-looks-to-come-up-for-air-as-dollar-loses-further-ground-20221026/“ target=“_blank“>here</a>. Meanwhile, USD/JPY is now tracking below 148.00 in a push to fresh lows since Monday:</p><p style=““ class=“text-align-justify“>This comes as Treasury yields are sliding further, with 10-year yields now down 8 bps to 4.03%. As mentioned earlier, that is a far cry from the peak on Friday at 4.335% – which came before all the dovish Fed talk. The rally in bonds yesterday translated to dollar selling and we are seeing more of that now in European trading.</p><p style=““ class=“text-align-justify“>Elsewhere, AUD/USD is up 1.4% against the dollar to 0.6485 and is looking for a push towards 0.6500 next:</p>

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

<ul><li>Some mistakes were made</li><li>There will be difficult decisions</li><li>Truss was not wrong to want to improve growth</li><li>Will not leave the next generation with debt to settle</li><li>Will have professionalism and accountability at every level</li></ul><p style=““ class=“text-align-justify“>For now, the drama is at least dying down but he still faces a tough challenge ahead in trying to bolster economic conditions. The UK outlook remains rather challenging at the moment and he has a tall order to try and steer things in the right direction. </p>

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

<p style=““ class=“text-align-justify“>There’s not much in it to really decipher as the pound is gaining some ground as the UK political uncertainty eases. Rishi Sunak has been announced as the new prime minister and he is set to deliver a statement in the coming minutes. GBP/USD is up 0.5% to 1.1330 levels at the moment and here’s a look at the near-term chart:</p><p style=““ class=“text-align-justify“>The near-term bias for the pair remains more bullish as price holds above the key hourly moving averages but there is still short-term daily resistance around 1.1400 for the time being. As such, the pair is sort of caught in between that for now as we gear towards key central bank meetings in the week ahead.</p><p style=““ class=“text-align-justify“>Dollar sentiment is more mixed today, with broader markets also not settling on a firm narrative. Equities are lower while bond yields are also on the retreat, so it is making for a bit of a choppy one in trading during the session.</p><p style=““ class=“text-align-justify“>But despite some easing in the political uncertainty, this still puts the pound in a position back to where it was before the whole Truss-Kwarteng mini-budget fiasco. The UK outlook remains extremely challenging amid high inflation, the energy crunch and the cost-of-living crisis and none of that has changed significantly.</p><p style=““ class=“text-align-justify“>As long as the Fed sticks to the status quo next week, it will continue to be tough to argue against the path of least resistance being for a move lower in cable.</p>

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

<ul><li>Prior -2</li></ul><p style=““ class=“text-align-justify“>The net order book balance among UK manufacturers fell by less than expected with expectations of price rises in the next three months also seen falling from +59 in September to +46 this month – that is the lowest since September last year. It is a positive development but overall sentiment remains gloomy with business optimism in Q4 (-48) sliding to its lowest since April 2020. CBI notes that:</p><p style=““ class=“text-align-justify“>“It’s a tough time for manufacturers. Price pressures remain acute, availability of raw materials is still a big issue.</p><p style=““ class=“text-align-justify“>“It is 49 years since manufacturing firms were this worried about being able to find workers with the skills they need. It’s really no surprise that sentiment has deteriorated further.“</p><p>/<a target=“_blank“ href=“https://www.forexlive.com/terms/g/gbp/“ target=“_blank“ id=“3a5ab7c1-ff09-45ea-87d4-eea6613bb754_1″ class=“terms__main-term“>GBP</a></p>

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

<p style=““ class=“text-align-justify“>The numbers are calculated by market sources, as cited by Reuters. This just adds to the one on Friday as noted <a target=“_blank“ href=“ctober-estimated-to-have-cost-over-5-trillion-20221024/“ target=“_blank“ rel=“nofollow“>here</a>. But if you look at where USD/JPY is trading now (near 149.00), one can easily ask what intervention? ¯_(ツ)_/¯</p><p style=““ class=“text-align-justify“>For some context, Japan’s FX reserves stood at about $1.23 trillion at the end of September, according to official reserves data. So, they definitely still do have plenty of ammunition left but do they really want to keep at this considering how ineffectiveness the latest attempts have been?</p>

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

<p class=“MsoNormal“>Gold has been
historically regarded as a safe haven, a backup for fiat currencies, and a
secure asset for the storage of value for many centuries. </p><p class=“MsoNormal“>Nations, investors, and
traders trust the value of gold, not just for its intrinsic & unique
properties as a metal or commodity, but also for its embeddedness in the
cultures and religions of various regions.</p><p class=“MsoNormal“>Throughout the past
century or so, gold has represented an asset which protects investors, corporations,
and countries against inflationary pressures. </p><p class=“MsoNormal“>Time and time again,
the precious metal was used as a hedge against economic recessions and
uncertainty, but this may not be the case in the modern era of volatility, high
inflation and increasing pessimism.</p><p class=“MsoNormal“>As seen in the chart
above provided by Macrotrends, the price of gold relative to the U.S. dollar
has been accelerating exponentially over the last hundred years, especially
since 1975.</p><p class=“MsoNormal“>The grey areas
represent recessions, and it can be noticed that the value of the bullion
propels higher when economies are swimming in calamity. This is because gold is
regarded as an asset which protects against macroeconomic contraction.</p><p class=“MsoNormal“>The Great Recession of
the 1930’s, Dot-com bubble of the early 2000’s, the stock market crash of 2008
and the COVID-19 pandemic are all examples of economic recessions which witnessed
the rise of the precious metal and the fall of dollar-backed assets such as
equities, bonds, and real estate.</p><p>Is Gold Still
a Safe Haven?</p><p class=“MsoNormal“>It’s not very easy to
answer this question. The trajectory of gold has been downward trending since
the start of the year, as can be seen in the chart provided by TradingView.</p><p class=“MsoNormal“>Macropolitical unrest,
growing pessimism and sky-high inflation has swayed investors away from
dollar-backed assets, but gold as well. Typically, investors would go on a gold
rush in times of fear and volatility, and head towards the yellow metal for
safety. </p><p class=“MsoNormal“>Now, in the modern era
of high pessimism and short-lived rallies, investors are skeptical to invest
even in safe havens. The Japanese Yen, a currency regarded as a safe haven as
well, has plummeted to 20-year lows at some point, and still isn’t seeing the
brighter side of day.</p><p>So, what now?</p><p class=“MsoNormal“>Gold is gold, and
bullion fanatics believe in the value and potential of gold as a final resort
when things turn sour. Analysts believe that as markets begin to recover, gold
may witness a surge in value once again.</p><p class=“MsoNormal“>The coalition between
Brazil, Russia, India, China, and South Africa (BRICS) plan to create a
currency backed by gold, which is not linked to the U.S. dollar greenback. It’s
meant to rival the USD amid macropolitical turmoil, and since nations believe
in it, investors and traders will eventually follow suit.</p><p class=“MsoNormal“>It’s the time for gold
to shine, sooner or later. Much of gold’s future direction would depend on what
happens next in the Russia-Ukraine conundrum, China’s initiatives on
‘peacefully’ taking over Taiwan, and how red-hot inflation across many regions
plays out in the coming months.</p><p class=“MsoNormal“>Prepared by team of
Goldenbrokers</p>

This article was written by ForexLive at forexlive.com.

<p style=““ class=“text-align-justify“>It’s all about <a target=“_blank“ href=“https://www.forexlive.com/news/the-start-of-the-central-bank-bonanza-20221024/“ target=“_blank“>key central bank meeting decisions</a> in the next two weeks and after last Friday’s recovery in broader market sentiment, we’re seeing a bit more chop and some pushing and pulling today. But the dollar is standing its ground despite the choppiness, posting a decent recovery after its fall at the end of last week.</p><p style=““ class=“text-align-justify“>S&P 500 futures are back up by 12 points, or 0.3%, after falling by around 23 points earlier in the session. 10-year Treasury yields also moved up from 4.13% to 4.21% only to fall back by 5 bps now to around 4.16% on the day. It looks like we may have to wait for North American traders to really settle the score.</p><p style=““ class=“text-align-justify“>EUR/USD is still down 0.4% to 0.9810-20 levels after sluggish PMI data from Europe earlier as noted <a target=“_blank“ href=“https://www.forexlive.com/news/euro-lacks-comfort-as-pmi-data-highlight-continued-downturn-20221024/“ target=“_blank“>here</a>, while USD/JPY is still looking perky as the bulls brush aside the intervention attempt in Asia.</p><p style=““ class=“text-align-justify“>The low in Asia hit 145.48 before rebounding back to above 149.00 levels at the moment. It looks like the Japanese government will have to <a target=“_blank“ href=“https://www.forexlive.com/news/japan-intervention-on-21-october-estimated-to-have-cost-over-5-trillion-20221024/“ target=“_blank“>burn more cash</a> if it really wants to send a stronger message to markets.</p><p style=““ class=“text-align-justify“>Meanwhile, GBP/USD is also now trading down by 0.2% to 1.1280 at the lows for the day. The pair opened with a gap higher as the pound gained some respite as Boris Johnson bowed out of the race to become the next UK prime minister. The opening levels were around 1.1400 but we look to be headed towards a test of its 100 and 200-hour moving averages at 1.1242-59:</p><p style=““ class=“text-align-justify“>Elsewhere, USD/CAD is up 0.6% to 1.3730 while AUD/USD is down 1.3% to 0.6290 as it runs into a challenge of its key hourly moving averages we well:</p>

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

<p class=“MsoNormal“>UPCOMING
EVENTS:</p><p class=“MsoNormal“>Monday: S&P
Global US PMI.</p><p class=“MsoNormal“>Tuesday:
German IFO Survey and US Consumer Confidence.</p><p class=“MsoNormal“>Wednesday:
Australian CPI and BoC Policy Announcement.</p><p class=“MsoNormal“>Thursday: ECB
Policy Announcement and US Q3 GDP Adv.</p><p class=“MsoNormal“>Friday: BoJ
Policy Announcement and US PCE.</p><p class=“MsoNormal“>The last
week was pretty much a mess. Volatility was high and markets were all over the
place. The US Dollar gained and lost, even against the yen after the Japanese
decided to intervene on Friday after days of continuing yen selling. The
intervention came almost exactly one month after the first one. </p><p class=“MsoNormal“>Last time it
offered a great dip buying opportunity as fundamentals didn’t change and the
monetary policy divergence remained solid. One month forward to now and the
fundamentals are still in place, but this time we are near the FOMC meeting and
if the WSJ story is true, looks like Fed officials want to start a less
aggressive approach from December onwards as the risk of overtightening is
making them uncomfortable. </p><p class=“MsoNormal“>There’s also
a good support in the 145.00 area if one wants to fade the intervention again,
otherwise the pair may go to 140.00 if the USD correction intensifies.</p><p class=“MsoNormal“>Overall, the
big picture didn’t change much, inflation is still high, and the core measure
keeps on climbing. As per the inflation nowcast from the Cleveland Fed, we may
see another hot print in the November CPI report and it’s hard to see the Fed
not getting uncomfortable with another hot CPI report. The leading indicators, on
the other hand, keep on printing a bleak picture going forward. Last week the
NAHB Housing Market Index fell more than expected to 38 from the prior 46
reading. The worst of the recession is yet to come. The NAHB index generally
leads unemployment rate by 6-12 months as shown in the picture below.</p><p class=“MsoCaption“ align=“center“>NAHB Index
(inverted) vs. Unemployment Rate</p><p class=“MsoNormal“>This week
the Fed is in blackout period, so we will not hear the same thing again and
again from them until November 2nd when we will get the policy
announcement and Powell’s press conference. Nevertheless, this week we will get
some tier one data and some central bank policy announcements.</p><p class=“MsoNormal“>Monday: We will
get the latest S&P Global PMIs for the US which surprised to the upside the
last time. Such blips are common, but the general trend is for further
deterioration. Although, this indicator is important, the ISM PMIs are
considered the best and most reliable measures and we will need to wait another
week to see those. The market may cheer a bad report with USD under pressure or
get discouraged if the report surprises to the upside and bid the USD. </p><p class=“MsoNormal“>Tuesday: German IFO
Survey is expected to weaken further as the recession coupled with a more hawkish
ECB add to the bleak future. The US Consumer Confidence is expected to weaken a
bit although remains high. This indicator is more correlated with the
employment situation as opposed to the UMich Survey which is correlated with
the financial situation and that explains why they diverged so much. Generally,
when the spread between the two indicators becomes very wide a recession has
followed as you can see in the chart below. </p><p class=“MsoCaption“ align=“center“>Chart by
Michael McDonough (twitter)</p><p class=“MsoNormal“>Wednesday: We will
see the latest CPI report for Australia. The Q/Q measure is expected to cool to
1.6% from 1.8% but the Y/Y measure is seen picking up to 7.0% from the prior
6.1%. The RBA favoured data, the Trimmed Mean figures, are seen matching the
prior for the Q/Q at 1.5% but the Y/Y is expected to rise to 5.6% from 4.9%. The
RBA surprised last time with a lower-than-expected hike, which contributed to
create a policy divergence between the RBA and RBNZ and resulted in AUD/NZD
falling for several pips. A surprisingly hot CPI may make the market to expect
the RBA to revert back to a more aggressive stance.</p><p class=“MsoNormal“>The Bank of
Canada is expected to hike by 75 bps in wake of the latest hot Core CPI report
and the recent commentary from Governor Macklem saying that if the CAD
depreciation against the Dollar persists, they will have to do more work on
interest rates. The problem is that even if the BoC hikes more than the Fed,
the global recession favours the USD anyway, so for USD/CAD to reverse the
general upward trend we need to see the Fed to reverse course, which is not expected
for 6 months at very least. </p><p class=“MsoNormal“>Thursday: As
inflation in EZ continues to advance the ECB is seen to hike rates again by 75
bps. ECB members already signalled this move and more to come in the next
“several meetings”. The ECB is also expected to begin QT sometime in Q2 2023
(doubt they will be able to do that when things will be much worse by then).
The market sees the peak rate in late Q2 at around 3%. It’s been kind of a
pattern fading the ECB event with an almost 100% success rate, although some
were better than the others in terms of follow through action. This is of
course because no matter what the ECB does, the recession will be bad, and the
USD is favoured in a global recession. In the chart below you can see the ECB
policy decisions and how the EUR/USD pair is trading cleanly in the downward
channel. </p><p class=“MsoNormal“>We will also
see the US Adv. Q3 GDP report, which is expected to show a 2% annualised growth
after two consecutive negative prints, which triggered a technical recession
talk. Generally, GDP isn’t a market mover as it’s a very lagging indicator. </p><p class=“MsoNormal“>Friday: The BoJ is expected to keep monetary policy
unchanged with rates at -0.10% and QQE with Yield Curve Control (YCC) to
flexibly target 10yr JGBs at around 0% with 0.25% as the ceiling. Inflation in
Japan remains much lower than the other advanced economies and it’s not adding
any pressure to the central bank. The BoJ may even get away with its policy as
the global recession intensifies and price pressures recede. </p><p class=“MsoNormal“>US PCE
hasn’t been a market mover as the market is focused on the timelier CPI report.
The headline PCE Y/Y is expected at 5.8% down from the prior 6.2% and the M/M
reading is seen at 0.5%, up from the prior 0.3%. The Core measures are expected
at 5.2% for the Y/Y figure, up from the prior 4.9% and the M/M reading is seen
at 0.5%, down from the prior 0.6%. </p><p class=“MsoNormal“>This article
was written by Giuseppe Dellamotta.</p>

This article was written by ForexLive at forexlive.com.

<p style=““ class=“text-align-justify“>This, according to a source from her campaign as cited by Reuters. Either way, it seems like Sunak is the heavy favourite at the moment after Boris Johnson bowed out earlier. From this morning:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/sunak-now-favourite-to-be-new-uk-pm-after-bojo-bows-out-20221024/“ target=“_blank“>Sunak now favourite to be new UK PM after BoJo bows out</a></li></ul>

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

<p class=“MsoNormal“>This week will start
with some PMI surveys in the eurozone and the flash services PMI in the U.S. on
Monday, followed by the core CPI y/y in Japan and the CB consumer confidence
for the U.S. on Tuesday.</p><p class=“MsoNormal“>Wednesday will be a
busy day with the CPI q/q and trimmed mean CPI q/q prints in Australia; the
monetary policy report, overnight rate and BOC press conference in Canada; and
the new home sales data for the U.S. On Thursday, the main event will be the
ECB press conference and main refinancing rate and in the U.S. all eyes will be
on the unemployment claims.</p><p class=“MsoNormal“>The week will finish
off with the BOJ press conference and policy rate on Friday, along with the
core PCE price index m/m in the U.S.</p><p class=“MsoNormal“>The Q3 CPI q/q in
Australia is likely to print lower to 1.6% from 1.8% the previous quarter, but
the y/y rate is expected to run hot — 7.0% from 6.1%.</p><p class=“MsoNormal“>In Canada, the
consensus according to the Reuters survey was that the BOC will hike rates by
50bps, but the survey was conducted before the latest CPI data surprised on the
upside. Because of the new data, some analysts now expect the Bank to deliver a
rate hike by 75bps, which according to Scotiabank, has more or less been priced
in. Analysts will be watching this meeting for any clues about future rate
hikes.</p><p class=“MsoNormal“>In the U.S. the new
home sales are expected to see some slowdown due to high mortgage rates. The
housing market has been negatively impacted by rising rates overall and will
likely see further decline in the near future, despite a 30% increase in new
home sales in August, which was more likely a temporary relief from the overall
market downtrend. On Friday we will also get the data for pending home sales
which will provide clues about the demand conditions. </p><p class=“MsoNormal“>The ECB is expected
to hike the rate by 75bps this week and the market has already priced in an 80%
possibility. The economy in the euro area faces many challenges due to the
rising energy and commodity prices so the outlook for the euro is not very optimistic.
The ECB seems to be committed to fighting inflation despite the economic
condition and President Lagarde said that hikes will be spread out over the
next several meetings.</p><p class=“MsoNormal“>ING analysts believe
it’s too early to talk about Quantitative Tightening (QT) but said „the
Bank will seek to mop up bank liquidity.“ The analysts think the things to
watch for in this ECB meeting are: the excess liquidity, quantitative
tightening and the terminal rate.</p><p class=“MsoNormal“>No change is expected
at this week’s BOJ meeting and it’s clear that the Bank will leave FX
intervention in the government’s hands. The Bank will likely maintain the QQE
with Yield Curve Control to flexibly target 10yr JGBs at around 0%. The Bank’s
Outlook Report will also be released which will contain its members‘ forecasts
for the Real GDP and Core CPI and the expectation is that the CPI will increase
from the previous forecast of 2.3%.</p><p class=“MsoNormal“>In the U.S., the
personal consumption expenditures (PCE) — the Fed’s favourite inflation gauge
— is likely to rise. Wells Fargo expects PCE to rise at a 0.8% annualized pace
for the third quarter, up from the previous 0.6%. An increase in consumption
would translate to import growth as well. Equipment spending is expected to be
strong, but residential investment likely took a hit due to the higher mortgage
rates.</p><p>USD/CAD
expectations</p><p class=“MsoNormal“>The pair closed the
week near the 1.3605 level of support. The CAD strengthened on Friday against
the USD, but overall, on the H1 chart the pair lacked a firm direction, but
rather moved in a range between 1.3650 and 1.3840. For this week it’s likely
we’ll see some choppy moves as well. </p><p class=“MsoNormal“>A risk for this pair
will be the BOC meeting and the U.S. GDP data for Q3. Expectations for the GDP
are encouraging as the consensus is for 2.1% SAAR. Strong data will support the
USD. </p><p class=“MsoNormal“>On the H1 chart the
next levels of support are at 1.3605 and 1.3500. A move below 1.3500 likely
opens the path for some depreciation. On the upside we have the levels of
resistance at 1.3705, 1.3835 andthe 1.3970. </p><p class=“MsoNormal“>This article was written by Gina
Constantin.</p>

This article was written by ForexLive at forexlive.com.