The snapshot today is that the dollar is down against the commodity currencies but higher against the European currencies and the Japanese yen. The poor PMI data in Europe and UK are proving to be the bane for the euro and pound respectively, while the BOJ failing to walk the talk is weighing on the yen.

In a case of bad news is good news, the continued weakness in the euro area and UK economies are putting a stop to the bond selling and US futures are able to trade more sideways on the session – holding slight gains. That being said, Wall Street tends to have a mind of its own and higher yields in the bigger picture are still a cause for concern for stocks.

EUR/USD is one to keep an eye out for ahead of the weekend, with the pair testing key support at 1.0635 currently:

Meanwhile, USD/JPY is up 0.5% to 148.25 while GBP/USD is down 0.3% to 1.2250 levels at the moment.

The commodity currencies are the ones leading the way today with USD/CAD down 0.2% to 1.3450, helped out by higher oil prices with WTI crude returning above $90. And AUD/USD is also up 0.4% to 0.6440 in what has been a rather back and forth week for the pair – up just a measly 13 pips on the week at its current level.

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

US:

• The Fed left interest rates unchanged as
  expected.
• The macroeconomic projections were revised higher
  as the economy showed much stronger resilience than expected and the Dot Plot
  showed that the majority of members still expects another rate hike by the end
  of the year with less rate cuts in 2024.
• Fed Chair Powell
  reaffirmed their data dependency but added that they will proceed carefully as
  they are trying to find the optimal level of rates. Powell also added that the
  soft landing is not the base case at the moment, although they are aiming for
  it.
• The latest US CPI came
  in line with expectations, so the market’s pricing remained roughly the same.
• The labour market
  displayed signs of softening although it remains fairly solid as seen also
  yesterday with the strong beat in Jobless Claims.
• The market doesn’t expect the Fed to hike again at
  the moment.

Japan:

• The BoJ kept everything unchanged as expected.
• The Japanese CPI today showed that inflationary
  pressures remain high with the core-core reading hovering at the cycle highs.
• The Unemployment Rate surprisingly increased recently,
  although it remains near cycle lows.
• The Japanese Manufacturing PMI fell further into contraction but
  the Services PMI remains in expansion.
• BoJ governor Ueda repeated that they will not
  hesitate to take additional easing measures if needed and clarified that the
  recent comment on “quiet exit” from monetary easing was misinterpreted.
• The recent Japanese wage data showed a slowing in wage growth,
  and this is something the BoJ focuses on particularly.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that USDJPY remains in an uptrend, but the bullish momentum is clearly waning.
The red 21 moving average
continues to act as dynamic support and the fundamentals keep supporting more
upside for the pair, but it looks like one ugly economic release for the US
could make the pair fall hard to the 145.00 level. For now, the 150.00 level
remains the target for the buyers.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have a
massive divergence with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we only got pullbacks, but the price action has been
forming what looks like a rising wedge, which
is a reversal pattern. So, this will be something to watch out for.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price action is very messy and it’s hard to find clear levels to lean on.
Nonetheless, we have two key levels to watch now. A break above the recent high
at 148.47 should see more buyers coming into the market and keep the uptrend
going, while a break below the low at 147.32 should confirm the break of the
rising wedge and lead the pair to the 145.00 support.

Upcoming Events

Today we only have the
Flash PMIs for the US before we head into the weekend. Strong data is likely to
keep the pair supported but weak readings might cause a selloff.

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

• Prior -15

The order books measure is as per estimates, seen falling once again. But adding to the woes of UK manufacturers is that output is seen falling again with the reading at -10 in the three months to September, though slightly improved from the -19 reading in the three months to August (still far below the average of +3). Tough times for the UK economy.

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

US:

• The Fed left interest rates unchanged as
  expected.
• The macroeconomic projections were revised higher
  as the economy showed much stronger resilience than expected and the Dot Plot
  showed that the majority of members still expects another rate hike by the end
  of the year with less rate cuts in 2024.
• Fed Chair Powell
  reaffirmed their data dependency but added that they will proceed carefully as
  they are trying to find the optimal level of rates. Powell also added that the
  soft landing is not the base case at the moment, although they are aiming for
  it.
• The latest US CPI came
  in line with expectations, so the market’s pricing remained roughly the same.
• The labour market
  displayed signs of softening although it remains fairly solid as seen also
  yesterday with the strong beat in Jobless Claims.
• The market doesn’t expect the Fed to hike again at
  the moment.

New Zealand:

• The RBNZ kept its official cash rate unchanged at the
  last meeting while stating that it will remain at the restrictive level for the
  foreseeable future to ensure that inflation comes down back to target.
• The recent New Zealand inflation and employment data surprised to the upside but
  the PMIs continue to slide further into contraction.
• The wage growth has also missed
  expectations and it’s something that the central banks are watching closely.
• The recent New Zealand Retail Sales beat expectations although the data
  remains deeply negative.
• The RBNZ is expected to keep the
  cash rate steady at the next meeting.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD has
finally pulled back all the way up to the 0.5987 resistance where it
sold off from following the more hawkish than expected FOMC dot plot. The price
action remains choppy, but the sellers should start coming back into the market
with strength unless the price breaks above the resistance invalidating the
bearish setup.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
strong selloff from the resistance. The price is currently pulling back. Things
are messy at the moment as there’s no clear divergence between central banks as
they are all moving to the sidelines and watching the tightening to day
filtering through the economies.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor resistance at the previous swing high with the 50% Fibonacci
retracement level for confluence. This
is where the sellers should step in with a defined risk above the level and
target another selloff into the 0.5860 support. More conservative sellers might
want to wait for the price to break below the counter-trendline to
pile in and extend the fall into the support.

Upcoming Events

Today the biggest event
will be the Flash PMIs for the US.

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

Yesterday, the Fed left interest rates unchanged at
5.25-5.50% as expected but revised its outlook on the more hawkish side. In
fact, the Fed not only sees another rate hike by the end of the year but also
much less rate cuts in 2024 as they revised it from 4.6% seen in June to 5.1%
now. The macroeconomic projections were also revised higher indicating a
resilient economy. In the press conference Fed Chair Powell
reaffirmed their data dependency and the need to move carefully as they
approach the terminal rate. One thing that caught everyone by surprise is when
asked if he would call the soft landing a baseline expectation now, Powell said
„No, I would not do that“.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite eventually broke out of the consolidation following the FOMC meeting
and it’s now eyeing the key support at 13174
where we have also the confluence with the
trendline and the
38.2% Fibonacci retracement level.
This is where the buyers should step in with a defined risk below the level to
position for a rally into the highs. The sellers, on the other hand, will want
to see the price breaking through the level to pile in even more aggressively
and target the 12274 level.

Nasdaq Composite
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the Nasdaq
Composite basically broke out of the bearish flag. The
target for this pattern is generally the equal extension of the first bearish
leg, so we might even see a break below the key support and a selloff into the
12274 level. For now, the bias remains bearish as the price is printing lower
lows and lower highs with the moving averages being
crossed to the downside.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
optimal level to short was after the breakout of the support. The price has
already moved a lot and it’s never a good idea to chase the market. If the
price pulls back, the sellers should lean on the downward trendline and the
previous low to position for another selloff into the 13174 support. The
buyers, on the other hand, will want to see the price to break above the
trendline to invalidate the bearish setup and start targeting new higher highs.

Upcoming
Events

The week is drawing to a
close, but we still have a couple of key economic releases ahead. Today, the main event will be the US Jobless Claims
report as the labour market data remains very important for the Fed and the
market. Tomorrow, we will see the latest US PMIs data which is expected to be
market moving.

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

• That is welcome news
• Previous rate hikes are working but inflation is still not where it needs to be
• There is absolutely no room for complacency
• Will be watching closely to see if further rate hikes will be needed
• Will need to keep rates high enough and long enough to get the job done
• Will do whatever is needed to get inflation back to normal

They’re not shutting the door for another rate hike in November but in all likelihood, they may already be done unless we do see a significant tick higher in inflation in the coming months. And if the UK economy continues to worsen at its current pace, that might just shut the door on the BOE itself before they can even consider any more rate hikes in the near future.

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

The BOE decision to not hike rates today might seem warranted to some extent but it might just end up being a lesson in history if things don’t go their way. The inflation report this week did show signs of slowing inflation but at 6.7%, the UK still sits atop the throne in terms of the inflation ranking among major economies:

*Japan data is an estimate, to be released on 22 September

And the thing to note about all of this is that the BOE is pausing at a time when the economy is beginning to worsen significantly. Yes, that is definitely the prudent step. But when you take into account that markets basically gave them a free pass to sneak in one more rate hike today, it could end up being an opportunity missed for the central bank.

I mean if Q4 conditions end up being as bad or worse than Q3, the argument for a rate hike in November might look like a poor reflection of how the BOE is managing their policy settings. And if that is the case, they risk overtightening into a rapidly declining economy and could just send it over the edge and bringing about a hard landing.

To keep things short, this was perhaps the last chance that the BOE might get to tighten policy further and they did not take it.

And so, therein lies the risks of stagflation in the UK economy with Bailey & co. maybe having no ways of resolving that situation.

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

In fact, US futures are even extending losses on the day now. Here’s a snapshot of things:

• Eurostoxx -1.4%
• Germany DAX -1.1%
• France CAC 40 -1.4%
• UK FTSE -0.2%
• S&P 500 futures -0.7%
• Nasdaq futures -1.0%
• Dow futures -0.5%

So, what’s the cause for the lack of cheer in stocks even as the SNB and BOE surprised by staying on hold today? Well, it’s all about the bond market.

And 10-year Treasury yields are still keeping higher by 3 bps today to 4.441% at the moment. As bond yields continue to shoot higher, that is going to keep creating more angst for equities. So, just be mindful of that ongoing development when reviewing broader markets and the central bank decisions this week.

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

And so the BOE now officially joins the ranks of all the other major central banks into pausing their tightening cycle. The gang is complete again, after having seen the SNB surprise earlier in the day as well. So, what exactly is the impact to the pound as the BOE takes a step back from hiking rates?

In terms of OIS pricing, the most evident one is a shift lower in the curve. In other words, traders are not as convinced of that one last rate hike by the BOE now. This was supposed to be a one and done case for the central bank but it now seems like maybe there could be an option where they still hike in November before officially pausing for good.

However, that will be largely dependent on the data in the coming weeks/months.

As things stand, the fact is that the UK economy is worsening at a much rapid pace than anticipated back in May or June. The BOE has also acknowledged that and says that they now see Q3 GDP growth of just 0.1% (previously 0.4%).

The thing is if we see the same kind of unpleasant showing in the economy in Q4, it just makes it that much harder for the BOE to try and convince markets that they can still get away with another rate hike. Otherwise, the risk is that they might overtighten policy and send the economy over the edge and administer a hard landing instead.

We’re not quite at that point of no return yet but with every passing data point and especially if labour market conditions also soften, we are slowly getting there.

The pound has fallen on the initial reaction with GBP/USD down from 1.2295 to 1.2240 but has now recovered some ground to 1.2265. Traders were seeing this as a 50-50 decision coming into today but the fact that the November window is still left open somewhat, means that we’re only seeing a slight shift in pricing odds.

That isn’t as damaging to the pound but it still points to further downside for the currency, especially if economic conditions show no signs of getting any better i.e. traders will have to keep slowly pricing out odds of another rate hike eventually.

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

Ethereum continues
to consolidate around a key support turned resistance maintaining a bearish
bias as the uncertainty around the future outlook is now at its highest levels.
On one hand, we have some resilience in the economies with the inflation rates
slowly normalising, but on the other hand, we have signs of weakening growth
and the central banks committed to keep monetary conditions tight for a long
time. The technicals should help with the risk management until we start to get
a clearer direction on the fundamentals side.

Ethereum Technical Analysis
– Daily Timeframe

On the daily chart, we can see that Ethereum
recently bounced on the previous low and rallied into the downward trendline where it
found resistance. This is where we should see the sellers piling in with a
defined risk above the trendline to target a new low. The buyers, on the other
hand, will want to see the price breaking above the trendline to position for
more upside and start targeting the highs.

Ethereum Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD as it
approached the trendline and the resistance at 1681.
This is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we should see a pullback into the black trendline
where the buyers are likely to step in with a defined risk below the trendline
to target new higher highs. The sellers, on the other hand, will want to see
the price breaking below the trendline to pile in and target the low first and
eventually a break lower.

Ethereum Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can see that at
the moment the price action is a bit messy as we are hovering around key
resistances. The best strategy would be to wait for a clear breakout as
rangebound markets can chop traders out.

Upcoming Events

This week has a few important economic releases that can
have an impact on Ethereum. Today, the Fed is expected to keep rates unchanged
with the market focusing more on the Dot Plot and Powell’s press conference,
where he’s likely to reaffirm their data dependency. Tomorrow, we will get the
latest US Jobless Claims report and much worse than expected data should weigh
on Ethereum due to recessionary fears while much better-than-expected figures
are likely to weigh on the cryptocurrency due to risks of more tightening from
the Fed. Finally on Friday we conclude the week with the US PMIs data with the
same playbook as for the Jobless Claims, that is, weak data is likely to send
the markets into risk off and lead to weakness in Ethereum, while strong data
should weigh due to a more hawkish repricing in rates.

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