Market Analysis

EURUSD

Outlook: Likely Decline

Fundamental Analysis:

On Tuesday, EUR/USD experienced a 0.6% drop, briefly stabilizing around the 1.1050 mark amid geopolitical tensions and weaker economic data, which fueled demand for the U.S. Dollar. This move brought the pair to its lowest level in almost a month, extending its losing streak to a third day as it hovered below 1.1100 before Wall Street's opening. The U.S. Dollar gained strength from cautious market sentiment, bolstered by Federal Reserve Chair Jerome Powell's comments, which dampened expectations for an imminent 50 basis point rate cut. Powell’s remarks signaled that the Fed is not rushing to reduce interest rates.

In the Eurozone, inflationary pressures eased, with the preliminary Harmonized Index of Consumer Prices for September rising by 1.8% year-over-year, down from August’s 2.2%. This softening inflation may push the ECB to consider further easing of its monetary policy. Meanwhile, in the U.S., upcoming key data releases, including the Job Openings and Labor Turnover Survey (JOLTS) and the ISM Manufacturing Index for September, along with speeches from several Federal Reserve officials, could influence further market direction.

Technical Analysis:

Technically, the EUR/USD pair appears poised for continued weakness. On the daily chart, the pair has fallen below its 20-day Simple Moving Average (SMA), which now serves as resistance near 1.1105. While it remains above the 100- and 200-day SMAs, limiting its downside potential for now, technical indicators are signaling increased selling pressure. The Relative Strength Index (RSI) hovers around 48, suggesting negative momentum and potential for further declines.

The 4-hour chart reinforces this bearish sentiment, with EUR/USD trading beneath all its moving averages. Sellers remain active around the 100 SMA, positioned near 1.1110. Additionally, technical indicators are trending lower, hinting at further downside movement in the short term.

XAUUSD

Prediction: Increase

Fundamental Analysis:

Gold prices are experiencing a slight decline, retracting some of the gains made the previous day. However, this downward movement appears limited due to escalating geopolitical tensions in the Middle East. Additionally, optimism surrounding China's stimulus measures could bolster physical demand for gold, providing support for XAU/USD.

On Tuesday, gold prices made a minor recovery, trading in the $2,640s per troy ounce, following Israel's ground invasion of Lebanon, which increased demand for safe-haven assets. This recovery occurred after two consecutive days of losses, despite a temporary shift of capital into the property sector and a rally in Chinese equity markets.

Nevertheless, the potential for gold to rise further may be restricted by comments from Federal Reserve Chair Jerome Powell, who stated that the recent 50 basis point rate cut does not imply that further cuts will follow. Market expectations for another 50 basis point cut in November have decreased significantly from over 60% to around 30%, as stronger economic data diminishes the likelihood of additional significant rate reductions, which typically exert downward pressure on gold prices.

Technical Analysis:

Currently, gold is retracing towards the 50-period Simple Moving Average on the 4-hour chart. This pullback has resulted in a series of lower lows and lower highs since the all-time high recorded on September 26, raising concerns about the sustainability of the short-term uptrend for the precious metal.

While the market remains relatively balanced, further weakness could see gold drop to the trendline around $2,615-$2,620. A move below Monday's low of $2,625 would confirm this bearish trend. If the trendline is breached, gold could continue its decline towards stronger support levels at $2,600, followed by $2,550 and $2,544.

The Relative Strength Index (RSI) is positioned in neutral territory, suggesting there is potential for additional downside movement. Despite this, gold maintains a medium- to long-term uptrend. A breakthrough above the all-time high of $2,685 would signal bullish momentum, with targets set at $2,700 and $2,750.

GBPUSD

Prediction: Increase

Fundamental Analysis:

On Tuesday, GBP/USD experienced a significant decline, hitting its lowest level in over a week following disappointing ISM Purchasing Managers Index figures from the U.S. The situation was exacerbated by rising geopolitical tensions, particularly reports of Iran firing on Israel, which dampened overall risk appetite.

Currently, the pair is under bearish pressure, trading below the 1.3350 mark after struggling to maintain momentum above 1.3400 earlier in the week. Despite a brief rise above 1.3400 during European trading on Monday, GBP/USD could not sustain its gains as the U.S. Dollar strengthened.

As of Tuesday, GBP/USD continues its downward trajectory, largely influenced by a recovering USD. The upcoming U.S. data releases, including the JOLTS Job Openings and the ISM Manufacturing PMI, are expected to impact the pair significantly. According to Powell, a decrease in job openings below 7 million could weaken the USD, while an increase above 8 million might strengthen it, further affecting GBP/USD.

Technical Analysis:

GBP/USD has dipped below the lower boundary of the ascending regression channel established since September 11. The Relative Strength Index (RSI) on the 4-hour chart has also fallen to around 40, signaling a bearish shift in the short-term outlook.

On the downside, the immediate support level is at 1.3300, followed by 1.3275 and the critical zone between 1.3240 and 1.3230. Should GBP/USD regain its footing within the ascending channel by breaking back above 1.3350, potential resistance levels to watch for would be 1.3400 and 1.3440.

USDJPY

Prediction: Increase

Fundamental Analysis:

The USD/JPY pair is maintaining its recovery gains just below the 144.00 mark in Wednesday's Asian trading session, buoyed by improved risk sentiment following the recent Iran-Israel tensions. However, concerns in the market are limiting further advances for the pair, with traders now focusing on the upcoming U.S. ADP employment data and insights from the Federal Reserve.

The Fed's latest summary suggests there are no immediate plans for further rate hikes, emphasizing stability and cautious communication. Meanwhile, the Bank of Japan continues to uphold its accommodative monetary policy but remains open to changes if economic indicators show substantial improvement.

Japan's Tankan Large Manufacturing Index has remained steady at 13 points for the third quarter, aligning with expectations. Furthermore, the unemployment rate decreased to 2.5% in August, down from 2.7% in July, exceeding forecasts. Dovish comments from former Defense Chief and incoming Prime Minister Shigeru Ishiba, who stressed the necessity of maintaining low borrowing costs to aid Japan's fragile economic recovery, are also exerting downward pressure on the JPY.

Technical Analysis:

As of Tuesday, USD/JPY is trading around 144.10. An analysis of the daily chart indicates that the pair has re-entered an ascending channel, reinforcing the continuation of its bullish trend. The 14-day Relative Strength Index is positioned just below the 50 mark; a breakout above this threshold could further validate the bullish momentum.

In terms of resistance levels, USD/JPY may aim for the upper boundary of the channel at 146.50, followed by the five-week high of 147.21 reached on September 3. On the downside, immediate support is located at the nine-day Exponential Moving Average around 143.51, with further support at the channel's lower boundary around 142.80. A decline below this level could push USD/JPY down to 139.58, marking the lowest point since June 2023.

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