Market Analysis
EURUSD
Prediction: Decline
Fundamental Analysis:
EUR/USD extended its downward trajectory on Wednesday, with bids slipping lower as market sentiment is weighed down by uncertainty in the Middle East and waning hopes for a significant Federal Reserve rate cut in November. While the pair rebounded slightly from Tuesday’s weekly low of 1.1045, traders remain cautious ahead of key U.S. economic releases. This week’s focus is on employment data, culminating with Friday’s Nonfarm Payrolls report.
The JOLTS Job Openings report surprised the market with an increase of 329K, bringing total openings from 7.711 million in July to 8.040 million in August, lending short-term support to the U.S. dollar. Additionally, the ADP employment report showed a gain of 143K private sector jobs in September, beating forecasts.
In contrast, the Eurozone reported that the unemployment rate for August remained steady at 6.4%. Risk-off sentiment due to escalating geopolitical tensions between Israel and Lebanon, coupled with rising oil prices, has bolstered demand for safe-haven assets like the U.S. dollar, further weighing on the euro.
Technical Analysis:
From a technical standpoint, EUR/USD maintains a bearish outlook, trading near the lower end of Tuesday’s range. The daily chart shows the pair struggling below the flat 20-day Simple Moving Average (SMA), which has become resistance around the 1.1100 mark. Meanwhile, the 100 and 200 SMAs have lost their upward momentum but remain positioned below the current price. Technical indicators reflect continued bearish pressure, signaling the potential for further declines.
On the 4-hour chart, the outlook remains bearish. The 20 SMA is nearing a bearish crossover with the 100 and 200 SMAs, reinforcing the selling pressure. Technical indicators have turned south after a consolidation period, suggesting that a further decline may be on the horizon.
XAUUSD
Prediction: Bullish Outlook
Fundamental Analysis:
Gold prices are struggling to gather significant momentum on Thursday, though they remain close to last week's record highs. Rising geopolitical tensions, particularly the risk of conflict in the Middle East, are bolstering the safe-haven appeal of XAU/USD. Spot Gold is currently trading around $2,650 per troy ounce, confined to a narrow range amid a cautious market sentiment that is favorable for both Gold and the U.S. Dollar.
The ongoing conflict between Israel and Iran is weighing on global investor confidence, further fueling fears of potential supply disruptions that have pushed crude oil prices higher. As a result, demand for safe-haven assets like Gold is on the rise. In the broader markets, Asian and European stock indexes show mixed performances, while in the U.S., the Dow Jones Industrial Average opened slightly higher, contrasting with modest declines in the Nasdaq and S&P 500.
Traders are closely watching U.S. labor market data, with the latest ADP report showing 143,000 new jobs added in September, exceeding expectations. This stronger-than-expected data is providing support for the U.S. Dollar ahead of Friday's Nonfarm Payrolls report. Meanwhile, concerns among Federal Reserve officials about the state of employment could prompt more aggressive rate cuts should economic indicators weaken.
Technical Analysis:
The daily chart for XAU/USD shows that the pair has recovered from earlier losses and is currently hovering near its opening level. The upward slope of the moving averages, positioned well below the current price, continues to support a long-term bullish trend. Although technical indicators have softened, they remain above their midlines, suggesting limited downward momentum and not indicating any imminent sharp declines.
On the 4-hour chart, XAU/USD appears poised for further gains. The pair is trading just above a flat 20-period Simple Moving Average (SMA), with both the 100 and 200 SMAs trending upward below the price, reinforcing the likelihood of a bullish continuation. Additionally, technical indicators are moving into positive territory, signaling growing buying interest and further upside potential.
GBPUSD
Prediction: Decrease
Fundamental Analysis:
The GBP/USD pair has declined to around 1.3265 in early Thursday's Asian session, driven by increased demand for the U.S. dollar amid heightened geopolitical tensions in the Middle East. The pair dropped nearly 0.7% on Tuesday and hovered near 1.3300 during Wednesday's European session, with no significant recovery momentum from a technical standpoint. Despite a bullish start to the week, the U.S. dollar gained strength as risk aversion continued to support the greenback.
The U.S. Bureau of Labor Statistics reported that job openings rose to 8.04 million in August, surpassing expectations. Later today, the ADP will release its private-sector employment report, with a forecast of a 120,000 job increase. A weaker result could put pressure on the USD, while a strong figure would likely support it. In addition, market attention is on the Middle East crisis, where Israel has vowed retaliation after Iran launched around 200 missiles, intensifying demand for safe-haven assets like the U.S. dollar.
Technical Analysis:
On the 4-hour chart, the Relative Strength Index (RSI) remains below the 50 mark, suggesting that the recent recovery may be a technical correction rather than a full reversal. On the downside, immediate support is seen at 1.3275, with the next key level at 1.3250, where the 100-period Simple Moving Average lies. A daily close below this level could attract additional selling pressure, potentially pushing the pair down to 1.3180.
If the GBP/USD manages to stabilize above 1.3300, it could face resistance around the 1.3340-1.3350 zone, with the next target at 1.3400.
USDJPY
Prediction: Uptrend
Fundamental Analysis:
USD/JPY continues to gain momentum for the second consecutive day, showing signs of further upward movement. Uncertainty surrounding future rate hikes from the Bank of Japan (BoJ) is pressuring the Japanese Yen, thereby supporting the pair. Moreover, diminishing expectations for a substantial rate cut by the Federal Reserve in November are strengthening the USD.
The Yen's weakness against the U.S. Dollar is largely driven by doubts over additional interest rate increases by the BoJ. The BoJ's recent meeting summary revealed no immediate plans for tightening monetary policy, as the central bank remains committed to its accommodative stance while leaving room for adjustments if economic conditions improve.
Japan's Economic Revitalization Minister, Ryosei Akazawa, mentioned that Prime Minister Shigeru Ishiba emphasizes careful evaluations before implementing any rate changes. In the U.S., the Dollar is benefiting from risk-averse market sentiment due to escalating tensions in the Middle East, although the Greenback has faced some pressure from weaker-than-expected ISM Manufacturing PMI data for September. Investors are now awaiting the U.S. ADP Employment Change report and comments from Federal Reserve officials for further guidance.
Technical Analysis:
USD/JPY is hovering around 143.80 as of Wednesday. On the daily chart, the pair is consolidating within an ascending channel, suggesting a continued bullish outlook. The 14-day Relative Strength Index (RSI) is just below the 50 mark, and a break above this level could signal the resumption of the bullish trend.
Key resistance levels are near the upper boundary of the channel at 146.80, followed by the five-week high of 147.21, last seen on September 3. On the downside, immediate support lies around the nine-day Exponential Moving Average (EMA) at 143.50, followed by the channel’s lower boundary near 143.00. A breach of this support could lead to a further decline towards 139.58, the lowest level since June 2023.
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