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• AUD/USD has remained muted despite the release of the Aussie PMI data.
• Manufacturing PMI has released at 53.9 vs. estimates of 54.0 while Services PMI has landed at 50.4 vs. 47.7.
• The DXY could witness a momentum loss ahead of US PMI numbers.

The AUD/USD pair has not responded effectively to the release of the Australian S&P Global PMI data. The asset has continued to trade sideways around 0.6640. Earlier, the major rebounded firmly after picking significant bids below 0.6580.

The Australian S&P Manufacturing PMI has landed in mid of expectations of 54.0 and the prior release of 53.8 at 53.9. While the Services PMI has remained upbeat, released at 50.4, significantly higher than the forecasts of 47.7 and the former release of 50.2.

On a broader note, the aussie bulls have remained in the grip of bears after the release of less-hawkish Reserve Bank of Australia (RBA) minutes. RBA Governor Philip Lowe and his colleagues were also considering the alternative of 25 basis points (bps) for a rate hike.

This indicates that the central bank is not aggressive in hiking its Official Cash Rate (OCR). No doubt, price pressures are also high in the antipodean region but the central bank is not ready to sacrifice the growth rate over inflation. Apart from that, the reason for also discussing the 25 bps rate could be that the conduct of monetary policy every month provides sufficient chances for the central bank to paddle up interest rates.

Meanwhile, the US dollar index (DXY) is expected to display some signs of momentum loss on the upside. The DXY printed a fresh two-decade high of 111.80 on Thursday after a harsh-than-expected tone by the Federal Reserve (Fed) on interest rate guidance. The DXY could witness some long liquidation as the US PMI is expected to display a mixed performance.

The Manufacturing PMI is seen lower at 51.1 vs. the prior release of 51.5. While the Services PMI will improve to 45.0 against the prior print of 43.7.

• EUR/JPY reached a fresh monthly low at around 138.70, though it trimmed some losses.
• Sellers in the EUR/JPY daily and 4-hour chart are gathering momentum, as shown by the RSI.
• EUR/JPY Price Analysis: in the 4-hour chart, a break below 140.00 could pave the way toward 138.00.

The EUR/JPY dropped to fresh monthly lows at around 138.70, though a confluence of moving averages (MAs), namely the 50 and 100-day EMA meandering around the 139.16/19 area, were difficult hurdles to surpass, while bulls moving in helped to re-conquer the 140.00 psychological level. As the Asian Pacific session begins, the EUR/JPY is trading at 140.13, up by 0.11%.

EUR/JPY Price Analysis: Technical outlook

On Thursday, the cross-currency pair seesawed in a 500 pip range as the Bank of Japan (BoJ) intervention in the USD/JPY sent most yen crosses nosediving sharply. Even though the EUR/JPY remains above the 50 and 100-day EMAs, oscillators, particularly the Relative Strength Index (RSI), fell to negative territory, suggesting that sellers are gathering momentum.

The GBP/JPY four-hour chart shows the 20-EM crossing under the 50 and 100-EMAs, keeping the downward bias intact, though failure to record a daily close below the 200-EMA, staying above 139.98, opened the door towards 140.00. Albeit the EUR/JPY is trading above 140.00, risks are skewed to the downside, as the RSI persists in negative territory, alongside buyers needing to step in and lift prices above the 141.00  price level.

Therefore, the EUR/JPY first support would be the 140.00 figure. Once cleared, the next support would be the 200-EMA at 139.70, followed by the 139.00 psychological level, ahead of the S1 pivot at 138.00. On the flip side, the EUR/JPY first resistance would be the daily pivot at 140.81. The break above will immediately expose the 141.00 figure, which, if cleared, could pave the way toward 142.00.

EUR/JPY Key Technical Levels

• Gold price has turned sideways after a wild gyration, awaiting a fresh trigger for a decisive break.
• Higher interest rates are forcing corporate to postpone their expansion plans.
• The DXY is aiming to recapture the fresh two-decade high around 111.80.

Gold price (XAU/USD) is bewildered after gyrating in a wider range post the announcement of the monetary policy by the Federal Reserve (Fed). The precious metal bounced sharply after testing a two-year low at $1,654.50. However, the upside seems capped at around $1,685.00, which has shifted the yellow metal back inside the woods.

Federal Reserve (Fed)’s agenda of cooling down the ultra-hot inflation is hurting the corporate at most. Higher obligations on borrowings are forcing them to postpone their current expansion plans and drop investment in fruitful opportunities. This is resulting in a sheer decline in the growth projections and eventually in employment generation. Also, the housing sector is becoming a major victim as higher interest rates are resulting in higher monthly installments, which are forcing them to postpone their home-purchase plans.

Meanwhile, the US dollar index (DXY) is aiming to recapture the two-decade high of 111.81 ahead of S&P Global PMI data. As per the preliminary estimates, the Manufacturing PMI will land lower at 51.1 vs. the prior release of 51.5. While the Services PMI will improve to 45.0 against the prior print of 43.7.

Gold technical analysis

Gold price is displaying topsy-turvy moves in a wider range of $1,654.00-1,690.50 on an hourly scale. The 21-period Exponential Moving Average (EMA) at $1.670.00 is overlapping with the asset price, which signals a consolidation ahead.

Also, the Relative Strength Index (RSI) (14) is oscillating into the 40.00-60.00 range, which seeks a further trigger for a decisive move.

Gold hourly chart

• EUR/USD is oscillating around 0.9840, weakness seems favored after hawkish Fed policy.
• A mixed performance is expected on the US PMI front while Eurozone PMI will slip further.
• ECB’s economic bulletin sees a growth rate in 2022 at 3.1%.

The EUR/USD pair has turned sideways around 0.9840 after rebounding from near the critical support of 0.9813 in the early Tokyo session. A rebound move after multiple tests of Wednesday’s low indicates the strength of the support. It will be worth watching how far the asset can plunge after surrendering the above-mentioned support.

The impact of the harsh-than-predicted tone adopted by the Federal Reserve (Fed) chair Jerome Powell while guiding over the peak of interest rates is going to stay for a tad longer period. An escalation in interest rate projections by a whooping difference from 3.8% to 4.6% is sufficient to accelerate volatility in the economy. For achieving price stability in the economy, the rate hikes will result in a loss of job opportunities, demand for housing and durable goods, and growth rate projections.

Going forwards, the release of the S&P Global PMI data will remain in focus. The Manufacturing PMI is seen lower at 51.1 vs. the prior release of 51.5. While the Services PMI will improve to 45.0 against the prior print of 43.7.

On the Eurozone front, escalating fears of a nuclear attack by Russian leader Vladimir Putin are forcing the market veterans to extend the downside targets for the shared currency bulls. Apart from that, the release of the European Central Bank (ECB)’s Economic Bulletin sees the economy to grow by 3.1% in 2022, 0.9% in 2023, and 1.9% in 2024.

The Eurozone Manufacturing PMI is expected to land at 48.7, lower than the prior release of 49.6. Also, the Services PMI will shift lower to 49.0 vs. the former figure of 49.6.

• GBP/JPY nosedived to fresh 4-month lows below 160.00, though buyers reclaimed the 160.00 figure.
• A decisive break below 160.00 could pave the way towards 158.00; otherwise, a re-test of 161.00 is on the cards.

The GBP/JPY slightly advanced, following Thursday’s volatile session, after the Bank of Japan (BoJ) decided to hold rates unchanged but intervene in the FX market, sending the USD/JPY tumbling from around 145.90 to 140.34 after emphasizing that the Japanese yen weakness, was not aligned with fundamentals. Consequently, the GBP/JPY dropped 1.34% on Thursday, but at the time of writing is trading at 160.25, up 0.05%.

GBP/JPY Price Analysis: Technical outlook

The GBP/JPY price action illustrates the pair tumbling below the 200-day EMA, hitting a fresh four-month-low at around 159.12; buyers stepped in and reclaimed the previously-mentioned 200-day EMA at 160.27. Traders should note that the Relative Strength Index (RSI) fell below the midline, extending its fall towards the 36.46 reading, suggesting that sellers are in charge. Therefore, the GBP/JPY is downward biased. Once it clears the 200-day EMA, a re-test of the 159.00 area is on the cards.

In the short term, the 4-hour chart illustrates that the GBP/JPY reached the head-and-shoulders chart pattern target at around 161.50; the downtrend extended towards the four-month low before recovering to 160.00. Nevertheless, the GBP/JPY bias shifted downwards, further cemented by the cross of the 20-EMA below the 200 one.

Therefore, the GBP/JPY’s first support would be the 160.00 psychological price level. The break below will expose the four-month low at 159.12, followed by 159.00, ahead of the S1 daily pivot at 158.07.

GBP/JPY Key Technical Levels

• NZD/USD fell to an almost two-year-low, though it’s trimming some of its earlier losses.
• The Fed is expected to lift rates to the 4.4% threshold, according to the FOMC’s Summary of Economic Projections.
• US S&P Global PMIs, alongside Fed Chair Jerome Powell’s speech, are eyed on Friday.

The New Zealand dollar dropped to almost two-year-lows on Thursday amidst increasing fears that a frenzy of central banks tightening monetary conditions would likely tap the global economy into a recession. At the time of writing, the NZD/USD is trading at 0.5845, below its opening price by 0.11%

The US Federal Reserve decided to hike rates by 75 bps on Wednesday and emphasized that it would likely maintain its tightening cycle. The Summary of Economic Projections (SEP) showed that FOMC’s members expect the Federal funds rate (FFR) to end at around 4.4%.

NZD/USD cuts earlier losses but remains on the defensive

During the press conference, Jerome Powell said, “We have got to get inflation behind us,” and added, “I wish there were a painless way to do that. There isn’t.” The SEP updated GDP, PCE, core PCE, and unemployment projections. Most members expect GDP at 0.2%, while PCE and core PCE were revised upward to 5.4% and 4.5% by the year’s end. Concerning the unemployment rate, policymakers revised the number to 3.8%.

Before Wall Street opened, the Labor Department showed that claims for unemployment in the US for the last week, which ended on September 17, increased by 213K, less than the 217K estimated, but above the previous reading, downward revised to 208K.

Meanwhile, US Treasury bond yields rose, led by the 10-year benchmark note rate up by 14 bps, at 3.714%, while the greenback fell, as shown by the US Dollar Index.

In the meantime, the New Zealand economic docket reported that the Consumer confidence for the Q3 improved, from 78.7 to 87.6 in the previous quarter. During the last week, ANZ Bank economists foresee three additional 25 bps rate hikes by the RBNZ at the February, April, and May monetary policy meetings. Therefore, the bank estimates the Overnight Cash Rate (OCR) to finish at around 4.75%.

“The economy is not rolling over, with the tight labour market and strong wage growth partially offsetting the impact of higher interest rates. The low New Zealand dollar is also a meaningful offset to current monetary conditions,” said ANZ Bank analysts.

What to watch

The New Zealand economic docket is empty, leaving traders adrift to US economic data.

The US economic calendar will release the S&P Global Manufacturing. Services and Composite Flash PMIs for September and Fed speakers led by Chair Jerome Powell will cross newswires.

NZD/USD Key Technical Levels

• Gold has managed to hold on despite the resurgence in the US dollar.
• Gold's safe-haven appeal is supporting the price within a familiar daily range.

The gold price is settling in for the end of the North American session around flat for the day having traveled between a low of $1,655.71 and a high of $1,684.95 so far. The yellow metal has found demand on renewed geopolitical concerns following Russia's president, Vladimir Putin, saying he will pour more troops into his war against Ukraine while threatening to use nuclear weapons. 

 In the face of battlefield setbacks, the Russian leader has doubled down. Russia will mobilize 300,000 additional troops — a number larger than the original invasion force — and Moscow also appears poised to annex Ukrainian territory under its control.

The threat of a wider war is reviving the appeal of the precious metal due to its safe haven role in financial markets despite a bid in the greenback that is trading near the highest in 20 years, supported by the Federal Reserve's 75 basis-point increase to US interest rates on Wednesday and its promise that rates will rise again until inflation is under control.

Fed key takeaways

• US Federal Reserve interest rate decision +75 bps vs +75 bps expected.
• Target Range stands at 3.00% - 3.25%.
• Interest Rate on Reserves Balances raised by 75Bps to 3.15% from 2.40%.
• The policy vote was unanimous. 
• Fed anticipates ongoing hikes will be appropriate, prepared to adjust policy as appropriate.
• Board members are highly attentive to inflation risks and strongly committed to returning inflation to 2%.
• Recent indicators point to modest growth in spending and production.
• Ukraine war creates additional upward pressure on inflation, weighing on global economic activity.
• Inflation remains elevated, reflecting pandemic-related imbalances, and higher food & energy.
• Job gains have been robust, the unemployment rate has remained low.
• The median forecast shows rates 4.4% at end-2022.
• Futures after FOMC decision imply traders see 89% chance fed raising rates at another 75bps at the November meeting.

In this context, the precious metals' price action could still have further to fall as the restrictive rates regime is set to last for longer, analysts at TD Securities argued. ''Indeed, gold and silver prices have tended to display a systematic underperformance when markets expect the real level of the Fed funds rate to rise above the neutral rate, as estimated by Laubach-Williams.''

Gold technical analysis

Meanwhile, from a technical perspective, there are still prospects of a move higher from out of the sideways channel as per the M-formation which is a reversion pattern.

What you need to take care of on Friday, September 23:

Several central banks announced monetary policy decisions following the US Federal Reserve meeting.

The first one was the Bank of Japan which decided to keep its monetary policy on hold. However, not long after the meeting, the BOJ intervene in the FX market. The USD/JPY pair plunged like a rock, from an intraday high post-meeting of 145.89 to 140.34. It currently trades at around 142.40.

The Switzerland National bank hiked its benchmark rate by 75 bps. However, USD/CHF advanced, ending the day in the 0.9780 price zone. Governor Thomas Jordan said they are ready to intervene to steer monetary conditions for the Swiss Franc.

It was then the turn of the Bank of England, which pulled the trigger by 50 bps, somehow disappointing investors. Governor Andrew Bailey noted they would continue responding “forcefully, as necessary” to inflation, despite the risk of a steeper economic setback.

As a note of color, it is worth adding that the  Türkiye Central Bank, in fact, cut rates from 13% to 12%. On the other hand, President Erdogan arranged a meeting with Russia to discuss an agreement on payment and possible sanctions. Moscow, in the meantime, threatened the western world with a nuclear war amid the latter help to Ukraine.

Recession seems inevitable as stubbornly high inflation plus the escalation of the war forced policymakers’ hands. Stocks fell, while US government bond yields soared to fresh multi-year highs.

The EUR/USD pair trades around 0.9830, meeting intraday sellers at around 0.9900. The AUD/USD pair posted a modest intraday advance and hovers around 0.6640/50, while USD/CAD trades at 1.3480.

Spot gold posted a modest intraday advance and settled at $1,672 a troy ounce. Crude oil prices finished the day pretty much unchanged, with WTI now changing hands at $83.50 a barrel.

On Friday, S&P Global will release the flash estimates of the September PMIs for major economies.

Russia accepts Bitcoin and crypto for cross-border payments, proposes policy change

Reuters reported that the Bank of England (BoE) policymaker Jonathan Haskel said the central bank was in a difficult position as the government's expansionary fiscal policy appeared to place it at odds with the BoE's efforts to cool inflation.

"We are in a difficult, uncomfortable position, frankly, because I don't like being in a situation where you have one institution - namely the independent central bank - at least being portrayed as set against another institution, the elected government," he said.

"Having a fiscal expansion in the context of tight supply is, I'm afraid, very difficult," he added, during a panel discussion hosted by the North Western Reform Synagogue.

Meanwhile, GBP remains pressured following the BoE surprising with just a 50bps rate hike instead of a 75bps increase. GBP/USD is back to flat at 1.1258 following a move between 1.1364 and 1.1211 on the day.

• USD/CAD bulls step in to test key 1.35s.
• WTI is supporting a recovery in an otherwise Us dollar bid environment.

 USD/CAD has been on consolidation in late North American trade while oil prices firm that has helped the Canadian dollar correct from its weakest level in more than two years. At the time of writing, the pair is up come 0.3% having traveled from a low of $1.3409 to a high of 1.3544 on the day.

The greenback has otherwise been supported by the Federal Reserve's hawkish outlook for interest rates and after Russian President, Vladimir Putin ordered the country's first mobilization since World War Two. On safe haven demand, DXY, which measures the currency against a basket of six counterparts hit a high of 111.814, the highest level since mid-2002.

A jump in oil followed news of China's plans to ramp up its exports of refined products, as per Reuters news that said ''Chinese refiners are expecting the government to issue export quotas for 15-million tonnes of export quotas for refined products covering the remainder of the year as Beijing looks to bolster exports from the world's No.1 oil importer.''

Additionally, there have been concerns over a disruption to oil markets caused by sanctions leveled against Russia. Russian president Putin said in a late Tuesday speech he planning to mobilize an additional 300,000 troops to bolster the country's flagging war on Ukraine, where it has surrendered swathes of occupied territory in recent fighting, raising

Elsewhere, supporting the greenback, the Federal Reserve's 75 basis-point increase to US interest rates on Wednesday remains an issue for the market, as the central bank looks to combat inflation by slowing the economy and reducing demand.

Fed key takeaways

• US Federal Reserve interest rate decision +75 bps vs +75 bps expected.
• Target Range stands at 3.00% - 3.25%.
• Interest Rate on Reserves Balances raised by 75Bps to 3.15% from 2.40%.
• The policy vote was unanimous. 
• Fed anticipates ongoing hikes will be appropriate, prepared to adjust policy as appropriate.
• Board members are highly attentive to inflation risks and strongly committed to returning inflation to 2%.
• Recent indicators point to modest growth in spending and production.
• Ukraine war creates additional upward pressure on inflation, weighing on global economic activity.
• Inflation remains elevated, reflecting pandemic-related imbalances, and higher food & energy.
• Job gains have been robust, the unemployment rate has remained low.
• The median forecast shows rates 4.4% at end-2022.
• Futures after FOMC decision imply traders see 89% chance fed raising rates at another 75bps at the November meeting.

Next on the agenda, we have Canada's retail sales data for July, due on Friday. This could offer markets more to go on as it assesses the Bank of Canada's outlook on rates.

• The EUR/GBP keeps the upward bias intact, despite piercing 0.8700 earlier in Thursday’s session.
• EUR/GBP Price Analysis: Break above 0.8760 to pave the way for higher prices; otherwise, a fall toward 0.8625 is on the cards.

The EUR/GBP climbs after testing a two-week upslope trendline, drawn from the September 2 and 14 lows that pass through the 0.8700 figure. During the day, the EUR/GBP tumbled to the daily low, below the previously-mentioned trendline at 0.8691, but bounced off and hit a daily high at 0.8760 before stabilizing at current exchange rates. At the time of writing, the EUR/GBP trades at 0.8737, above its opening price.

EUR/GBP Price Analysis: Technical outlook

From a daily chart perspective, the EUR/GBP dip towards 0.8700 was on the cards. Oscillators, particularly the Relative Strength Index (RSI), peaked just below entering overbought conditions three times since August 31, opening the door for a retracement. Once the Bank of England’s (BoE) decision was known, the euro gained traction, and buyers reclaimed the 0.8700 thresholds, maintaining the upward bias intact.

Switching to an intraday time frame, the EUR/GBP four-hour chart illustrates the pair as neutral-to-downward biased, with some solid resistance levels above the current exchange rate that might cap the EUR/GBP recovery. Break above the EUR/GBP 0.8760 daily high could pave the way toward the YTD high at 0.8787, ahead of the 0.8800 psychological level.

Contrarily, a drop below the S1 daily pivot at 0.8702 would expose the weekly low at 0.8691, followed by the confluence of the S2 pivot and the 100-EMA at around 0.8680/82, and then the September 14 low at 0.8625.

EUR/GBP Key Technical Levels

• USD/JPY bears move in at a 61.8% ratio of around 142.20.
• Should the bears commit, a break below 140.50 opens prospects of a downside continuation to take out 140.00.

As per the prior analysis, USD/JPY Price Analysis: Bears about to pounce as US dollar meets 4-hour resistance, the yen continued to defy the bears with the added fuel on the back of fundamentals.

News that the Ministry of Finance (MoF) intervened for the first time since 1998 has sent the pair well on its way to breaking a critical daily structure as follows:

USD/JPY prior analysis

Prior verbal intervention of the Japanese officials had sparked a bid in the yen and helped to see a harmonic pattern in the USD/JPY play out resulting in a continuation as the week progresses.

USD/JPY update

As illustrated, the pair has extended its decline and embarks on a break of the 140.80 support.

Meanwhile, the hourly charts show that the price is decelerating in a creeping correction that could now see the bears move in at a critical level of resistance near a 61.8% ratio around 142.20. Should the bears commit, a break below 140.50 opens prospects of a downside continuation to take out 140.00.

• AUD/USD reached a multi-year low at around 0.6574 but bounced back and is gaining 0.29%.
• The Summary of Economic Projections (SEP) reported that Fed officials see rates at around 4.4% by the end of 2022.
• The US Department of Labor reported that Jobless Claims rose less than estimated but exceeded the previous reading.

The AUD/USD rebounds off YTD lows reached at around 0.6574 and is back above the 0.6600 psychological figure as the greenback weakens, following an aggressive rate hike by the Fed, which opened the door for further increases. Even though the previously mentioned would support the greenback, the AUD/USD climbs, trading at 0.6642 at the time of writing.

Global equities remain on the back foot, recording hefty losses. Worldwide central banks continue to tighten monetary conditions amidst a period of two-digit inflation in some countries. On Wednesday, the Fed raised rates by 75 bps. According to the Summary of Economic Projections (SEP), Fed officials estimate another 120 bps of rate increases, seeing the Federal funds rate (FFR) at around 4.4% by the year-end.

AUD/USD is recovering as the US dollar falls

On Thursday, the Labor Department showed that claims for unemployment in the US for the last week, which ended on September 17, increased by 213K, less than the 217K estimated, but above the previous reading, downward revised to 208K. The number of people receiving benefits after an initial week of aid decreased by 22K to 1.379 million in the week ended on September 10.

In the meantime, an absent Australian economic docket left traders to keep digesting the RBA’s minutes released earlier. The central bank noted that it was not in a “pre-set path and would be balanced to try and keep the economy on an even keel.” Furthermore, most of RBA’s board members have begun to assess the possibility of raising rates at a slower pace as the cash rate rises.

However, Westpac analysts expect the RBA to hike 50 bps in October, followed by 25 bps in November, December, and February, lifting rates to 3.6%.

What to watch

On Friday, the Australian economic docket will feature the S&P Global Manufacturing, Services and Composite PMIs.

The US calendar will also reveal the S&P Global PMIs alongside Fed Chair Jerome Powell’s speech at around 18:00 GMT.

AUD/USD Key Technical Levels

• EUR/USD bounces off YTD lows nearby 0.9800 as price action gets overextended.
• Sentiment remains negative, though it failed to underpin the greenback.
• US jobless claims were better-than-expected, while the EU’s consumer confidence disappointed.

The shared currency is almost flat after hitting a fresh YTD low at 0.9806 after September’s Fed interest rate decision. The central bank further confirmed an aggressive approach, with most policymakers expecting additional increases to the Federal funds rate; therefore, the interest rate differentials between the EU and the US are a headwind for the EUR/USD.

The EUR/USD began trading at around the day’s lows and hit a daily high of 0.9907 before paring those gains and settling around current spot prices. At the time of writing, the EUR/USD is trading at 0.9842, registering minimal gains of 0.03%.

EUR/USD recovers some ground amidst a soft greenback

Global equities remain under pressure after Fed Chair Powell and Co. raised rates. The US Department of Labor reported that Initial Jobless Claims for the week ending on September 17 increased by 213K below the 217K forecasted, delineating the “very tight” labor market, as expressed by Chair Powell on Wednesday’s post-Fed decision presser.

Meanwhile, the US Dollar Index erases some of its earlier gains, down 0.09% at 111.347, a tailwind for the EUR/USD. On the contrary, the US 10-year Treasury bond yield remains positive, up at 3.682%, gaining 14 bps, after hitting an 11-year high at around 3.71%.

In the meantime, adding to an already deteriorated economic scenario in the Euro area, the EU’s consumer confidence in September dived to -28.8, exceeding estimates of -25.0. meanwhile, the ECB Governing Council member Isabel Schnabel commented that inflation is still too high, so further rate increases would be needed. While she failed to acknowledge a recession in the Eurozone, she warned that it might be unavoidable in Germany.

What to watch

The EU’s calendar will feature a tranche of S&P Global PMIs for Spain, France, Germany and the Eurozone. On the US front, the US S&P Global PMIs would also be reported, alongside Fed Chair Jerome Powell’s speech at around 18:00 GMT.

EUR/USD Key Technical Levels

The EUR/USD is trading below 0.9830, on its way to the lowest weekly close in decades. Analysts at MUFG Bank hold a bearish perspective on the EUR/USD pair for October. They see the pair trading in a range between 0.9500 and 1.03000. 

Key Quotes:

“In the month ahead, we are maintaining a short EUR/USD bias. The Fed’s commitment to deliver further large rate hikes and the tightening of global financial conditions should continue to favour a stronger US dollar. The Fed has signalled clearly that it wants to see sustained evidence that inflation pressures are easing before delivering a dovish policy pivot. The stronger US CPI report for August has provided an even higher hurdle for a dovish pivot.”

“The main upside risk to our bearish EUR/USD bias could be triggered by a further paring back of more acute energy supply concerns in Europe. If the price of gas continues to fall heading into the winter it would help to ease fears over a sharper slowdown in the euro-zone. At the same time, the EUR could strengthen more than expected if the ECB keeps raising rates at a faster pace while the Fed signals that is considering slowing hikes.”

On Thursday, Japanese authorities intervened in the currency market to limit the depreciation of the yen. The USD/JPY dropped sharply from above 145.00 to as low as 140.35. Analysts at Danske Bank point out Japan has the world’s second-largest FX reserve, thus, it has the ammunition to continue to defend the Japanese yen. However, they warn that in the current economic environment, markets are likely to intensify pressure on the Yield Curve Control policy. 

Key Quotes: 

“The decision to stem the massive weakening of the yen triggered a USD/JPY decline by five figures to 140.8 levels and then bounced up and down during the following hours. Japan has the world's second largest foreign exchange reserve, so there is some weight behind an intervention like this. But the fact remains that the BoJ pursues a monetary policy that sends more yen into the market. It is hardly a sustainable situation for the BoJ to pursue its inflation target while simultaneously propping up the yen.”

“Today's decision has increased the likelihood that the BoJ will end up giving in to the global pressure for higher yields and abandon the YCC, or allow for a steeper yield curve. It is not least this higher probability that is being priced in the market and which has driven the yen stronger. If the BoJ does not adjust its monetary policy, then it may be difficult to prevent the yen from weakening again, and then we could quickly be back in a situation with a record weak yen again.”

As expected, the Swiss National Bank (SNB) rose the key interest rate by 75 basis points on Thursday. Analysts at Wells Fargo, believe the SNB will continue tightening monetary policy but will deliver rate hikes of smaller magnitude, amid an outlook of slower growth and somewhat more contained inflation next year. 

Key Quotes: 

“The announcement's forward guidance was not as hawkish compared to many other global central banks' comments. Rather than signaling forceful rate hikes ahead, the SNB instead repeated that it cannot be ruled out that further increases in the SNB policy rate will be necessary to ensure price stability over the medium term. In addition, the central bank indicated it remains willing to intervene in the foreign exchange market as necessary.”

“With the updated SNB forecasts showing annual average inflation of 2.4% for 2023 and 1.7% for 2024, we believe the central bank will continue tightening monetary policy, although larger rate hikes are likely not needed given inflation is expected to be closer to target by the end of 2023.”

“While our base case is for smaller magnitude rate hikes in the coming quarters, we would not fully rule out a 75 bps rate hike in December. Since the SNB only has one monetary policy meeting per quarter, half as many as the ECB, the central bank could opt to deliver a larger rate hike to account for this. The central bank has also repeatedly emphasized its commitment to support the franc in order to soften the blow from higher import prices and inflationary pressures. While its willingness to intervene in foreign exchange markets is an important policy lever, large rate hikes that support the currency could also complement these actions.”
 

A spokesperson for the US Treasury said on Tuesday that they acknowledge the Bank of Japan's intervention in the foreign exchange market.

"The Bank of Japan today intervened in the foreign exchange market. We understand Japan’s action, which it states aims to reduce recent heightened volatility of the yen," the spokesperson stated, as reported by Reuters.

Market reaction

The USD/JPY pair showed no immediate reaction to this statement and it was last seen losing more than 1% on the day at around 142.00.

The Bank of England announced on Thursday a 50 bps rate hike. Five members of the Monetary Policy Committee voted for that decision, three members wanted at 75 bps hike and one member a 25 hike. According to analysts at Rabobank, the slip decision reflects a very uncertain economic outlook. They point out that strong fiscal easing opens the door to a 75 bps increase in November, especially if the market believes the government borrows too much. But they consider the uncertain growth and inflation outlook continues to favor a more gradual rather than a frontloaded approach.

Key Quotes: 

“The Monetary Policy Committee voted to raise the benchmark rate to 2.25% from 1.75%. There was a 3-5-1 split, reflecting uncertainty even as the eventual vote was in line with consensus and our own expectation of a 50 bps hike. Market participants were positioned for a 75 bps increase going into this meeting, following similar recent increases on the part of the Federal Reserve and the European Central Bank. The minutes were, however, seen as fairly hawkish, prompting another leg higher in yields.”

“We stick to our rationale that the change in the expected inflation profile – certainly significantly lower energy-driven inflation in the short-term; probably more persistent demand-driven inflation in the medium-term – should keep the Bank of England on a more gradual but also a more sustained path of rate increases. We therefore call for another 50 bps increase in November.”

“The Bank of England can, however, only maintain such a relatively gradual pace of interest rate increases (vis-à-vis other central banks!) if Truss and her team are able to reassure markets that she has a plan on how she will eventually provide balance in public spending. Today’s price action, with large spikes in gilt yields, shows that just the promise of more growth is certainly not enough.”

• Gold looks vulnerable as government bond yields continue to rise.
• Yellow metal peaked at 1684$ and retreated back to the 1670$ area.
• Price continues to move in a wide range, bearish bias.

Gold rose after the beginning of the American session to 1685$, hitting a fresh daily high but it failed to hold above 1680$ and retreated to 1667$. It is hovering around 1670$, as it continues to move sideways in a wide range between 1655$ and 1685$.

Volatility remains elevated but XAUUSD holds within the range. The consolidation takes place within a bearish trend that remains in place. A firm recovery above 1680$ could open the doors for a larger bullish correction. On the flip side, under 1650$ could trigger an acceleration targeting initially 1640$.

Following the 75 bps rate hike from the Federal Reserve, US yield continues to rise on Thursday. The US 10-year yield are at 3.70%, the highest level since February 2011 while the 2-year reach 4.15%, the highest since 2007. Higher yields are usually not good news for gold bulls. In the current context, bad news could be positive for gold. 

Earlier on Thursday, the Japanese government's intervention in the currency market weakened the dollar and favoured the rebound in XAU/USD. However, the recovery was short-lived.

Technical levels

• The BoE raised rates to 2.25%, though the interest rate differential with the Fed capped upward pressure on the GBP/USD.
• US Initial Jobless Claims again exceeded estimations, justifying the case for yesterday’s Fed rate hike.
• On Friday, S&P Global PMIs would be featured for the UK and the US, and Fed Chair Jerome Powell will speak.

The British pound oscillates around its opening price, following consecutive monetary policy decisions of the Bank of England, earlier rising rates by 50 bps, while the Fed hiked 75 bps on Wednesday. Initially, the GBP/USD dropped toward new YTD lows at 1.1211 but bounced off and hit a daily high above 1.1350 before tumbling below the 1.1300 mark. At the time of writing, the GBP/USD trades around 1.1258s.

Overnight, market sentiment remains negative, as shown by global equities trading in the red. The Bank of England lifted rates to the 2.25% mark while saying it would continue to “respond forcefully, as necessary” to elevated prices. Worth noting that three members of the Monetary Policy Committee (MPC), namely Ramsden, Haskel, and Mann, voted for a 75 bps. In contrast, Swati Dhingra, its newest member in place of Michael Saunders, wanted a 25 bps.

GBP/USD seesaws around 1.1250s post-Fed and BoE’s rate hikes

At the same meeting, the MPC voted to reduce the BoE’s GBP 838 Billion by 80 billion pounds over the coming year. The BoE expects inflation to peak at around 11%. Now that September’s meeting is in the rearview mirror, money market futures still estimate the BoE to increase rates towards the 3.75% mark.

Aside from this, the US economic docket featured unemployment claims for the week ending on September 17, which rose by 213K less than estimates of 217K, further confirming yesterday’s Fed decision to hike rates by ¾ of a percent toward the 3.25% threshold, as data shows a solid labor market.

In the meantime, the US Dollar Index, a performance measure of the buck’s vs. six currencies, barely rises 0.05% up at 111.408, while the US 10-year T-bond yield skyrockets 17 bps, toward the 3.704% threshold, for the first time since February of 2011.

Therefore, the GBP/USD would likely remain on the defensive. After the BoE’s projected a 15-month recession, to likely begin by the year’s end, will further exert downward pressure on the pair, as the US dollar will likely continue to strengthen as the Fed prepares to end the 2022 tightening cycle at around 4.4% levels.

What to watch

The UK economic calendar will feature the GfK Consumer Confidence and the S&P Global Services, Manufacturing, and Composite PMIs. On the US front, the US S&P Global PMIs would also be reported, alongside Fed Chair Jerome Powell’s speech at around 18:00 GMT.

GBP/USD Key Technical Levels

• AUD/USD attempts a modest recovery from over a two-year low, though lacks follow-through.
• A sharp USD pullback from a two-decade high turns out to be a key factor lending some support.
• Aggressive Fed rate hike bets, recession fears act as a tailwind for the buck and cap the upside.

The AUD/USD pair recovers nearly 100 pips from its lowest level since May 2020 touched this Thursday, though the momentum stalls near the 0.6670 region. The pair quickly retreats below mid-0.6600s during the early North American session and is currently placed in neutral territory.

A sharp US dollar pullback from a fresh two-decade high turns out to be a key factor that assists the AUD/USD pair to attract some buyers near the 0.6575 region. News that Japanese authorities intervened in the forex market triggers aggressive short-covering around the JPY and prompts traders to take some profits off their USD bullish positions.

That said, a more hawkish stance adopted by the Fed helps limit the USD corrective declines and acts as a headwind for the AUD/USD pair. In fact, the Fed signalled more large rate increases at its upcoming policy meetings. This, along with the cautious mood and rising US Treasury bond yields, underpins the safe-haven buck and caps the risk-sensitive aussie.

Investors remain concerned that a more aggressive policy tightening by major central banks will lead to a deeper global economic downturn. This, along with headwinds stemming from China's zero-covid policy and the risk of a further escalation in the Russia-Ukraine conflict, have been fueling recession fears and denting the global risk sentiment.

The fundamental backdrop suggests that the path of least resistance for the AUD/USD pair is to the downside. Hence, any attempted recovery might still be seen as a selling opportunity. Spot prices remain vulnerable to prolonging over a one-month-old descending trend and test the 0.6500 psychological mark in the near term.

Technical levels to watch

• EUR/NOK bounces of the post-Norges Bank lows near 10.12.
• The Norges Bank raised the key policy rate by 50 bps to 2.25%.
• Further rate hikes will depend on how inflation evolves.

The Norwegian Krone gives aways part of the initial gains and now helps EUR/NOK resuming the upside to the area above 10.2000 on Thursday.

EUR/NOK up despite oil gains, dovish NB weighs on NOK

EUR/NOK manages to leave behind Wednesday’s daily decline and regains upside traction, as investors continue to adjust to the somewhat dovish tilt in the Norges Bank.

Indeed, the Scandinavian central bank raised the policy rate by half point to 2.25% at its meeting earlier on Thursday, although it linked the prospects for extra rate hikes to the progress of inflation.

In fact, the Norges Bank reiterated that inflation remains well above the bank’s target, although some signs of cooling in the economy could morph into some deceleration of inflationary pressures. The bank sees rates at around 3% over the winter.

EUR/NOK significant levels

As of writing the cross is gaining 0.48% at 10.2228 and the next resistance emerges at 10.3198 (monthly high September 20) followed by 10.5393 (2022 high June 16) and then 10.6323 (monthly high August 20 2021). On the downside, a drop below 10.1260 (weekly low September 22) would open the door to 9.9884 (200-day SMA) and finally 9.8313 (monthly low September 6).

• USD/JPY retreats sharply from a fresh 24-year peak after Japan intervenes in the FX market.
• The intraday USD corrective pullback from a two-decade high contributes to the steep decline.
• Rising US bond yields, the Fed-BoJ policy divergence limits any further losses, at least for now.

The USD/JPY pair witnessed a dramatic intraday turnaround on Thursday and plunges over 550 pips from the vicinity of the 146.00 mark, or a fresh 24-year high touched this Thursday. The pair maintains its heavily offered tone through the early European session and hits a nearly three-week low in the last hour, though rebounds thereafter.

Japanese authorities intervened in the forex market for the first time since 1998 to stem the rapid decline in the domestic currency and trigger a massive sell-off around the USD/JPY pair. The strong intraday rally in the Japanese yen gives the US dollar bulls to take some profits off the table, especially after the recent strong run-up to a two-decade high. This was seen as another factor that aggravated the bearish pressure surrounding the major.

That said, a recovery in the risk sentiment, as depicted by a generally positive tone around the equity markets, should keep a lid on any further gains for the safe-haven JPY. Apart from this, a fresh leg up in the US Treasury bond yields, bolstered by a more hawkish stance adopted by the Federal Reserve, supports prospects for the emergence of some USD dip-buying. This, in turn, assists the USD/JPY pair to rebound over 100 pips from the daily low.

It is worth recalling that the Fed raised interest rates by another 75 bps on Wednesday and signalled more large rate increases at its upcoming policy meetings. In contrast, the BoJ left its policy settings unchanged and reiterated that it will continue powerful monetary easing. This marks a big divergence in the Fed-BoJ policy outlooks, which has been a key factor behind the yen's slump of over 25% against its American counterpart since the beginning of 2022.

Technical levels to watch

Japanese authorities have today intervened to sell USD/JPY for the first time since 1998. Economists at ING expect the pair to see a volatile 140-145 trading range.

Investors to be happy to buy dollars on dips near 140-141

“Clearly, investors are going to think twice about paying for USD/JPY over 145 now. And one can argue that we will now enter a volatile 140-145 trading range.”

“But expect investors to be happy to buy dollars on dips near 140-141 knowing that Tokyo will find it impossible to turn this strong dollar tide – a tide that should keep the dollar supported through the remainder of this year.”   

EUR/CHF is bouncing higher. Nonetheless, the pair remains below 0.9728/17, which keeps the near-term risk lower, according to economists at Credit Suisse.

EUR/CHF set to continue the decline toward 0.9334/9293

“EUR/CHF remains below the 55-day moving average and the downtrend from mid-June at 0.9728/17, which keeps the near-term pressure still pointed to the downside.

“Support now shifts to 0.9503/00 initially and then to 0.9464, below which should support a direct move to our technical objective at a cluster of Fibonacci projection levels at 0.9334/9293.” 

“Key resistance remains at 0.9728/17, which ideally holds to prevent yet another pause within the broader downtrend.”

The Bank of England hiked its Bank Rate by 50 bps to 2.25%. In the opinion of economists at TD Securities, the BoE will not do GBP any favours, reflecting the current macro mix that will invite higher inflation and lower real rates.

The BoE hiked Bank Rate by 50 bps to 2.25%

“The BoE opted for the 50 bps hike. They are inching towards more aggressive hikes, but that probably won't do GBP many favours. For starters, monetary policy tightening has advanced to dovetail with the boost to fiscal spending. In turn, the policy mix requires tighter monetary policy just to keep pace with the fiscal spending. In the short term, that will likely exacerbate inflationary conditions, leading to a drop in real rates, especially relative to the USD.”

“We continue to expect further GBP downside, especially against the USD. GBP/USD HFFV sits near 1.18, though we think the pair will continue to trade with a discount in the months ahead. That leaves us looking to fade near-term rallies ahead of 1.15.”

• EUR/USD regains some poise and bounces off 0.9800.
• The loss of this region exposes a drop to the 0.9685 level.

EUR/USD prints new cycle lows around 0.9800 and sparks a marked rebound soon afterwards.

The pair seems to have met some apparent contention in the 0.9800 neighbourhood so far. Further weakness, however, remains well in store for the time being and could force spot to challenge this zone sooner rather than later. The breakdown of this region could lead up to a visit to the October 2022 low at 0.9685.

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0701.

EUR/USD daily chart

• Initial Jobless Claims in the US rose by 5,000 in the week ending September 17.
• US Dollar Index stays in negative territory below 111.00.

There were 213,000 initial jobless claims in the week ending September 17, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 208,000 (revised from 213,000) and came in better than the market expectation of 218,000.

Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1% and the 4-week moving average was 216,750, a decrease of 6,000 from the previous week's revised average.

"The advance number for seasonally adjusted insured unemployment during the week ending September 10 was 1,379,000, a decrease of 22,000 from the previous week's revised level," the DOL reported.

Market reaction

The greenback stays on the backfoot after this data and the US Dollar Index was last seen losing 0.5% on the day at 110.80.

Gold has confirmed a major double top. Strategists at Credit Suisse expect the yellow metal to suffer further weakness.

Break above 55-DMA at $1,734 needed to alleavite downside pressure

“Gold below $1,691/76 has confirmed a large ‘double top’, which turns the risks lower over at least the next 1-3 months, with XAU/USD also now hovering clearly below both the 55-day and 200-day averages, currently seen at $1,734/1,831.” 

“We note that the next support is seen at $1,618/16, then $1,560 and eventually $1,451/40.”

“Only a convincing break above the 55-DMA at $1,734 would ease the pressure on the precious metal, with next resistance then seen at the even more important 200-DMA, currently at $1,831.”

The MoF has actioned intervention in the FX market this morning for the first time since 1998 in support of the Japanese yen. Nevertheless, economists at Rabobank continue to target USD/JPY 147.00 on a three-month view.

Divergence between Fed and BoJ policy continues to signal upside potential

“According to Vice Minister of Finance for International Affairs Kanda, the intervention was triggered by the sudden and one-sided nature of the moves in the JPY.”

“Earlier this morning the BoJ reiterated its commitment to its ultra-loose monetary policy settings. This was just hours after the Fed outlined its very hawkish policy outlook. As a consequence, it is unlikely that the MoF expects the intervention to turn USD/JPY lower. Instead, today’s action is likely aimed at slowing down the pace of gains in USD/JPY.”

“In view of our bullish USD view, we retain a three-month target of USD/JPY 147.00.”

• USD/CAD retreats around 130 pips from its highest level since July 2020 touched this Thursday.
• A sharp USD turnaround from a two-decade high turns out to be a key factor exerting pressure.
• An intraday uptick in oil prices underpins the loonie and contributes to the sharp intraday decline.

The USD/CAD pair retreats sharply from its highest level since July 2020 touched earlier this Thursday and remains on the defensive through the early North American session. The pair is currently placed near the lower end of its daily trading range, just above the 1.3400 mark, though any meaningful corrective fall still seems elusive.

The US dollar witnessed a dramatic turnaround from a fresh 20-year peak touched earlier this Thursday. Apart from this, a goodish pickup in crude oil prices underpins the commodity-linked loonie and further contributes to the USD/CAD pair's steep intraday fall of nearly 130 pips. News that the Japanese government intervened in the forex market triggers a massive rally in the Japanese yen and prompts aggressive USD long-unwinding trade.

That said, a more hawkish stance adopted by the Federal Reserve, along with growing recession fears, should act as a tailwind for the safe-haven greenback. Furthermore, worries that a deeper global economic downturn will dent fuel demand could keep a lid on any meaningful upside for the black liquid. This, in turn, supports prospects for the emergence of some buying around the USD/CAD pair, warranting caution before confirming a near-term top.

Even from a technical perspective, the overnight post-FOMC positive move confirmed a fresh bullish breakout through a multi-month-old ascending trend-channel resistance. Hence, any subsequent pullback might still be seen as a buying opportunity and is more likely to remain limited, at least for the time being.

Technical levels to watch

USD/JPY looks set for an incredibly volatile session. However, the market is still holding key support at 139.40 and analysts at Credit Suisse stay biased higher for now.

Scope for a pause

“USDJPY looks set for an aggressive bearish ‘outside day’ following the BoJ’s intervention after the market tried to push above psychological resistance at 145.00, which is becoming an increasingly important line in the sand.” 

“We may see a short-term period of consolidation, however, we stay biased higher over the medium-term, with next resistance seen at confirmed trend resistance from late April at 146.80. Thereafter, our core objective remains at 147.62/153.01 – the 1998 high and 38.2% retracement of the entire 1982/2011 bear trend. It is here we would be alert to a potentially important top.” 

“Key support stays at 139.42/40, which we expect to hold to keep the risks skewed directly higher.”

GBP/USD has traded at its weakest level since 1985 but pares intraday recovery gains. Still, analysts at Société Générale expect the pair to head lower towards 1.10.

Short-term resistance aligns at 1.1410 

“GBP/USD recently broke the lows of 2020 denoting persistence in downtrend. That low of 1.1410 is expected to be a short-term resistance.” 

“The pair is expected to head lower towards next potential supports at projections of 1.1210/1.1160 and 1.1000 representing the descending trend line connecting lows of 2016 and 2020.”

EUR/NOK is now close to the upper limit of a multiyear channel at 10.32 which is also the 76.4% retracement from June. Above here, the pair is set to enjoy further gains, economists at Société Générale report.

A short-term pullback is not ruled out

“A short-term pullback is not ruled out towards 200-DMA at 9.99/9.96. This is first layer of support.”

“Weekly MACD is attempting a cross above its trigger and entering positive territory which points towards upside.”

“Once a move beyond 10.32 materializes, an extended rebound is not ruled out.”

• DXY climbs to fresh highs near 112.00 before losing momentum.
• Further upside remains well on the cards for the dollar near term.

DXY corrects lower after two consecutive daily advances, including new 20-year highs just below the 112.00 mark earlier on Thursday.

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 7-month support line near 106.80. That said, occasional bouts of weakness could be deemed as buying opportunities with the immediate target at the 2022 high at 111.81 (September 22).

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 101.95.

DXY daily chart

• USD/CHF catches aggressive bids on Thursday and rallies over 200 pips from the daily low.
• The SNB’s 50 bps seems to have disappointed traders and weighs heavily on the Swiss franc.
• The USD trims a part of intraday retracement losses and remains supportive of the move up.

The USD/CHF pair catches aggressive bids after the Swiss National Bank announced its policy decision earlier this Thursday and continues scaling higher through the mid-European session. The momentum lifts spot prices to a fresh two-week high, though stalls ahead of the 0.9860-0.9870 supply zone tested in August and earlier this month.

The SNB hikes its policy rate by 75 bps, as was widely expected, though some market participants have been pricing in a more aggressive 100 bps increase going into the decision. This turns out to be a key factor that weighs heavily on the Swiss franc and prompts aggressive short covering around the USD/CHF pair.

The strong intraday ascent takes along some short-term trading stops placed near the 100-day SMA. A subsequent strength and acceptance above the 0.9700 mark prompt some technical buying. This, along with the emergence of some US dollar dip-buying, provides an additional lift to the USD/CHF pair and remains supportive.

The initial market reaction to the news that the Japanese government has intervened in the forex market is fading rather quickly. Apart from this, a more hawkish stance adopted by the Federal Reserve continues to act as a tailwind for the greenback. This, in turn, supports prospects for additional gains for the USD/CHF pair.

Bulls, however, might prefer to wait for a sustained strength beyond the 0.9860-0.9870 region before positioning for any further appreciating move. Next on tap will be the release of the US Weekly Initial Jobless Claims data, which might influence the USD price dynamics and provide some impetus to the USD/CHF pair.

Technical levels to watch

• USD/TRY prints new record peak around 18.40 on Thursday.
• The CBRT reduced the One-Week Repo Rate by 100 bps.
• Türkiye Consumer Confidence improved in September.

Further weakness in the Turkish lira motivated USD/TRY to advance to new all-time highs near the 18.40 yardstick on Thursday.

USD/TRY stronger post-CBRT

USD/TRY trades in the positive territory since Monday and has accentuated the upside on Thursday after the Turkish central bank (CBRT) once again surprised markets and reduced the One-Week Repo Rate by a full point to 12.00%.

In its statement, the CBRT sees the probability of a slowdown in the third quarter in response to the loss of momentum in foreign demand and reiterated that the elevated inflation is bolstered by geopolitical tensions resulting in higher energy costs, price formation that goes in contrast with economic fundamentals and higher food and commodity prices.

The CBRT keeps the medium term inflation target at 5%.

Other than the CBRT meeting, Türkiye’s Consumer Confidence improved slightly to 72.40 in September (from 72.20).

What to look for around TRY

USD/TRY picks up extra pace following another unexpected interest rate cut by the CBRT and flirts with the 18.40 region ono Thursday.

So far, price action around the Turkish lira is expected to keep gyrating around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine - the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating (despite rising less than forecast in July and August), real interest rates remain entrenched well in negative territory and the political pressure to keep the CBRT biased towards low interest rates remains omnipresent.

In addition, the lira is poised to keep suffering against the backdrop of Ankara’s plans to prioritize growth (via higher exports and tourism revenue) and the improvement in the current account.

Key events in Türkiye this week: Consumer Confidence, CBRT Interest Rate decision (Thursday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress of the government’s scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.34% at 18.3807 and faces the next hurdle at 18.3995 (all-time high September 22) seconded by 19.00 (round level). On the downside, a break below 17.9396 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low

• GBP/USD trims a part of its intraday gains after the BoE delivers a 50 bps rate hike on Thursday.
• The USD remains stuck below a two-decade high but continues to extend some support.
• Aggressive Fed rate hike bets act as a tailwind for the USD and should cap the upside for the pair.

The GBP/USD pair meets with fresh supply and trims a part of its strong intraday gains after the Bank of England announced its policy decision. Spot prices retreat back below the 1.1300 mark, though remain comfortably above the lowest level since 1985 touched earlier this Thursday. 

As was widely expected, the UK central bank raised interest rates by 50 bps - the seventh hike since December - at the end of the September policy meeting. This, however, might have disappointed some investors anticipating a more aggressive rate increase and turned out to be a key factor acting as a headwind for the British pound.

The US dollar, on the other hand, is seen consolidating its sharp intraday retracement slide from a new two-decade high and continues to lend some support to the GBP/USD pair. The sharp USD downfall on Thursday follows the news that the Japanese government has intervened in the forex market, which triggers a massive rally in the Japanese yen.

From a technical perspective the pair has today recovered back up to the underside of an important trendline and the base of a long-term falling channel at 1.1315, drawn by connecting the May, June and July 2022 lows. This was breached by the previous day's candle on USD strength following the Fed meeting, however, today's recovery on the back of the BoE meeting announcement has seen a throwback move unfold to the underside of the channel. The prior day's close is a bearish signal and more downside is quite possible. The throwback may provide the perfect low risk entry for short sell orders as price kisses it goodbye for the last time, although a more cautious entry point would be the day's lows at 1.1210. A possible downside target at 1.1100 is the 61.8% Fibonacci extension of the move prior to breakout. 

That said, a more hawkish stance adopted by the Federal Reserve should continue to lend some support to the greenback. Apart from this, a bleak outlook for the UK economy might further contribute to keeping a lid on any meaningful upside for the GBP/USD pair, warranting some caution before positioning for any meaningful recovery move in the near term.

Technical levels to watch

Following its September policy meeting, the Bank of England (BoE) announced that it raised the policy rate by 50 basis points (bps) to 2.25%. Although this decision came in line with the market expectation, futures markets were pricing in a strong chance of a 75 bps hike.

Follow our live coverage of the BoE policy announcements and the market reaction.

Key takeaways from policy statement

"MPC votes 5-4 to raise bank rate to 2.25%."

"MPC members Haskel, Mann and Ramsden voted to raise rates to 2.5%; MPC's Dhingra voted for 2%."

"MPC voted 9-0 to reduce stock of government bonds by 80 bln stg over next 12 months to 758 bln stg."

"Reduction in gilt holdings is in line with strategy announced in August."

"Inflation to peak at just under 11% in October (Aug forecast: 13.3% in Oct)."

"CPI expected to remain above 10% for a few months after Oct, before falling."

"Q3 GDP seen -0.1% QQ (Aug forecast: +0.4% QQ), second successive quarter of contraction, meets definition of technical recession."

"UK energy price guarantee will significantly limit further inflation rises, support demand relative to aug forecasts."

"MPC will respond forcefully, as necessary, to more persistent inflation pressures."

"Energy price guarantee adds to inflation pressure in medium term."

"Will assess monetary policy implications of government growth plan in nov forecasts."

"Energy price guarantee may reduce risk of persistent domestic price and wage pressures, but risk remains material."

• EUR/JPY abruptly dropped to 2-week lows near the 139.00 mark.
• Another visit to the 2022 highs beyond 145.00 is not ruled out.

EUR/JPY adds to the weekly pullback and retreats to multi-session lows near 139.00 following the BoJ-Government intervention.

The cross met initial support in the vicinity of the 139.00 neighbourhood, where the 55- and 100-day SMAs coincide. The drop, however, lacked follow through and sparked a rapid rebound to the 140.00 mark and beyond.

Against that, further recovery should not be ruled out just yet and the cross continues to target the YTD peak at 145.63 (September 12) in the relatively short-term horizon.

In the meantime, while above the 200-day SMA at 135.51, the prospects for the pair should remain constructive.

EUR/JPY daily chart

BoE Monetary Policy Decision – Overview

The Bank of England (BoE) is scheduled to announce its monetary policy decision this Thursday at 11:00 GMT and looks poised to hike rates for the seventh time since December to rein in soaring inflation. The broader consensus is that the UK central bank would raise benchmark interest rates by 50 bps. Meanwhile, UK Prime Minister Liz Truss announced an energy relief package for households and businesses, which could help slow inflation and sets the stage for a dovish pivot.

Analysts at Danske Bank offer a brief preview and explain: “We expect BoE to hike the Bank Rate by another 50 bps but acknowledge that it is a close call between 50 bps and 75 bps. We expect further 50 bps hikes in both November and December followed by 25 bps in February. Hence, we lift the end point of our projection to 3.25% (prev. 2.50%). We expect fewer hikes than priced in markets as we emphasise the rising recession risk.”

How could it affect GBP/USD?

Heading into the key event risk, the GBP/USD pair stages a goodish rebound from its lowest level since 1985 touched earlier this Thursday amid a sharp US dollar pullback from a two-decade high. A decision to frontload the rate hike and deliver a supersized 75 bps increase could prompt aggressive short-covering around the British pound. That said, any immediate 
market reaction is likely to remain limited amid the looming recession risk.

Conversely, a dovish tilt should weigh heavily on sterling and set the stage for an extension of the GBP/USD pair's recent well-established bearish trend. This, along with a further escalation in the Russia-Ukraine conflict, would be enough to confirm a fresh bearish breakdown and drag the GBP/USD pair further below the 1.1200 round-figure mark.

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical overview of the GBP/USD pair and writes: “The Relative Strength Index (RSI) indicator on the four-hour chart stays well below 30, pointing to extremely oversold conditions in the pair. Unless the BoE delivers a hawkish surprise as mentioned above, however, market participants are likely to ignore the technical conditions for the time being.”

Eren also outlines important technical levels to trade the GBP/USD pair: “Interim support seems to have formed at 1.1220 (static level) before 1.1200 (psychological level) and 1.1100 (psychological level). On the upside, initial resistance is located at 1.1250 (former support) ahead of 1.1300 (psychological level) and 1.1350 (static level, 20-period SMA).”

Key Notes

  •  BOE Interest Rate Decision Preview: GBP/USD braces for volatility storm, eyeing a 75 bps hike

  •  BoE Preview: Forecasts from 10 major banks, a close call between 50 bps and 75 bps

  •  GBP/USD Forecast: Can pound find bottom on a 75 bps BoE hike?

About the BoE interest rate decision

The BoE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

In a press brief following the Japanese government's intervention in the forex market, Japanese Finance Minister Shunichi Suzuki said that they were concerned about excessive fx moves and noted that they cannot be overlooked, per Reuters.

Suzuki refrained from commenting on the size of the intervention and didn't comment on whether it was a solo act.

"We will take necessary steps against excessive moves," Suzuki reiterated. "We are always closely in touch with currency authorities of other countries."

Meanwhile, Japan's top currency diplomat Masato Kanda told reporters that forex action can be taken "any day, anywhere, including on holidays."

Market reaction

USD/JPY recovered modestly after these comments and was last seen trading t 142.80, where it was still down 0.85% on a daily basis.

Additional takeaways

"Fx intervention having intended effects so far."

"Decided to intervene by examining overall trend."

"Must respect Bank of Japan's independence."

"Shared view with BoJ that recent volatility, one-sided fx moves are undesirable."

"Intervention can't be tied to specific currency level, will watch overall trend."

• EUR/JPY dropped to a fresh multi-week low at 139.25 on Thursday.
• Japanese government finally intervened in the FX market.
• The pair trades deep in negative territory despite latest rebound.

EUR/JPY lost nearly 300 pips during the European trading hours and touched its lowest level in two weeks at 139.25 before staging a rebound. As of writing, the pair was trading at 140.58, where it was still down nearly 1% on a daily basis.

During the Asian trading hours, the Bank of Japan (BoJ) announced that it left the policy rate unchanged at -0.1% as expected and maintained the 10-year Japanese Government bond yield target at 0%. The BoJ's inaction caused the Japanese yen to come under selling pressure and EUR/JPY climbed to a daily high of 143.70.

In a dramatic turn of events, Japan's top currency diplomat Masato Kanda confirmed over that they have intervened in the FX market and JPY recorded impressive gains against its major rivals. With the initial reaction, USD/JPY lost 500 pips, CHF/JPY fell over 3% and GBP/JPY fell from 164.50 to a seven-week low of 159.65.

Japanese Finance Minister Shunichi Suzuki and Kanda are expected to brief reporters on the decision to intervene in the FX market at 0930 GMT.

Later in the day, the European Commission will release the preliminary Consumer Confidence data for September.

Technical levels to watch for

• Gold attracts some dip-buying near the $1,655 region, though lacks any follow-through.
• A sharp USD pullback from a two-decade high offers some support to the commodity.
• Aggressive Fed rate hike bets, a positive risk tone acts as a headwind for the XAU/USD.

Gold reverses an early European session dip to the $1,655 area and climbs to a fresh daily high in the last hour, though lacks follow-through buying. The XAU/USD is currently placed around the $1,670 region and remains confined in a familiar trading range held over the past week or so.

The US dollar witnessed a dramatic turnaround from a fresh 20-year peak touched earlier this Thursday and turns out to be a key factor lending some support to the dollar-denominated gold. The sharp USD downfall is sponsored by a massive rally in the Japanese yen that followed news that the Japanese government has intervened in the forex market. That said, a more hawkish stance adopted by the Federal Reserve could act as a tailwind for the greenback.

As was widely expected, the Fed raised interest rates by another 75 bps on Wednesday and signalled more large rate increases at its upcoming policy meetings. The Fed's so-called dot plot revealed that policymakers expect the benchmark lending rate to top 4% by the end of 2022 and further hikes in 2023, with rate cuts beginning only in 2024. This remains supportive of elevated US Treasury bond yields and caps the upside for the non-yielding gold.

Apart from this, a modest recovery in the risk sentiment - as depicted by a generally positive tone around the equity markets - might further contribute to keeping a lid on the safe-haven precious metal. From a technical perspective, the one-week-old trading range constitutes the formation of a rectangle. Given the recent decline, this might still be categorized as a bearish consolidation phase and supports prospects for a further near-term fall.

The fundamental, as well as the technical backdrop, suggests that the path of least resistance for gold is to the downside. Hence, any meaningful recovery attempt could be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Market participants now look forward to the US Weekly Initial Jobless Claims. This, along with the US bond yields and the broader risk sentiment, might provide some impetus to the commodity.

Technical levels to watch

• CHF/JPY suffered heavy losses during the European trading hours on Thursday.
• SNB hiked its policy rate by 75 bps following September policy meeting.
• Japanese government announced that they intervened in the FX market.

After having touched its highest level since 1980 above 151.00 earlier in the day, the CHF/JPY pair lost over 600 pips in the last hour. As of writing, the pair was down nearly 3% on the day at 145.00.

Earlier in the day, the Bank of Japan (BoJ) announced that it left its policy settings unchanged, keeping the policy rate steady at 0.1% and maintaining the 10-year  JGB yield target at 0.00%. With the initial reaction, the JPY weakened against its rivals and allowed CHF/JPY to gather bullish momentum.

During the European trading hours, the Swiss National Bank (SNB) said that it hiked the policy rate by 75 basis points to 0.5%. Since markets have been speculating that the SNB could opt for a 100 bps hike, this decision caused the CHF to lose interest and capped CHF/JPY's upside.

SNB hikes rates by 75 bps to 0.50%, as widely expected.

Finally, Japan's top currency diplomat Masato Kanda said they have intervened in the FX market to limit JPY weakness, adding that the government “took decisive action in the forex market.”

Breaking: USD/JPY corrects sharply below 144.00 as Japan intervenes.

Combined with the SNB's smaller-than-speculated 75 bps hike, the Japanese government's intervention opened the flood gates and caused CHF/JPY to suffer one of the largest one-day declines in its history. 

CHF/JPY 15-min chart

• GBP/USD comes under intense selling pressure on news of Japan’s intervention in the FX market.
• A solid intraday recovery in the British pound offers some support and helps limit the downside.
• The market focus remains glued to the crucial BoE monetary policy decision due on Thursday.

The GBP/JPY cross witnessed a dramatic intraday turnaround on Thursday and tumbles nearly 500 pips from the daily high touched during the early European session. The sharp downfall drags spot prices closer to mid-159.00s, or its lowest level since early August and is exclusively sponsored by a massive rally in the Japanese yen.

Japan's top currency diplomat Masato Kanda confirmed this Thursday that the government has intervened in the FX market, which, in turn, prompts aggressive short-covering around the JPY. This, to a larger extent, overshadows the Bank of Japan's dovish stance and turns out to be a key factor exerting heavy downward pressure on the GBP/JPY cross. It is worth recalling that the Japanese central bank decided to leave its policy settings unchanged and vowed to keep purchasing bonds so that 10-year yields remain pinned at zero.

The British pound, on the other hand, stages a solid bounce amid some repositioning trade ahead of the crucial Bank of England policy decision and a sharp US dollar pullback from a two-decade high. This offers some support to the GBP/JPY cross and assists spot prices to quickly bounce back above the 160.00 psychological mark. It, however, remains to be seen if bulls can capitalize on the attempted recovery or Thursday's steep fall marks a bearish breakdown, which might have already set the stage for a further depreciating move.

Technical levels to watch

EUR/USD recovered modestly during the European trading hours. The pair needs to reclaim 0.9880 to extend the rebound, FXStreet’s Eren Sengezer reports.

The dollar could lose interest in case US stocks rebound

“In case Wall Street's main indexes gain traction after the opening bell, the dollar could deepen its downward correction and allow EUR/USD to continue to stretch higher.”

“0.9880 (former support, static level) forms initial resistance. If EUR/USD manages to rise above that level and starts using it as support, it could target 0.9900 (psychological level), 0.9950 (static level, 20-period SMA on the four-hour chart) and 0.9980 (100-period SMA).”

“On the downside, 0.9800 (psychological level, static level) aligns as first support ahead of 0.9750 (static level from October 2002) and 0.9700 (psychological level).”

• EUR/USD bounces off lows near the 0.9800 mark.
• The dollar now looks offered following the Fed-led rally.
• ECB-speak, Flash EMU Consumer Confidence next on tap.

Following another test of the 0.9800 neighbourhood, EUR/USD manages to regain some upside traction and advances to the 0.9870 region on Thursday.

EUR/USD looks well supported around 0.9800

EUR/USD partially reverses the weekly leg lower after the Fed-induced pullback forced the pair to retreat to the area last visited back in later October 2002 near the 0.9800 mark on Wednesday and earlier on Thursday.

The daily recovery in spot comes in response to the now renewed selling pressure surrounding the dollar, as investors appear to be cashing up some gains considering the acute uptick in the wake of the Fed’s decision to hike rates at its gathering on Wednesday.

In the euro calendar, the EMU advanced Consumer Confidence gauged by the European Commission will be the only release of note ahead of the ECB General Council Meeting and speeches by Board members E.Fernandez-Bollo, A.Tuominen and I.Schnabel.

In the US docket, Initial Claims and the CB Leading Index will take centre stage later in the NA session.

What to look for around EUR

EUR/USD tumbled to nearly 2-decade lows in the 0.9800 neighbourhood following the equally abrupt move higher in the dollar, particularly exacerbated after the Fed’s move on rates on Wednesday.

So far, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence.

On the negatives for the single currency emerge the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals.

Key events in the euro area this week: Flash Consumer Confidence (Thursday) – EMU, Germany Flash Manufacturing/Services PMI (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections on September 25. Fragmentation risks amidst the ECB’s normalization of its monetary conditions. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EUR/USD levels to watch

So far, the pair is advancing 0.38% at 0.9874 and the next up barrier is at 1.0050 (weekly high September 20) followed by 1.0085 (55-day SMA) and finally 1.0197 (monthly high September 12). On the flip side, a breach of 0.9806 (2022 low September 22) would target 0.9685 (October 2002 low) en route to 0.9608 (September 2002 low).

The Federal Open Market Committee (FOMC)  delivered its third straight 75 bps increase.  Economists at HSBC now expect another 75 bps hike in November and continue to look for USD strength ahead.

More supersized hikes

“We now expect additional rate hikes of 75 bps in November, 50 bps in December, and a final 25 bps hike in February 2023, taking the federal funds target range up to 4.50-4.75%. The risks for policy rates may still be skewed to the upside, given sticky and elevated inflation.”

“The USD should be well supported by the three pillars of our framework,. First, the Fed has indicated that there is still much work to be done to rein in inflation to target. Second, a higher ‘peak rate’ is helpful for the USD. It is also clear that the Fed views slower growth as a likely and necessary part of this endeavour. With other global central banks operating with a similar mindset, the resultant challenging outlook for growth is likely to remain similarly USD positive. Third, the combination of these first two factors is likely to hamper risk appetite, boosting the ‘safe-haven’ USD.” 

“We believe the September FOMC outcome has materially bolstered the bullish case for the USD.”

The US dollar is stronger in the wake of another hawkish FOMC announcement. Economists at MUFG Bank expect the greenback to remain on solid foot amid prospects of further tightening.

S&P 500 Index set to break below the June low

“Momentum remains clearly in favour of the US dollar as the actions strengthen the prospect of continued tightening of financial conditions.”

“The S&P 500 dropped 1.7% yesterday and is quickly approaching the June low, which we believe will be broken over the coming days or weeks.”

• GBP/USD stages a goodish intraday recovery from its lowest level since 1985.
• A modest USD pullback from a new two-decade high offer supports to the pair.
• The market focus remains glued to the crucial BoE monetary policy decision.

The GBP/USD pair attracts some buying in the vicinity of the 1.1200 mark and rebounds from its lowest level since 1985 touched during the early European session this Thursday. The pair is currently trading near the daily high, just below the 1.1300 mark, though any meaningful recovery seems elusive as the focus remains on the crucial Bank of England policy decision.

Heading into the key central bank event risk, some repositioning trade turns out to be a key factor offering support to the GBP/USD pair. Apart from this, the intraday uptick could further be attributed to some cross-driven strength stemming from a dovish Bank of Japan-inspired rally in the GBP/JPY cross. Furthermore, a modest US dollar pullback from a new 20-year peak remains supportive of the modest recovery move.

The USD downtick, meanwhile, lacks any obvious fundamental catalyst and is likely to remain limited amid a more hawkish stance adopted by the Federal Reserve. In fact, the Fed raised interest rates by another 75 bps on Wednesday and signalled more aggressive rate increases at its upcoming meetings. This, along with the prevalent risk-off mood, should act as a tailwind for the safe-haven buck and cap the GBP/USD pair.

Traders might also prefer to move to the sidelines and wait for the BoE monetary policy update before placing aggressive bets. The UK central bank is expected to step up its efforts to curb inflation and deliver a supersized 75 bps rate increase on Thursday. Investors will also look to the accompanying policy statement for clues about future rate hikes amid growing recession risks, which will influence the British pound.

Technical levels to watch

USD/JPY has come under intense selling pressure and given away nearly 200 pips on news that the Japanese government has intervened in the forex market to stem the rapid decline in the yen.

Japan's top currency diplomat Masato Kanda confirmed over the last minutes that they have intervened in the FX market.

Earlier in the day, Kand warned that they “will respond appropriately to fx moves without ruling out any options.”

In response to the big move by Japan, USD/JPY is in a free fall and has broken several critical support, as yen bulls are being rescued finally. The pair hit the highest level in 24 years at 145.90 before the Japanese authorities deemed it necessary to step in in order to save the local currency.

In an Economic Bulletin article published on Thursday; the European Central Bank (ECB) provides a detailed analysis of current and future economic conditions.

Additional takeaways

Market reaction

In light of the recent price action, FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang suggest USD/CNH could advance to the 7.1500 region in the next few weeks.

Key Quotes

24-hour view: “While our view for USD to strengthen yesterday was correct, we did not expect the upward acceleration as USD jumped easily above 7.0500 (high has been 7.0800). USD extended its advance during early Asian hours and a break of 7.1000 would not be surprising. The next level to watch is at 7.1200. Support is at 7.0730 followed by 7.0630.”

Next 1-3 weeks: “We have held a positive view since the middle of last week. After USD pulled back sharply from 7.0427, we indicated on Monday (19 Sep, spot at 6.9980) that there is still chance for USD to advance to 7.0500. Our view was correct but we did not quite expect the rapid manner in which USD blew past 7.0500 yesterday. The price actions suggest USD is ready for the next up leg towards 7.1500, possibly to the 2020 high of 7.1960. Overall, only a break of 7.0400 (‘strong support’ level was at 6.9750 yesterday) would indicate that the USD strength has eased.”

The Federal Reserve lifted its policy rate 75 bps to 3.25%. The USD advanced in response to the announcement. Economists at Scotiabank believe that the greenback is set to remain firm for now, but sustained gains are unlikely.

USD appears quite significantly overvalued

“We expect the USD to remain firm in the short run but we remain reluctant to factor in additional, sustained USD gains from here and we think it would be complacent to dismiss out-of-hand downside risks here. This is sounding a bit like a broken record but the salient points remain that 1) the USD appears quite significantly overvalued. 2) The USD now looks quite fully priced, with peak Fed funds expectations having advanced by more than 100 bps since early August. 3) Speculative and leveraged accounts have turned more bullish on the USD and hold the biggest combined (net) USD long since February.”

“The counterarguments in favour of the USD remaining strong for now are clear. 1) Elevated geo-political and market risks support USD demand. 2) Alternatives are scarce and the USD is still the ‘least dirty shirt’ among the G10 currencies.” 

“We think the time is coming for a USD correction but dollar bears will have to remain patient for a little longer.”

Following the Swiss National Bank's (SNB) decision to hike its policy rate by 75 bps on Thursday, Chairman Thomas Jordan noted that “negative rates will remain an important instrument, to be used if needed.”

Additional takeaways

Market reaction

USD/CHF has paused its upsurge, consolidating at around 0.9772, as investors digest comments from the SNB Chief. The pair is gaining 1.16% on the day.

• USD/CHF catches aggressive bets and jumps to a two-week high following the SNB policy decision.
• A 75 bps hike was already priced in and weigh on the CHF in the absence of any hawkish surprise.
• Bets for more aggressive Fed rate hikes continue to lift the USD and remain supportive of the move.

The USD/CHF pair reverses an intraday dip to the 0.9620 area and spikes to a two-week high after the Swiss National Bank (SNB) announced its monetary policy decision. The pair breaks through the 100-day SMA barrier and is currently trading around the 0.9765-0.9770 region.

As was widely expected, the SNB hiked its benchmark sight deposit interest rate by 75 bps to 0.50% from -0.25% previous. This comes on the back of a surprise 50 bps increase in the June meeting, which was the first hike since September 2007. The Swiss franc, however, weakens across the board in the absence of a hawkish surprise. Apart from this, relentless US dollar buying provides a strong lift to the USD/CHF pair.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, rose to a fresh 20-year peak amid a more hawkish stance adopted by the Federal Reserve. It is worth noting that the Fed raised interest rates by another 75 bps on Wednesday and signalled more aggressive rate increases at its upcoming meetings. Apart from this, technical buying above the 100 DMA barrier remains supportive of the move.

Hence, it remains to be seen if the latest leg up is backed by genuine buying or turns out to be a stop. Investors now look forward to the post-meeting press conference, where comments by Thomas Jordan, Chairman of the Governing Board of the SNB, should provide a fresh impetus to the USD/CHF pair. Later during the early North American session, traders will take cues from the release of the US Weekly Initial Jobless Claims data.

Technical levels to watch

At its September quarterly monetary policy assessment, the Swiss National Bank (SNB) hiked its benchmark sight deposit interest rate by 75 bps to 0.50% from -0.25% previous, as widely aniticpated.

In the June meeting, the central bank surprised markets with a 50 bps increase, its first rate hike since September 2007. The dramatic move sent the Swiss franc surging more than 2% against the common currency.

Summary of the statement

Market reaction 

In an initial reaction to the SNB rate hike decision, the USD/CHF pair spiked to fresh two-week highs of 0.9759, where it now wavers. The spot is adding 0.95% on the day.

About SNB Rate Decision

The Swiss National Bank conducts the country’s monetary policy as an independent central bank. It is obliged by the Constitution and by statute to act in accordance with the interests of the country as a whole. Its primary goal is to ensure price stability, while taking due account of economic developments. In so doing, it creates an appropriate environment for economic growth.

At its September monetary policy meeting on Thursday, Indonesia’s central bank, Bank Indonesia (BI), hiked its 7-day reverse repo rate by an unexpected 50 bps from 3.75% to 4.25%.

The central bank Governor Warjiyo noted that the rupiah depreciation is relatively better than peers.

Additional Comments:

more to come ...

• USD/JPY rallies to a fresh 24-year high after the BoJ sticks to its dovish policy stance.
• Expectations for aggressive Fed rate hikes boost the greenback and remain supportive.
• Fears of intervention, the risk-off mood could limit losses for the JPY and cap the upside.

The USD/JPY pair catches fresh bids during the early European session and hits a new 24-year high, with bulls now eyeing to reclaim the 146.00 round-figure mark.

The latest leg up follows comments from the Bank of Japan Governor Harihuko Kuroda, reiterating that they will patiently continue powerful monetary easing. During the post-meeting press conference, Kuroda added that there is no need to change forward guidance at present and negative rates are not having a big impact on financial institutions. This, in turn, is seen weighing heavily on the JPY and allowing the USD/JPY pair to build on its strong intraday rally from the 143.50 area.

The US dollar, on the other hand, climbs to a fresh 20-year peak and continues to draw support from a more hawkish stance adopted by the Federal Reserve. It is worth recalling that the Fed raised interest rates by another 75 bps on Wednesday and signalled that it will likely undertake more aggressive rate increases to cap inflation. This marks a big divergence in comparison to the BoJ's dovish outlook and supports prospects for an extension of the appreciating move for the USD/JPY pair.

That said, speculations of an intervention by the Japanese government, along with the prevalent risk-off mood, could limit losses for the safe-haven JPY and caps the upside for the USD/JPY pair. Against the backdrop of growing recession fears, the risk of a further escalation in the Russia-Ukraine conflict continues to temper investors' appetite for riskier assets. Apart from this, the overbought RSI on the daily chart warrants cautions for bulls and before positioning for further gains.

Technical levels to watch

The US Dollar Index surged to its highest level since July 2002 above 111.70 following the US Federal Reserve's decision to hike its policy rate by 75 basis points (bps). Economists at ING expect the greenback to get even stronger.

Dollar to remain bid on dips

“Expect the dollar to remain bid on dips as confidence grows that deposit rates for the world's most liquid currency will push above 4% over the coming months.”  

“DXY is flying. Expect corrections to prove shallow.”

EUR/USD continues to grind to new lows of the year. Economists at ING expect the world’s most popular currency pair to extend its decline towards the 0.9650 zone.

Eurozone faces some major challenges this winter

“Yield differentials have not been playing a big role in EUR/USD pricing. It is more about the overall environment. Here, the Fed is leading the world's major central banks into more hawkish policy settings and making recessions more likely.”

“As a relatively open economy with a large manufacturing base – and a war on its doorstep – the eurozone faces some major challenges this winter.”

“We suspect EUR/USD continues to grind lower to the 0.9650 area over coming weeks.”

Norges Bank is set to hike its interest rate by 50 bps to 2.25%. EUR/NOK has rallied since the start of September and the central bank’s decision is unlikely to reverse the upmove, economists at ING report.

Norges Bank hike unlikely to turn the NOK around

“Norges Bank is widely expected to deliver another 50 bps rate hike today. With core inflation having continued to press higher, we expect NB to signal more tightening ahead, and we currently forecast another 50 bps rate hike in November. This may not have many implications for the krone’s short-term outlook, as external drivers should remain dominant.”

“We continue to see scope for a recovery in NOK around the turn of the year, but near-term downside risks remain significant, and a return to sub-10.00 EUR/NOK levels may not materialise for several more weeks.”

See – Norges Bank Preview: Forecasts from five major banks, set for another 50 bps

Turkish central bank’s rate decision is unlikely to have an impact on the lira, in the opinion of economists at Commerzbank. TRY is set to suffer another round of selling pressure.

High inflation rates and the dollar are the driving forces in USD/TRY

“The lira’s cautious reaction to the August decision illustrated that the market has given up hoping for monetary policy to support the currency. That means today’s decision is unlikely to have much of an effect on the TRY exchange rates either.”

“High inflation rates and the dollar are the driving forces in USD/TRY. Due to the continued high levels of foreign debt, we still do not consider simply accepting TRY depreciation to constitute a sustainable strategy. As a result, the next TRY crisis is only a matter of time in our view.”

• The index picks up further pace and approaches 112.00.
• US yields in the short end of the curve rose past 4.00%.
• Initial Claims, CB Leading Index next of note in the docket.

The greenback, when tracked by the USD Index (DXY), climbs to new highs in levels last seen in June 2002 near 111.80 on Thursday.

USD Index bid after Fed, looks to data

The optimism around the dollar remains well and sound amidst increasing tailwinds after the Federal Reserve raised the Fed Funds Target Range (FFTR) by 75 bps to 3.00%-3.25% at its event on Wednesday.

Indeed, the renewed strength in the buck has been also reinforced by Powell’s comments reinforcing the tighter-for-longer stance from the Fed, in line with what he already announced at the Jackson Hole Symposium.

The move higher in the dollar also comes in tandem with further upside in US yields, where the short term of the curve surpasses the 4.00% mark for the first time since October 2007.

In the US data space, usual weekly Claims are due seconded by the CB Leading Index.

What to look for around USD

The dollar’s rally remains unabated and it has been fuelled further by the recent FOMC event and comments by Chair Powell. The next target of note in DXY now emerges at the 112.00 area.

Bolstering the dollar’s underlying positive stance appears the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market.

Looking at the more macro scenario, the greenback appears propped up by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: Initial Claims, CB Leading Index (Thursday) – Flash Manufacturing/Services PMIs, Powell speech (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation over a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is advancing 0.38% at 111.76 and a breakout of 111.81 (2022 high September 22) would expose 112.00 (round level) and then 113.50 (weekly high May 24 2002). On the downside, the next contention aligns at 107.92 (55-day SMA) seconded by 107.68 (monthly low September 13) and finally 107.58 (weekly low August 26).

The Bank of England (BoE) is set to hike 50 bps which will take Bank Rate up to 2.25%. Nonetheless, economists at ING expect the GBP/USD pair to extend its downfall towards 1.10.

BoE to hike 50 bps, sterling at risk

“The hawkish BoE has provided little support to sterling this summer. Instead, fiscal concern is growing in the UK and tomorrow's 'fiscal event' could prove the trigger for another round of Gilt and sterling selling.”

“GBP/USD to continue grinding towards 1.10. And a difficult equity environment could see EUR/GBP edging back to the 0.88 area.”

See – BoE Preview: Forecasts from 10 major banks, a close call between 50 bps and 75 bps

Norges Bank is set to raise its policy rate by 50 bps. Economists at Commerzbank expect the krone to benefit from the decision as further rate hikes are expected to combat inflation.

Wealth of energy sources and Norges Bank support NOK

“It is expected that Norges Bank will hike its interest rate by 50 bps to 2.25% today.”

“Norges Bank is not going to leave any doubt about its determination in fighting inflation today and will signal further rate hikes. That is likely to provide sufficient support to NOK, in particular as Norway’s gas and oil supplies ensure that NOK will principally benefit from the energy crisis in Europe.”

“We assume that EUR/NOK will ease below 10 again over the coming months.”

See – Norges Bank Preview: Forecasts from five major banks, set for another 50 bps

S&P 500 have broken important support levels at the uptrend from the 2022 low, which should trigger a sooner than expected resumption of the core bearish downtrend, in the view of economists at Credit Suisse.

Near-term resistance moves to 3930/62

“S&P 500 has broken below the uptrend from the 2022 low and 61.8% retracement at 3914/3887, which negates the potential for a short-term period of consolidation and instead suggests a direct resumption of the broader downtrend, reinforced by the rolling lower in weekly MACD.”

“We look for a move back to new lows for the year below 3637 and for a test of the 200-week average at 3586, then 3505/00. Whilst we would look for better support to show here, a break can clear the way for a fall to a cluster of supports at 3234/3195, which includes the 38.2% retracement of the entire uptrend from the 2009 GFC low.”

“Near-term resistance moves to the recent breakdown point at 3930/62, which we ideally look to cap the market to keep the risks directly lower. Next minor resistance above here is back at the 4119 high.”

• AUD/USD continues losing ground for the third straight day and drops to over a two-year low.
• The post-FOMC USD rally remains uninterrupted and continues to exert downward pressure.
• The risk-off impulse further contributes to driving flows away from the risk-sensitive aussie.

The AUD/USD pair remains under heavy selling pressure for the third straight day on Thursday and drops to the 0.6580 region - the lowest since May 2020 during the early European session.

The US dollar builds on the previous day's post-FOMC breakout momentum and hits a fresh 20-year high, which, in turn, is seen as a key factor dragging the AUD/USD pair lower. It is worth recalling that the Fed raised interest rates by another 75 bps on Wednesday and signalled that it will likely undertake more aggressive rate increases to cap inflation. This, along with the prevalent risk-off environment, provides an additional lift to the safe-haven greenback.

The market sentiment remains fragile amid growing worries about a deeper economic downturn and the risk of a further escalation in the Russia-Ukraine conflict. In the latest development, Russian President Vladimir Putin announced an immediate partial military mobilization and threatened to use all the means to defend Russia and its people. This, in turn, takes its toll on the global risk sentiment and contributes to driving flows away from the risk-sensitive aussie.

With the latest leg down, the AUD/USD pair confirms this week's bearish breakdown through the 0.6700 mark. A subsequent slide below descending trend-line support extending from December 2020 might have already set the stage for additional weakness. Given that technical indicators on the daily chart are still far from being in the oversold territory, spot prices seem vulnerable to extending the descending trend and aim toward testing the 0.6500 psychological mark.

Technical levels to watch

The Bank of England (BoE) is set to raise its policy rate by 50 bps. In the opinion of economists at Commerzbank, even a 75 bps hike will not be sufficient to lift the British pound.

BoE under particular pressure to deliver a courageous rate hike

“The BoE is under particular pressure today to deliver a courageous rate hike. However, even a 75 bps rate hike (expected is rather a 50 bps hike) is not likely to be sufficient to provide a lasting breather for sterling. 

“The dire growth outlook, rising government debt and high current account deficit point towards depreciation pressure on sterling continuing for now.”

See – BoE Preview: Forecasts from 10 major banks, a close call between 50 bps and 75 bps

The FOMC delivered, as expected, a 75 bps increase in the Fed Funds target range to 3.00-3.25%. EUR/USD's move lower pre and post-Fed meeting is not an encouraging sign. Thus, economists at TD Securities expect the pair to suffer further losses.

EUR/USD year-end target set at 0.96

“We suspect geopolitically posturing ahead of this meeting helped to drive the pair lower. From where the Fed sits, there is still no reason to look topside the pair.”

“The ECB has been talking a big game recently, in what seems to be correlated with the further below-parity EUR/USD drifts. The reality is that they will not be able to compete with the Fed on rates, no matter how hawkish they sound.”

“EUR is a pro-cyclical currency, and the global growth impulse is worsening. The balance of payments remains a mess despite great strides made to improve energy security for the upcoming winter. That could change – for better or for worse.”

“We remain content with our 0.96 target by year-end for now.”

Bank of Japan (BOJ) Governor Harihuko Kuroda continues to speak at the press conference that follows the bank’s monetary policy meeting.

Key quotes

Related reads

• BOJ’s Kuroda: Will patiently continue powerful monetary easing
• USD/JPY Price Analysis:  Bullish Flag assures continuation of a dream run, 147.00 eyed

• Silver price pokes 50-DMA as traders reverse latest gains.
• Monthly support line adds to the downside filters.
• MACD, RSI hints at receding bullish bias, $18.30 appears a tough nut to crack for sellers.

Silver price (XAG/USD) remains pressured around $19.30 while reversing the previous day’s upside momentum heading into Thursday’s European open. In doing so, the bright metal pokes the 50-DMA support while reversing from the downward-sloping resistance line from early June.

Not only the pullback from the key resistance line but the recent retreat of the RSI and the MACD line also keeps the XAG/USD sellers hopeful.

However, an upward sloping support line from September 01, around $19.20, could act as an extra challenge for the metal bears, in addition to the 50-DMA support of $19.30.

In a case where the quote breaks the $19.20 support, a quick fall towards the $19.00 can’t be ruled out.

Following that, a horizontal support area comprising multiple levels marked since mid-July, near $18.30-25, could act as the last defense of silver buyers.

Alternatively, recovery moves need to cross the aforementioned resistance line, at $19.90 by the press time, to convince buyers.

Even so, the monthly high near the $20.00 threshold and the previous month’s peak of $20.87 could challenge the XAG/USD upside afterward.

Silver: Daily chart

Trend: Further downside expected

The Swiss National Bank (SNB) is going to do away with negative interest rates today. Economists at Commerzbank expect the central bank to continue paving the way for a stronger Swiss franc.

CHF remains tool in the SNB’s fight against inflation

“SNB is expected to hike rates by 75 bps to 0.5%. However, what is decisive for the development of CHF is mainly what the SNB signalled regarding its intervention strategy.”

“The SNB cannot accept major franc depreciation if it wants to avoid undesirable inflationary effects. We therefore expect that it continues to signal an exchange rate policy that paves the way for further CHF strength.”

Federal Reserve hiked rates by 75 bps. Economists at Danske Bank revise their Fed call and now expect two more 75 bps hikes in the November and December meetings. They also still forecast EUR/USD to fall to 0.95 in 12 months.

Fast hikes to continue

“We think Fed will prefer more aggressive path and hike 75 bps in both November and December meetings. We also continue to see risks tilted towards Fed maintaining financial conditions at restrictive levels for longer. Consequently, as Powell also acknowledged, the chances of a ‘soft landing’ have declined.” 

“Our forecast would bring the Fed Funds target rate to 4.25-4.50% by the end of the year. In terms of broader market views, we stick to our forecast for EUR/USD to fall to 0.95 in 12M.”

The continuation of the uptrend in USD/JPY appears likely with the next hurdle of relevance now emerging at 146.00, comment FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we indicated that USD ‘could rise above 144.00 but is unlikely able to maintain a foothold above this level’. USD subsequently popped to a high of 144.70, dropped to 143.39 before snapping back up to close at 144.04 (+0.22%). Despite the choppy price actions, the overall outlook points to a higher USD today. That said, the major resistance at 145.00 is unlikely to come under threat (144.70 is still quite a strong resistance level). Support is at 144.00 followed by 143.65.”

Next 1-3 weeks: “We have expected USD to trade sideways since late last week. Yesterday, USD soared and tested the top of our expected range of 141.40/144.70 (high of 144.70 during NY hours). While it is premature to expect a break of 145.00, the odds of USD rising above this level have increased. Looking ahead, the next resistance level of note is at 146.00. Support wise, a breach of 143.30 (‘strong support’ level) would indicate that the chance of USD breaking 145.00 has passed.”

The Bank of Japan (BoJ) left its ultra-expansionary monetary policy unchanged. As a result, the yen depreciated. Economists at Commerzbank believe that a weaker yen is justified.

The JPY flinches, the BoJ does not

“Clearly, some on the FX market had expected that in view of the rampant yen-weakness the BoJ would at least send out cautious signals of monetary tightening. They were disappointed.”

“As long as the monetary policy divide between Japan and the rest of the world remains in place a weaker yen remains fundamentally justified, and the motivation for other central banks to make concerted interventions is likely to remain low.”

Bank of Japan (BOJ) Chief Haruhiko Kuroda reiterated that they “will patiently continue powerful monetary easing” while addressing the post-monetary policy decision press conference.

Additional quotes

Market reaction

The Japanese yen is finding fresh demand on the BOJ Chief’s comments, as USD/JPY eases off fresh 24-year highs at 145.41 to trade at 145.23, at the time of writing. The pair is still up 0.82% on the day.

EUR/GBP has broken key resistance at 0.8746/19. Economists at Credit Suisse expect the pair to enjoy further upside.

Immediate support seen at 0.8721

“We expect further upside to unfold in the medium-term, with next significant resistance seen at the neckline to the late 2020 top and the 61.8% retracement at 0.8861/76, a clear break above which would support strength to the 78.6% retracement and psychological resistance at 0.9000/58.”

“Immediate support is seen at the broken YTD high at 0.8721 and then further below at the recent low at 0.8624, with only a break below here raising concern of a false breakout.”

Considering advanced prints from CME Group for natural gas futures markets, open interest clinched the second consecutive daily drop on Wednesday, this time by around 6.2K contracts. On the other hand, volume went up by around 54.3K contracts after four consecutive daily pullbacks.

Natural Gas still looks contained near $7.50

Prices of natural gas charted an inconclusive session once again on Wednesday amidst shrinking open interest and rising volume, exposing the continuation of the ongoing side-lined theme in the very near term. In the meantime, there is still a decent support around the $7.50 region per MMBtu.

The Federal Open Market Committee (FOMC) raised the policy rate corridor by 75 basis points. In the view of economists at Commerzbank, it is getting harder and harder to add more strength, at least, from the Fed’s factor.

Past hawkish tones are hard to top

“Yesterday's news from the Fed justifies the current USD strength, but hardly provides any new arguments. I still consider this to be moderately USD-positive.” 

“Powell had to answer some questions about a hypothetical future pause in the interest rate cycle. Getting that done without supporting those who want to interpret his words dovishly was not easy.”

“Lesson learned: past hawkish tones are hard to top. It's getting less and less likely that the Fed can push the dollar massively stronger. Those who are betting on USD strength must hope for other factors. On Mr. Putin, for example. But you certainly don't want that either — at least if you're living in Europe.”

• GBP/JPY picks up bids to reverse post-BOJ losses.
• 200-SMA, one-week-old resistance line challenges buyers amid sluggish oscillators.
• Bears have multiple hurdles before aiming at the 160.00 threshold.

GBP/JPY rises half a percent as it reverses the Bank of Japan (BOJ) led moves near 163.10 during early Thursday morning in Europe. In doing so, the cross-currency pair bounces off the two-week low while poking the 200-SMA.

In addition to the 200-SMA level of 163.10, the downward sloping resistance line from September 13, around 163.60, also challenges the pair buyers.

It’s worth noting that the sluggish MACD signals and the RSI (14) also challenge the GBP/JPY buyers.

In a case where the quote rises past 163.60, the odds favoring its run-up towards the latest swing high near 164.40 and the monthly peak of 167.22 can’t be ruled out.

Alternatively, pullback moves need a clear downside break of the seven-week-old support line, close to 162.00 by the press time.

Following that, multiple levels around 161.40 and 160.70-80 could test the GBP/JPY bears before directing them to the 160.00 psychological magnet. Also acting as a downside filter is the previous monthly low near 159.45.

To sum up, GBP/JPY is likely to pare recent losses but the recovery needs a successful break of 163.60 resistance.

GBP/JPY: Four-hour chart

Trend: Further recovery expected

Here is what you need to know on Thursday, September 22:

The US Dollar Index surged to its highest level since July 2002 above 111.70 following the US Federal Reserve's decision to hike its policy rate by 75 basis points (bps) late Wednesday. The dollar preserves its strength early Tuesday as market participants get ready for the Swiss National Bank (SNB) and the Bank of England's (BoE) policy announcements. Later in the day, the European Commission will release the September Consumer Confidence data and the US economic docket will feature the weekly Initial Jobless Claims.

Although the Fed's 75 bps hike was in line with the market expectation, the Summary of Economic Projections showed a hawkish tilt in the policy outlook. The dot plot revealed that officials' median view of the fed fund rate at the end of 2023 rose to 4.6% from 3.8% in June's dot plot. Furthermore, policymakers see the policy rate at 3.9% by the end of 2024, compared to 3.4% previously. During the press conference, FOMC Chairman Jerome Powell acknowledged that there was no "painless way" to bring inflation down but noted that it was difficult to know whether the US economy would tip into recession.

Fed Quick Analysis: Powell projects pain, higher rates for longer set to keep the dollar bid.

Wall Street's three main indexes lost more than 1.5% on Wednesday and the benchmark 10-year US Treasury bond yield managed to hold above 3.5%. Early Thursday, US stock index futures are down between 0.25% and 0.65%.

Earlier in the day, the Bank of Japan (BoJ) announced that it left its policy settings unchanged, leaving the interest rate steady at -0.1% and maintaining the 10-year  JGB yield target at 0.00%. USD/JPY gathered bullish momentum and climbed to its highest level since July 1998 at 145.40 before correcting toward 145.00.

Breaking: USD/JPY jumps as BOJ keeps policy settings steady.

Despite the broad-based dollar strength, USD/CHF stays relatively quiet at around 0.9650. The SNB is expected to raise its policy rate by 75 bps to 0.5% from -0.25%. 

SNB Preview: Firing up the franc? Currency war, 3 other reasons, imply massive 100 bps hike.

GBP/USD trades at its weakest level since 1985 below 1.1250 early Thursday. Analysts see the BoE raising its policy rate by 50 bps to 2.25% but the positioning of futures markets suggests that there is a strong chance of a 75 bps hike. Since there won't be a press conference, the vote split could impact the British pound's valuation against its major rivals.

BOE Interest Rate Decision Preview: GBP/USD braces for volatility storm, eyeing a 75 bps hike.

EUR/USD dropped to a fresh two-decade low early Thursday and came within a touching distance of 0.9800. European Central Bank (ECB) executive board member Isabel Schnabel reiterated on Thursday that they must continue to raise interest rates, providing support to the shared currency for the time being.

Although gold managed to close in positive territory on Wednesday, it failed to preserve its bullish momentum and turned south early Thursday. Pressured by rising US yields, XAU/USD was last seen trading at around $1,660. 

Bitcoin fell toward $18,000 late Wednesday but recovered to the $19,000 area early Thursday. Ethereum lost nearly 6% and touched its lowest level since mid-July near $1,200 on Wednesday. At the time of press, ETH/USD was up 2% on the day at $1,270.

USD/CNY has reached the 7 level. Analysts at Credit Suisse see scope for a further advance to 7.1844.

Notable near-term support shifts to 6.9799/6.9690

“With the 55-day and 200-day averages in a solid uptrend and with our bullish USD view in mind, we see potential for further upside in the medium-term and thus we revise our objective higher once again to the highs of 2019/20 at 7.1844/7.1766, where we would look for a more solid ceiling to be found.”

“Notable near-term support shifts to 6.9799/6.9690, which ideally limits any potential near-term turn back lower.”

FX option expiries for Sept 22 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9800 1.76b
• 0.9900 2.09b
• 0.9950-55 1.08b
• 0.9990-00 5.55b
• 1.0020-30 1.08b
• 1.0050 1.17b
• 1.0100 893m

- GBP/USD: GBP amounts        

• 1.1400 200m
• 1.1490 502m

- USD/JPY: USD amounts                     

• 143.35-45 836m
• 144.50 300m

- USD/CHF: USD amounts        

• 0.9600 300m
• 0.9650 463m

- AUD/USD: AUD amounts  

• 0.6500 357m
• 0.6600-10 375m

- USD/CAD: USD amounts       

• 1.3420 890m
• 1.3450 1.0b

- EUR/CHF: EUR amounts

• 0.9525 311m

The Federal Reserve raised rates by triple-sized 75 bps as expected. There are further rate increases to come, economists at Commerzbank report.

Inflation is a priority

“The Fed took its third big rate step in a row, raising rates by 75 bp to 3.00%-3.25%.” 

“The central bank held out the prospect of further significant rate hikes and is apparently prepared to accept a recession if this is necessary to combat the high inflation.”

“Powell made it very clear again that the Fed is giving priority to fighting inflation. As a result, key rates are likely to rise much higher than most observers and the Fed itself had originally expected. These steps will probably take place quite quickly.”

• Oil prices are expected to tumble further as the hawkish Fed has trimmed growth forecasts.
• A slippage of oil prices below $82.28 will trigger a downside momentum.
• The build-up of oil inventories for a third consecutive week by EIA is hinting at a decline in oil demand.

West Texas Intermediate (WTI), futures on NYMEX, are displaying a fragile pullback move after hitting a low of $82.28 in the early European session. The black gold witnessed a steep fall on Wednesday after failing to sustain above the critical resistance of $86.00. The oil prices were offered vigorously after the Federal Reserve (Fed) hiked the interest rates by 75 basis points (bps) consecutively for the third time.

Investors dumped longs in the black gold as Fed’s tightening measures call institutions to trim the growth projections further. The impact on oil prices would have been lower if Fed chair Jerome Powell would have announced a rate hike only. Escalation in terminal rates was in line with the projections of the market. However, the dictation of the strategic plan to fix the ramping up inflation spoiled the market mood.

Fed chair Jerome Powell is seeing interest rates at 4.6% by the end of 2023. The guidance has shifted much higher from 3.8%. Also, the Unemployment Rate is seen higher at 4.1%. Big tasks come with big sacrifices and the economic growth will face severe pain from the pace of hiking interest rates. A decline in economic growth projections will eventually drop demand for oil for a longer period.

Adding to that, the build-up of oil inventories reported by the Energy Information Administration (EIA) adds fuel to the fire. The EIA reported a build of oil stockpiles by 1.142. No doubt, the reading remains lower than consensus but a third consecutive inventory build-up indicates a sheer decline in oil demand.

• Gold price holds lower ground near two-year bottom flashed on Fed day.
• Risk-aversion, firmer DXY joins downside break of $1,680 level to keep bears hopeful.
• Multiple central bankers are in line to woo market players, hawkish moves could weigh on XAU/USD.

Gold price (XAU/USD) reverses the bounce off two-year low year, marked the previous day, as risk-aversion intensifies ahead of the key central bank events. That said, the metal’s latest weakness could also be linked to the US Federal Reserve’s (Fed) third rate hike worth 75 basis points (bps) and hopes of a painful journey to tame inflation moving forward. Additionally, global agitation towards Russia’s mobilization of troops and fears surrounding China are extra negatives for the metal prices. Above all, the metal’s sustained downside break of the $1,680 key support keeps the bears hopeful as multiple central banks are likely to follow the Fed’s hawkish path.

Also read: Gold Price Forecast: XAU/USD awaits bear pennant confirmation for a fresh downswing

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price has breached the $1,680 support confluence comprising the previous yearly low and the pivot point one month S1.

With this, the bears are now bracing for the fresh multi-month low, which in turn highlights the pivot point one-day S1 and lower-end of the Bollinger on one-day, around $1,657.

Following that, the previous weekly low near $1,655 may offer an intermediate halt during the metal’s further downside before directing it towards the pivot point one month S2, near $1,644.

Meanwhile, recovery moves could initially attack the SMA10 1H and the Fibonacci 61.8% one day, around $1,667. However, major attention will be given to the $1,680 level during the XAU/USD’s further advances.

In a case where the gold price rise beyond $1,680, the odds of witnessing a run-up towards $1,700 can’t be ruled out.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, NZD/USD could slip back to the 0.5750 region ahead of 0.5720 in the short-term horizon.

Key Quotes

24-hour view: “We highlighted yesterday that ‘there is room for NZD to drop to 0.5870’. We added, ‘The next support at 0.5840 is unlikely to come into view’. While NZD dropped to a low of 0.5844 in NY, it cracked 0.5840 during early Asian hours. Obviously, NZD is still under pressure and we see chance for NZD to weaken to 0.5780, possibly 0.5750. On the upside, a breach of 0.5870 (minor resistance is at 0.5850) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “We turned negative on NZD one week ago (14 Sep, spot at 0.6005). As NZD declined, in our latest narrative from yesterday (21 Sep, spot at 0.5900), we indicated that further NZD weakness is likely. We highlighted, the next levels to watch are at 0.5870 and 0.5840. While our view of a weak NZD is correct, we did not expect the rapid pace of decline as NZD plunged to 0.5844 before extending its decline today. We continue to expect NZD to weaken, likely to 0.5750, possibly 0.5720. Resistance wise, a breach of 0.5900 (‘strong resistance’ level was at 0.5980 yesterday) would indicate that NZD is unlikely to weaken further.”

Open interest in gold futures markets reversed two consecutive daily builds and shrank by around 3.1K contracts on Wednesday, according to preliminary readings from CME Group. On the other hand, volume increased sharply for the second straight day, this time by around 87.5K contracts.

Gold looks supported by $1,650

Wednesday’s decent rebound in gold prices was amidst the ongoing erratic performance and in tandem with shrinking open interest and a marked increase in volume. That said, the continuation of the current range bound theme appears on the cards for the time being, with decent support in the $1,650 zone per ounce troy.

Gold price is back in the red zone. As FXStreet’s Dhwani Mehta notes, XAU/USD awaits bear pennant confirmation for a fresh downswing.

There is more room to the downside

“The non-interest-bearing yellow metal appears vulnerable with more tightening coming in from Switzerland and the UK in the session ahead. Meanwhile, should the tensions between Russia and the West intensify, the dollar could see the additional upside, as a flight to safety may remain at full steam. Therefore, XAU/USD appears in a lose-lose situation in the near term.”

“Gold price briefly breached the rising trendline support at $1,664 on Wednesday but averted confirmation of a bear pennant by closing at the day around $1,674. Daily closing below the support is needed to validate the bearish continuation pattern. The $1,650 psychological level will be the immediate line of defense, below which buyers will yearn for a sustained move towards the next support at around $1,643.”

“On the flip side, any recovery attempts will need acceptance above the recent range highs near $1,680. The next upside barrier is aligned at around $1,700. Daily closing above the latter is critical to unleashing the further recovery towards the bearish 21-Daily Moving Average (DMA) at $1,704.”

See – BoE Preview: Forecasts from 10 major banks, a close call between 50 bps and 75 bps

• USD/JPY has kissed 145.00 for the first time in 24 years after a dovish stance by the BOJ.
• A formation of a bullish is hinting at the continuation of upside momentum.
• Advancing 20-and 50-EMAs add to the upside filters.

The USD/JPY pair has turned sideways after delivering volatile moves post the announcement of the interest rate decision by the Bank of Japan (BOJ). The asset gyrated in a tad wider range of 143.51-145.36 and is now oscillating in a narrow range of 144.54-144.95. On a broader note, the asset is oscillating in a 141.50-145.40 range for the past two weeks. It is worth noting that the major has smashed 145.00 for the first time in the past 24 years.

The formation of a Bullish Flag denotes a consolidation phase after a vertical upside move. The north-side sheer move is been recorded from August 2 low at 130.40. The consolidation phase of a Bullish Flag indicates an initiative buying structure in which the buyers initiate longs after an upside break of the chart pattern.

The 20-and 50-period Exponential Moving Averages (EMAs) at 142.00 and 139.00 respectively are aiming north, which signals a continuation of an upside bias.

Also, the Relative Strength Index (RSI) (14) is oscillating in the bullish range of 60.00-80.00 for a prolonged period, which indicates that the upside momentum is intact.

A decisive break above the fresh 24-year high at 145.40 will drive the asset towards June 1998 high at 146.79, followed by August 1998 high at 147.67.

On the flip side, the greenback bulls could lose their grip if the asset drops below September 9 low at 141.50 for a downside towards September 6 low at 140.25. Slippage of the latter will drag the asset towards July 14 high at 139.39.

USD/JPY daily chart

GBP/USD remains under pressure and could extend the decline to the 1.1150 and 1.1100 levels in the next weeks, suggest FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday that GBP ‘is likely to drop below 1.1350’. We added, ‘The next support at 1.1300 is likely out of reach’. The anticipated weakness exceeded our expectations as GBP plunged to a low of 1.1237 before closing on a weak note at 1.1270 (-0.98%). Further weakness appears likely, even though it is left to be seen if GBP can maintain a foothold below 1.1200 (next support is 1.1150). Resistance is at 1.1270 followed by 1.1305.”

Next 1-3 weeks: “We have held a negative GBP view for a week now. In our latest narrative from yesterday (21 Sep, spot at 1.1380), we indicated that shorter-term downward momentum is beginning to build and GBP appears to be ready to move out of its consolidation phase. However, we were of the view that the major support at 1.1300 might not be easy to break. The 1.1300 level held during London hours (low of 1.1304) but gave way during NY session as GBP nose-dived to a low of 1.1237. The rapid increase in momentum suggests GBP is likely to weaken further. The next levels to monitor are at 1.1150 and 1.1100. The GBP weakness is intact as long as GBP does not move above 1.1360 (‘strong resistance’ level was at 1.1490 yesterday).”

• USD/CHF remains sidelined as it consolidates weekly gains.
• Fed, Russia and yields offered trifecta support to the bulls.
• Bears need SNB’s hawkish outcome amid mixed concerns.

USD/CHF grinds lower as sellers flirt with the 0.9650 level heading into Thursday’s European session, after snapping a two-day downtrend the previous day. In doing so, the Swiss currency (CHF) pair traders brace for the Swiss National Bank’s (SNB) monetary policy announcement while paring the Fed-linked gains.

SNB is up for quitting the negative rates with its 75 basis points (bps) of a rate hike, which in turn might ease the CHF’s safe-haven demand. However, a stronger rate move and Switzerland’s heavy reserves could keep the market’s favor for the Swiss currency intact.

That said, the US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead. Following the Fed’s widely anticipated hawkish move, the US Dollar Index (DXY) refreshed its 20-year high.

In addition to the Fed-linked moves, the risk-negative headlines from Russia and China also propel the USD/CHF buyers. Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch woes. In a reaction, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula. On the same line were the comments from the Group of Seven (G7) leaders who confirmed cooperation on support for Ukraine. Furthermore, Goldman Sachs revised China’s GDP forecasts amid fresh covid woes, which in turn adds strength to the risk-off mood.

Amid these plays, the US 10-year Treasury yields bounce back towards the 11-year high marked the previous day, up three basis points (bps) near 3.55% whereas the 2-year counterpart rises 0.75% intraday to 4.085% at the latest, near the highest levels in 15 years. Also, the S&P 500 Futures refresh a two-month low of around 3,770, down 0.70% intraday by the press time.

Looking forward, risk catalysts and the SNB moves are crucial for the USD/CHF pair traders to watch for fresh impulse. The bears, however, have less to cheer than the bulls.

Technical analysis

A daily closing beyond the 100-DMA hurdle surrounding 0.9685 becomes necessary for the USD/CHF bulls to keep reins. Otherwise, a pullback move towards revisiting the 200-DMA support near 0.9490 can’t be ruled out.

On the sidelines of a United Nations General Assembly in New York on Wednesday, China's Foreign Minister Wang Yi told his Russian counterpart, Sergei Lavrov, that Beijing’s position on Ukraine will continue to be 'objective' and 'fair'.

He said that China hopes that all parties will not give up on their dialogue efforts.

Market reaction

Risk sentiment remains in a weaker spot amid Russia tensions and hawkish Fed signals, with AUD/USD losing 0.30% on the day to 0.6605, as of writing.

CME Group’s flash data for crude oil futures markets noted traders added around 7.3K contracts to their open interest positions on Wednesday, reaching the second daily build in a row. Volume followed suit and also increased for the second consecutive session, now by around 85.2K contracts.

WTI: Rising bets for a test of $80.00

Prices of the WTI extended the leg lower on Wednesday amidst rising open interest and volume, which is supportive of a probable deeper retracement in the very near term. Against that, the next support of note appears at the round level at $80.00.

• USD/TRY is auctioning around its all-time highs recorded at 18.41.
• Exhaustion in upside momentum could lead to a mild correction further.
• The RSI (14) is oscillating in the bullish range of 60.00-80.00 for a prolonged period.

The USD/TRY pair is attempting an upside break of the consolidation formed in a narrow range of 18.30-18.40 in the early European session. The asset has remained in the grip of bulls for the past week after establishing above the critical hurdle of 18.25. The major printed a fresh all-time high at 18.41 on Wednesday amid hawkish Federal Reserve (Fed) policy.

On a daily scale, the USD/TRY pair has refreshed the all-time highs after overstepping the 20 December 2021 high at 18.39. The asset is hovering around all-time highs at 18.40, however, signs of exhaustion in the upside momentum is favoring a mild correction ahead.

The 20-and 50-period Exponential Moving Averages (EMAs) at 18.24 and 17.95 respectively are scaling higher, which adds to the upside filters.

Also, the Relative Strength Index (RSI) (14) is oscillating in the bullish range of 60.00-80.00 for a prolonged period, which indicates a continuation of upside momentum.

A decisive slippage below the 20-EMA at 18.24 will drag the asset towards the round-level support at 18.00, followed by August 9 low at 17.56.

On the contrary, the greenback bulls will shift into the unchartered territory after overstepping the fresh all-time highs at 18.41. An occurrence of the same will send the asset towards the psychological resistance at 19.00 followed by the round-level resistance at 19.50.

USD/TRY daily chart        

The continuation of the downside pressure in EUR/USD could extend to the 0.9770 ahead of 0.9720, according to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We expected EUR to decline yesterday but we were of the view that ‘any weakness is unlikely to break the solid support at 0.9900’. The anticipated weakness exceeded our expectations as EUR easily took out 0.9900 and plunged to a low of 0.9812. Despite the wild gyration after the low, the risk for today is still on the downside, likely to 0.9770. Resistance is at 0.9865 followed by 0.9900.”

Next 1-3 weeks: “Our latest narrative was from last Wednesday (14 Sep, spot at 0.9980) where while EUR is under pressure, a sustained decline below the major support at 0.9900 appears unlikely. After a week, EUR decisively cracked 0.9900 and plunged to a low of 0.9812 during NY hours. The sharp decline indicates that EUR is likely to continue to head lower in the coming days. The levels to watch are at 0.9770 and 0.9720. On the upside, a breach of 0.9940 (‘strong resistance’ level was at 1.0050 yesterday) would indicate that the current weakness in EUR has stabilized.”

• EUR/USD holds lower ground at the two-decade low, prints three-day downtrend.
• Short-term support line, 61.8% FE joins oversold RSI (14) to trigger corrective bounce.
• Recovery remains elusive below parity level, sellers could aim for the 2002 low.

EUR/USD licks its wounds near the lowest levels since October 2002, picking up bids to 0.9830 heading into Thursday‘s European session. In doing so, the major currency pair consolidates the biggest daily losses in a week, mainly inspired by the US Federal Reserve (Fed), as market players await a slew of other central bank announcements.

That said, 61.8% Fibonacci Expansion (FE) of the pair’s June-September moves joins a one-month-old descending trend line and the oversold RSI to challenge EUR/USD bears around 0.9830.

However, a convergence of the previous support line from September 06 and the 50-SMA, around the 1.0000 parity level, could keep challenging the EUR/USD pair’s recovery moves.

Also acting as the upside hurdle is the 200-SMA and a six-week-long falling trend line, respectively near 1.0045 and 1.0140.

It’s worth noting that the EUR/USD pair’s run-up beyond 1.0140 will need validation from the monthly high near 1.0200 to convince buyers.

Alternatively, a downside break of the 0.9830 support won’t hesitate to direct EUR/USD bears towards the year 2002 low near 0.9610.

EUR/USD: Four-hour chart

Trend: Further weakness expected

European Central Bank (ECB) executive board member Isabel Schnabel said on Thursday, “we must further increase interest rates.”

“In the short term, inflation could rise even further despite interest rate hikes,” she said.

Schnabel went on to say that a “German recession may be unavoidable” while adding that “the euro-zone economy is likely to stagnate not shrink.”

Market reaction

EUR/USD is consolidating the latest leg down to fresh 19-year lows of 0.9809. The pair was last seen trading at 0.9824, down 0.11% on the day.

• USD/IDR retreats from two-month high, prints the first daily loss in three.
• DXY pares gains at two-decade high amid chatters over Russia, China.
• Fed fuelled the US dollar despite matching 0.75% rate hike expectations.
• Bank Indonesia is likely to announce 25 bps rate increase and can favor the pair sellers.

USD/IDR slips towards intraday low, down 0.10% on a day near $15,020 as traders await Bank Indonesia (BI) Rate announcement during early Thursday. In doing so, the USD/IDR snaps a two-day uptrend while reversing from the highest levels since July 22, marked the previous day.

In addition to the pre-BI consolidation, the Indonesian rupiah (IDR) also cheers the recent winding down of palm oil inventories at home. “Backed by Jakarta's waiver of palm oil export levies, which was recently extended to Oct. 31 and reversed course from an export ban in May that had shut them out of global trade, producers are moving in to lighten up their stocks at tempting prices,” stated Reuters.

Forecasts suggest that the BI is likely to announce 25 basis points (bps) of a rate hike during today’s monetary policy meeting announcements. “Bank Indonesia will follow a surprise August interest rate rise with another 25 basis point hike at its meeting on Thursday, still moving more slowly than most of its peers in trying to bring down inflation, a Reuters poll forecasts,” said Reuters ahead of the BI release.

On the other hand, US Dollar Index (DXY) stays firmer at the two-decade top of 111.65, around 111.60 after refreshing the multi-year high before a few hours. In doing so, the greenback’s gauge versus the six major currencies cheers the Fed’s third 0.75% rate hike. The US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead.

In addition to the Fed-linked woes, Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch woes. In a reaction, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula. On the same line were the comments from the Group of Seven (G7) leaders who confirmed cooperation on support for Ukraine.

Furthermore, Goldman Sachs revised China’s GDP forecasts amid fresh covid woes, which in turn adds strength to the risk-off mood and should have favored the USD/IDR buyers.

Moving on, USD/IDR traders will pay close attention to the BI announcement as a surprise 0.50% rate hike could quickly drag the quote to defy the bullish chart formation and welcome the bears.

Technical analysis

A six-week-old bullish channel, currently between $15,130 and $14,870, could keep USD/IDR buyers hopeful.

“There may be cases where we may conduct stealth intervention,” said Japan’s top currency diplomat Masato Kanda during early Thursday, per Reuters.

Key quotes

USD/JPY remains firmer

Following the news, USD/JPY grinds higher around the daily tops, up 0.50% near 144.85 by the press time of early Thursday morning in Europe.

Also read: USD/JPY smashes 145.00 for the first time in 24 years as BOJ keeps policy unchanged

• Asian indices have tumbled after following the negative cues from Wall Street.
• Fed hawkish guidance has accelerated the risk-off impulse in the Asian markets.
• BOJ’s continuation of its dovish stance has supported Nikkei225 on the downside.
• Lower oil prices will delight the Asian indices by trimming their fiscal deficit.

Markets in the Asian domain have shifted into a bearish trajectory after tracing negative cues from S&P500. Asian equities have fallen dramatically after a scrutiny of the roadmap provided by the Federal Reserve (Fed) to respect its foremost priority of bringing price stability.

At the press time, Japan’s Nikkei225 and ChinaA50 tumbled 0.80%, and Hang Seng plunged almost 2%. Outside Tokyo, Australian markets are closed on account of National Mourning Day.

Bloods spilled on Wall Street on Wednesday after the Fed chair Jerome Powell sounded extremely hawkish while dictating the guidance on interest rates. A third consecutive 75 basis points (bps) rate hike announcement didn’t do any worse as it was already priced in by the market participants. However, the target for terminal rates at 4.6% brought carnage.

Fed Powell and his colleagues are ready to sacrifice growth projections, employment, and demand for housing and durable goods to drag the inflation rate to desired levels.

Meanwhile, Japanese equities have trimmed their losses after a weak open. Nikkei225 is gaining strength on a continuation of the ‘dovish’ stance on interest rates by the Bank of Japan (BOJ). The BOJ has kept its policy unchanged despite the headwinds of sheer depreciation in the Japanese yen against the remaining G-7 countries. No doubt, the dovish BOJ will keep pouring liquidity into the economy but it will keep the market cap of imported-inputs-dependent companies on the tenterhooks.

On the oil front, oil prices are expected to remain in the grip of bears as soaring interest rates by western central banks will keep the oil demand lower. The black gold has declined again towards $82.00 and will surrender the support sooner. It is worth noting that lower oil prices will benefit the Asian indices as it will delight them in reducing the fiscal deficit.

USD/CAD grinds higher after refreshing the 26-month peak to 1.3530, near 1.3510 during early Thursday morning in Europe. In doing so, the Loonie pair traces the options market signals amid the risk-averse markets.

One-month risk reversal (RR) on USD/CAD, a measure of the spread between call and put prices, remained unchanged for Wednesday, after rising the most in one week the previous day, per the options market data from Reuters. It should be noted that the weekly RR remains positive but marks a softer figure of 0.084 versus 0.158 prior.

A call option gives the holder the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. A put option represents a right to sell. 

It's worth noting that the USD/CAD traders’ previous optimism could be linked to the hawkish Fed action while the latest inaction appears to take clues from firmer oil prices, Canada’s biggest export item.

Also read: USD/CAD refreshes 26-month top near 1.3485 as Fed propels USD, oil weakens

• AUD/USD remains on the back foot around 29-month low.
• Trend widening formation, oversold RSI could restrict short-term downside.
• 50-SMA could test immediate upside, May 2020 bottom can probe bears.

AUD/USD bears attack the 0.6600 threshold while refreshing the multi-month low during Thursday’s Asian session. In doing so, the Aussie pair remains inside a falling megaphone trend widening chart pattern amid the risk-off mood.

Given the bearish chart formation and the risk-aversion, as well as the quote’s sustained trading below the 50-SMA, the AUD/USD prices are likely to refresh the 29-month bottom.

In that case, the stated formation’s support line near 0.6550 could challenge the pair bears before directing them to the May 2020 low near 0.6370.

Should the AUD/USD pair remains bearish past 0.6370, the odds of its slump towards the late March 2020 swing high near 0.6215 can’t be ruled out.

Alternatively, recovery moves will initially aim for the 50-SMA hurdle surrounding 0.6735 before highlighting the stated bearish chart formation’s upper line, close to 0.6865 at the latest.

Even so, the monthly high near 0.6915 and the 0.7000 psychological magnet could challenge the Aussie pair’s further upside before giving control to the bulls.

AUD/USD: Four-hour chart

Trend: Limited downside expected

• Gold price is likely to print a fresh two-year low as DXY is preparing for a fresh rally.
• Ultra-hawkish guidance by the Fed has forced investors to dump gold prices.
• S&P Global PMI is expected to display a mixed performance ahead.

Gold price (XAU/USD) is resuming its downside journey after a less-confident pullback to nearly $1,664.00 in the Asian session. The precious metal is expected to surrender the critical support of $1,654.00 and the investing community will witness a fresh two-year low. The gold prices have weakened dramatically as the Federal Reserve (Fed) chair Jerome Powell has delivered higher-than-expected hawkish guidance on interest rates to wipe off the add-on inflation beyond the desired rate of 2%.

Meanwhile, the US dollar index (DXY) has printed a fresh two-decade high at 111.78. The DXY is expected to continue its dream run as more rate hikes are on the way till the Fed experiences a series of slow down in price pressures for months. The roadmap for bringing price stability is leaked and the interest rates are seen making top around 4.60%. The latest reading of the interest rate target is extremely higher, which will result in a decline in growth projections and job creation.

Going forward, investors will focus on the S&P Global PMI data, which will release on Friday. The Manufacturing PMI is seen lower at 51.1 vs. the prior release of 51.5. While the Services PMI will improve to 45.0 against the prior print of 43.7.

Gold technical analysis

Gold price is oscillating near the lower edge of the consolidation formed in a wider range of $1,654.00-1,690.50 on an hourly scale. The 50-period Exponential Moving Average (EMA) is mostly overlapping with the asset price, which signals a consolidation ahead.

Also, the Relative Strength Index (RSI) (14) has shifted back into the 40.00-60.00, which seeks further trigger for a decisive move.

Gold hourly chart

• GBP/USD bears keep reins at the lowest levels in 37 years amid broad US dollar strength, pre-BOE anxiety.
• Fed, Russia propel DXY, yields ahead of a slew of central bank decisions.
• BOE could surprise markets with 75 bps rate hike but Cable sellers may not react too strongly amid risk-off mood.

GBP/USD slumped to the fresh 37-year low near 1.1220 before licking its wounds around 1.1230 during early Thursday morning in Europe. In doing so, the Cable pair justifies the broad US dollar strength amid the risk-aversion while also portraying the market’s pessimism ahead of the Bank of England’s (BOE) monetary policy meeting.

While portraying the mood, the US 10-year Treasury yields bounce back towards the 11-year high marked the previous day, up three basis points (bps) near 3.55% whereas the 2-year counterpart rises 0.75% intraday to 4.085% at the latest, near the highest levels in 15 years. Also, the S&P 500 Futures refresh a two-month low of around 3,770, down 0.70% intraday by the press time.

It should be noted that the firmer yields and the downbeat equities, as well as stock futures, direct the risk-averse traders towards the US dollar. As a result, US Dollar Index (DXY) takes the bids to refresh the two-decade top as it rises to 111.65, up 0.22% intraday near 111.60 at the latest.

In doing so, the greenback’s gauge versus the six major currencies cheers the Fed’s third 0.75% rate hike, as well as the Russia-Ukraine tension.

The US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead.

On the other hand, Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch woes. In a reaction, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula. On the same line were the comments from the Group of Seven (G7) leaders who confirmed cooperation on support for Ukraine.

At home, the UK government’s fresh relief plan surrounding the limits on the energy bill and aid to the British business fails to convince the Cable buyers. Also exerting downside pressure on the GBP/USD prices could be the fears of harsh Brexit as UK PM Liz Truss is a firm opponent of the European Union (EU) laws.

To sum up, GBP/USD bears are all in to challenge the 1.0000 psychological magnet on the BOE’s 0.50% rate hike. Meanwhile, a surprise move of the 75 basis points (bps) by the “Old Lady”, as it is popularly known, may not impress the cable bulls except for a short-term rebound amid the broad risk-aversion and comparatively better status of the US versus the UK.

Also read: BOE Interest Rate Decision Preview: GBP/USD braces for volatility storm, eyeing a 75 bps hike

Technical analysis

Unless bouncing back beyond the four-month-old previous support line, around 1.1290 by the press time, GBP/USD is vulnerable to testing the 78.6% Fibonacci Expansion (FE) level of the pair’s moves between August 17 and September 13, near 1.1160.

• EUR/JPY refreshed multi-day low before bouncing off 141.14 on BOJ’s inaction.
• BOJ kept monetary policy unchanged while meeting market expectations.
• Two-week-old support line restricts immediate downside but 100-SMA tests buyers.
• RSI rebound hints at the further recovery of the pair, falling wedge eyed too.

EUR/JPY picks up bids to attack 100-SMA around 142.25, following a whipsaw that refreshed the intraday bottom after the Bank of Japan’s (BOJ) monetary policy announcements on early Thursday. In doing so, the cross-currency pair rebounds from a fortnight-old support line.

BOJ kept the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero, as expected, during September’s monetary policy. The Japanese central bank also concluded its pandemic relief stimulus as said, “BOJ decided to phase out pandemic funding program, shift to fund provision step that meets a wide range of financing needs.”

Given the RSI’s rebound from the oversold territory supporting the quote’s latest bounce off the short-term support line, the EUR/JPY is likely to overcome the immediate 100-SMA hurdle near 142.30.

However, the quote’s further upside hinges on the successful break of a downward sloping resistance line from September 12, around 143.60 at the latest.

That said, a clear upside break of the 143.60 hurdle will confirm the falling wedge bullish chart pattern, which in turn suggests the EUR/JPY rally towards 148.00 on a theoretical basis.

Meanwhile, a downside break of the nearly support line, also forming part of the wedge, close to 141.75, will quickly fetch the quote towards the 200-SMA support near 139.70.

EUR/JPY: Four-hour chart

Trend: Further recovery expected

• USD/JPY has touched an intraday high above 145.00 on unchanged BOJ policy.
• The BOJ is highly expected to intervene in the currency market to support yen.
• Fed’s ultra-hawkish guidance has stabled the DXY above 111.00.

The USD/JPY pair has kissed the critical hurdle of 145.00 for the first time in the past 24 years as the Bank of Japan (BOJ) has kept the interest rates unchanged. A dovish stance was highly expected from the BOJ as it has been failing in spurting the growth rate and inflation. The interest rate is stable at -0.1% despite continuous depreciation in the Japanese yen.

Japan’s officials have been worrying over the steep depreciation of yen against the remaining G-7 currencies. Earlier, the Japanese government was delighted with the weaken yen as it was accelerating its exports and tourism industry.

Now, the nose-diving yen is becoming a headache for the economy. Companies that are highly dependent on inputs purchased from other countries are facing currency risk. This has scaled up their production costs and has trimmed their operating margins significantly. Therefore, the firms are forced to trim the usage of entire production capacities.

Apart from that, the BOJ was planning to intervene in currency markets to support yen as they believe that the current price doesn’t justify the fundamentals.

Also, Japan’s former Vice FM Tatsuo Yamasaki cited that the Japanese administration is ready to intervene in currency markets at any moment if needed, news wires from Bloomberg. He further added that the government doesn’t need to wait for a green light from the US to support yen.

Meanwhile, the US dollar index (DXY) is established comfortably above 111.00 after the hawkish guidance from the Federal Reserve (Fed). Fed chair Jerome Powell has provided an extremely hawkish roadmap to achieve the objective of price stability. The Fed sees interest rates making top at 4.6%.

• GBP/JPY marked a volatile move to refresh intraday high before renewing the daily bottom on BOJ’s status-quo.
• BOJ matches market forecasts and announces no change in the monetary policy.
• Firmer yields, GBP traders’ caution ahead of the BOE also play their roles.
• BOE is expected to announce 0.50% rate hike but 75 bps move could please pair bulls.

GBP/JPY dribbles around 162.40 after marking a volatile move to refresh daily limits on the Bank of Japan’s (BOJ) monetary policy announcements early Thursday. In doing so, the cross-currency pair remains around the lowest levels since September 05 while waiting for the Bank of England (BOE).

BOJ kept the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero, as expected, during September’s monetary policy. The Japanese central bank also concluded its pandemic relief stimulus as said, “BOJ decided to phase out pandemic funding program, shift to fund provision step that meets a wide range of financing needs.”

Also read: BOJ: Japan's core consumer inflation likely to acceleate toward year-end

On the other hand, firmer yields also propel the yen and keep the GBP/JPY mildly bid on a daily basis. That said, the US 10-year Treasury yields bounce back towards the 11-year high marked the previous day, up three basis points (bps) near 3.55% whereas the 2-year counterpart rises 0.75% intraday to 4.085% at the latest, near the highest levels in 15 years.

The reason for the firmer bond coupons could be linked to the market’s rush for risk-safety amid the central bank’s aggression and geopolitical fears emanating from Russia.

On Wednesday, the US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead.

Elsewhere, Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch woes. In a reaction, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula. On the same line were the comments from the Group of Seven (G7) leaders who confirmed cooperation on support for Ukraine.

Moving on, GBP/JPY traders will pay attention to the BOE moves as the “Old Lady”, as it is popularly known, is expected to announce 50 basis points (bps) rate hike amid increasing inflation fears. However, the BOE’s peers from the US, Sweden and Brazil have recently announced a 0.75% rate increase and the central bank is under pressure to take a big move, even if the latest UK statistics don’t support the claim, which in turn hints at a positive surprise from the British central bank and a corrective bounce of the pair.

Technical analysis

A clear downside break of the four-month-old ascending trend line, around 161.70 by the press time, becomes necessary for the GBP/JPY pair to aim for the 200-DMA support near 160.30.

Reuters is out with key highlights from the September Bank of Japan (BOJ) monetary policy statement.

Additional takeaways

Related reads

• USD/JPY smashes 145.00 for the first time in 24 years as BOJ keeps policy unchanged
• GBP/JPY whipsaws around three-week low under 163.00 on BOJ’s inaction, BOE eyed

• EUR/USD has sensed a sigh of relief after dropping to near 0.9813.
• Extreme hawkish guidance from the Fed has demolished the shared currency bulls.
• Russian military threat to use nuclear weapons has underpinned the risk-off impulse.

The EUR/USD pair is displaying a lack of selling pressure while re-testing Wednesday’s low at 0.9813 in the Tokyo session. The asset has turned sideways which could be considered as an intraday inventory accumulation, which could ditch the downside momentum for a while. On a broader note, the major witnessed a steep fall after delivering a downside break of the consolidation formed in a 0.9950-1.0050 range.

The shared currency bulls witnessed extreme volatility on Wednesday over the monetary policy announcement by the Federal Reserve (Fed). The currency market arena got electrified after Fed chair Jerome Powell escalated guidance on interest rates.

A rate hike by 75 basis points (bps) was already expected by the market participants and the latter have already priced them in risk-perceived assets. However, a higher-than-expected hawkish stance on interest rates by the Fed spooked the market sentiment.

The Fed sees terminal rates making top at 4.6%, higher than the former expectations of 3.8%. Fed’s Powell is ready to sacrifice the growth projections, employment generation, housing sales, and demand for durable goods to fix the inflation chaos.

Meanwhile, the shared currency bulls are worried over fresh impetus on Russia’s nuclear attack talks. Russian leader Vladimir Putin’s announcement of military mobilization and threat to use nuclear weapons have refreshed fears of war situation. The retaliation from Russia against western sanctions has triggered a risk-off impulse.

Also, the German government is exploiting its all measures of collecting energy to make sufficient inventories to cater to the demand during the winter season.

The Bank of Japan (BOJ) board members decided on Thursday to make no changes to its monetary policy settings, holding rates at -10bps while maintaining 10yr JGB yield target at 0.00%. The announcement comes after the central bank concluded its two-day policy review meeting.'

Summary of the statement

Market reaction

The yen saw a fresh selling wave on the expected BOJ announcement, driving the USD/JPY pair higher above 145.00. The pair was last seen trading +0.83% on the day at 145.26.

About BOJ Interest Rate Decision

BoJ Interest Rate Decision is announced by the Bank of Japan. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the JPY. Likewise, if the BoJ has a dovish view on the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.

Japanese Chief Cabinet Secretary Hirokazu Matsuno said on Thursday, “we are closely monitoring the impact of US monetary policy and its changes on Japan and the global economy.”

“We will monitor the economic impact of US price increases and Fed rate hikes,” Matsuno added.

He said that “expect BOJ to continue with appropriate monetary policy taking into account economic situation.”

Market reaction

USD/JPY is unfazed around 144.50 on these comments. Matsuno spoke just ahead of the BOJ’s policy announcement.

Following the G7 leaders’ meeting, European Union (EU) Foreign Policy Chief Josep Borrell said that EU ministers have agreed that additional sanctions against Russia will be implemented as soon as possible.

Borrell did not mention any details on the same.

Market reaction

The euro is seeing a fresh bout of selling on the above comments, with EUR/USD closing in on the 0.9800 critical support. The spot is down 0.24% on the day.

Related reads

• Russian President Putin: Will take necessary steps to defend sovereignty
• NATO's Stoltenberg: Putin's military mobilisation is dangerous and reckless rhetoric

Early on Thursday, around 03:00 AM GMT, the Bank of Japan (BOJ) will announce routine monetary policy meeting decisions taken after a two-day brainstorming. Following the rate decision, BOJ Governor Haruhiko Kuroda will attend the press conference, around 06:00 AM GMT, to convey the logic behind the latest policy moves.

The Japanese central bank is widely expected to keep the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero.

Although the BOJ isn’t expected to offer any change in its monetary policy, the latest hawkish moves of the major central banks and the inflation fears highlight today’s BOJ as the key event for the USD/JPY traders. Also increasing the importance of the BOJ announcements are the chatters over the BOJ’s formal announcement of the market intervention to defend the yen.

Ahead of the event, Standard Chartered said,

Additionally, FXStreet’s Valeria Bednarik said,

How could it affect the USD/JPY?

USD/JPY prints mild gains around 144.00 as risk-aversion propels the US dollar and the Treasury yields, up 0.20% near 144.30 by the press time of Thursday’s Asian session. It should, however, be noted that the yen price remains cautious during the four-day uptrend as traders await the BOJ.

Japanese policymakers have already turned down the expectations of any major moves from the Bank of Japan (BOJ). However, the previous day’s announcement of bond-buying and talks of the town supporting the official push for market intervention keep the USD/JPY traders hopeful of a pullback.

The same could quickly drag the USD/JPY pair towards an upward-sloping support line from early August, near 143.80. However, the risk-off mood and firmer USD, as well as fewer odds of the BOJ’s hawkish mood, are likely to favor the USD/JPY buyers.

Technically, USD/JPY bulls need a clear upside break of the 145.00 threshold to keep reins while a downside break of the six-week-old support line, near 143.80, won’t hesitate to recall sellers as the RSI is nearly overbought.

Key Notes

BOJ Preview: One day, it will surprise us all, but not today

USD/JPY advances towards 145.00 on Fed’s hawkish roadmap, BOJ policy eyed

About BoJ Rate Decision

BoJ Interest Rate Decision is announced by the Bank of Japan. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the JPY. Likewise, if the BoJ has a dovish view on the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.

• Market sentiment remains sour amid hawkish Fed move, Russia-inspired fears.
• Fed matched market forecasts with 0.75% rate hike but predicts painful path to tame inflation.
• Global leaders condemn Russia over its plans to mobilize troops.
• BOJ, SNA, BOE are some of the key central bankers left to rock the market.

Global traders rush for risk safety early Thursday as the Fed’s hawkish move joins the fresh fears surrounding Russia and China. It should be noted that a slew of central bankers left for announcing their monetary policy moves also keeps the market players on their toes.

While portraying the mood, the US 10-year Treasury yields bounce back towards the 11-year high marked the previous day, up three basis points (bps) near 3.55% whereas the 2-year counterpart rises 0.75% intraday to 4.085% at the latest, near the highest levels in 15 years. Furthermore, Wall Street closed in the red and the S&P 500 Futures refresh a two-month low of around 3,770, down 0.70% intraday by the press time.

Recently, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula. On the same line were the comments from the Group of Seven (G7) leaders who confirmed cooperation on support for Ukraine.

On Wednesday, Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch woes.

It should be noted that Goldman Sachs revised down China’s GDP forecasts amid fresh covid woes, which in turn adds strength to the risk-off mood.

Furthermore, the US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead. While the Fed matched market forecasts, the economic fears surrounding the rate hikes and expectations of another 0.75% increase in November kept the US Dollar on the front foot, despite marking heavy volatility around the announcements.

That said, the US Dollar Index (DXY) renews its 20-year high while commodities are on slippery grounds of late.

Moving on, the central bankers’ actions and the second-tier US data, not to forget the risk catalysts mentioned above, will be important for near-term market directions.

Also read: US Dollar Index renews 20-year high around 111.50 on firmer yields, hawkish Fed

Following a meeting with US President Joe Biden in New York, South Korean President Yoon Suk-yeol asked Biden to resolve Seoul's concerns over the US inflation reduction act, per Yonhap.

In response, Biden acknowledged S.Korea's concern over the inflation reduction act.

Both leaders agreed to strengthen cooperation to deter North Korean attacks.

They reaffirmed cooperating on stabilizing markets if needed.

Market reaction

USD/KRW catches fresh bid in early Asia and resumes its rally beyond 1,400. The Soiuth Korean won (KRW) hit the lowest since early 2009 against the US dollar, despite jawboning by the government officials and the Bank of Korea (BOK) Governor Rhee Chang-yong.

Rhee said that “we are to closely watch the effect of the fed on the fx market,” adding, “we will determine rates after examining the influence of the fed on FX.”

Meanwhile, S. Korea's Finance Minister Choo Kyung-ho noted that “if necessary, we will take action on FX.”

• NZD/USD takes offers to refresh multi-month low, prints four-day downtrend.
• Clear downside break of four-month-old descending trend line, 78.6% Fibonacci retracement favor sellers.
• Oversold RSI may trigger corrective bounce on the way to year 2020 bottom.

NZD/USD takes offers to refresh the 30-month low as it drops to 0.5810 during Thursday’s Asian session. In doing so, the Kiwi pair extends the previous day’s downside break of a four-month-old support line, as well as the 78.6% Fibonacci retracement of the 2020-21 upside.

With bearish MACD signals supporting the quote’s latest break of the previous key support, the prices are likely to decline towards the year 2020 low near 0.5470.

However, the oversold RSI (14) may offer intermediate halts during the south run.

In that case, the round figures near 0.5800 and 0.5500 may offer breathing spaces to the NZD/USD bears.

Alternatively, recovery remains elusive unless the quote stays below the 78.6% Fibonacci retracement level near the 0.5900 threshold.

Also likely to challenge the pair’s immediate rebound is the support-turned-resistance from May, around 0.5870.

Even if the NZD/USD prices rally beyond the 0.5900 mark, the 0.6000 psychological magnet and the monthly high near 0.6165 could challenge the quote’s further upside.

NZD/USD: Daily chart

Trend: Further downside expected

• GBP/JPY is expected to drop to near 162.00 amid BOJ planning on intervention in the currency market.
• UK PM Liz Truss has announced a reduction in tax slabs and a cap on energy and electricity prices.
• A rate hike announcement by the BOE will widen the BOE-BOJ policy divergence further.

The GBP/JPY pair has surrendered the critical support of 162.20 in the Asian session and is declining towards 162.00 modestly. The asset has turned bearish after a downside break of the consolidation formed in a 162.80-164.47 range. The cross has shifted into the negative trajectory despite accelerating odds of further expansion in Bank of England (BOE)-Bank of Japan (BOJ) policy divergence.

Price pressures in the UK economy are acting as headwinds for UK households. The latter is forced to make inflation-adjusted payouts with penny-worth increments in earnings. No doubt, the labor market conditions, growth prospects, and energy prices are not supporting a rate hike by the BOE. However, BOE Governor has to swallow the bitter gulp and announce a rate hike by 50 basis points (bps).

Meanwhile, operations from new UK Prime Minister Liz Truss seem favorable for the economy led by the announcement of a reduction in tax slabs, a cap on energy and electricity prices, and a trade deal with the US. In spite of this fact, the pound bulls are not getting stronger.

On the Tokyo front, BOJ's warning o intervention in the currency market is supporting the Japanese yen. Japan’s former Vice FM Tatsuo Yamasaki cited that the Japanese administration is ready to intervene in currency markets at any moment if needed, news wires from Bloomberg. He further added that the government doesn’t need to wait for a green light from the US to support the yen.

The approach to monetary policy by the BOJ is expected to remain ‘neutral’ as growth prospects and inflation catalysts still need care from the economy. This will widen the BOE-BOJ policy divergence further.

The People’s Bank of China (PBOC) set the USD/CNY reference rate at 6.9798 on Thursday when compared to the previous fix and the previous close at 6.9536 and 7.0489 respectively. It should be noted that the PBOC fix eased below the market forecasts of 6.9946.

"With 2 billion yuan worth of reverse repos maturing on Thursday, china central bank injects 16 billion yuan on a net basis on the day," stated Reuters while quoting the PBOC update just after the fix.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

Foreign ministers from the Group of Seven (G7) advanced economies confirmed in a meeting in New York on Wednesday their cooperation in extending support for Ukraine and responding to food and energy security, the Japanese Foreign Ministry said, per Reuters.

The news also mentioned, “The development came after President Vladimir Putin announced Russia's first wartime mobilization since World War Two and moves to annex swaths of Ukrainian territory, and threatened to use nuclear weapons to defend Russia.”

Key quotes

Market reaction

Risk appetite weakens on the news, which in turn weighed on the S&P 500 Futures while favoring the yields and the US dollar.

Also read: US Dollar Index renews 20-year high around 111.50 on firmer yields, hawkish Fed

• Gold price takes offers to renew intraday low, reverses the previous day’s rebound from yearly bottom.
• DXY rises to fresh 20-year high as risk-aversion intensifies on Fed action, Russian fears.
• Major central bankers’ moves, risk catalysts to direct XAU/USD moves.

Gold price (XAU/USD) remains on the back foot at around $1,660 as bears cheer the firmer US dollar and the risk-off mood during Thursday’s Asian session. That said, the Fed’s hawkish action and Russia-linked fresh geopolitical fears are the latest catalysts that weigh on the metal prices of late.

US Dollar Index (DXY) takes the bids to refresh the two-decade top as it rises to 111.65. In doing so, the greenback’s gauge versus the six major currencies cheers the Fed’s third 0.75% rate hike. The US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead. While the Fed matched market forecasts, the economic fears surrounding the rate hikes and expectations of another 0.75% increase in November kept the US Dollar on the front foot, despite marking heavy volatility around the announcements.

On the other hand, Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch fears, which offered an initial run-up to oil prices before the latest downside. Recently, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula. It should be noted that the Group of Seven (G7) leaders also confirmed cooperation on support for Ukraine.

It should be noted that Goldman Sachs revised down China’s GDP forecasts amid fresh covid woes, which in turn also weigh on the XAU/USD price due to the dragon nation’s status as the key gold consumer.

Amid these plays, the US 10-year Treasury yields bounce back towards the 11-year high marked the previous day, up three basis points (bps) near 3.55% whereas the 2-year counterpart rises 0.75% intraday to 4.085% at the latest, near the highest levels in 15 years. Furthermore, Wall Street closed in the red and the S&P 500 Futures print mild losses by the press time.

Moving on, gold price moves depend upon the central bankers’ actions and the second-tier US data, not to forget the risk catalysts mentioned above.

Technical analysis

A clear U-turn from the 50-SMA, as well as a downside break of the weekly support line, keeps gold sellers hopeful of refreshing the yearly low, currently around $1,654.

In doing so, the lower line of a seven-week-old bearish channel, close to $1,643, will be in focus ahead of the $1,600 threshold and April 2020 bottom near $1,590.

Alternatively, the support-turned-resistance line and the 50-SMA, respectively around $1,665 and $1,685, could restrict short-term recovery moves of the yellow metal.

Even so, the XAU/USD bulls could remain off the table unless witnessing a clear upside break of the stated bearish channel’s resistance line, close to $1,711 at the latest.

Gold: Four-hour chart

Trend: Further weakness expected

• AUD/USD has slipped below the cushion of 0.6600 on pessimism after a hawkish policy from the Fed.
• The Fed sees terminal rates at 4.6% vs. the prior projection of 3.8%.
• Australian markets are closed on account of National Mourning Day.

The AUD/USD pair has slipped below the critical support of 0.6600 in the Tokyo session. The asset is falling like a house of cards after the announcement of the interest rate decision by the Federal Reserve (Fed). The asset has continued its two-day losing streak and has dropped below the round-level support of 0.6600. It is highly expected that the asset will find a cushion around the psychological support of 0.6500.

Market participants had priced in the third consecutive 75 basis points (bps) interest rate hike by the Fed. What has weakened the risk-sensitive and commodity-linked currencies is the hot hawkish guidance. The Fed has sacrificed job creation, growth prospects, housing sector, and demand for durable goods to achieve its foremost objective of bringing price stability.

The target for terminal rates is set at 4.6%, significantly higher than the prior determined peak of 3.8%. This will squeeze a big pool of funds from the market and will slow down the extent of loan disbursement. It could also result in higher delinquency costs for the loan providers. A tremendous decline in loan disbursement will result in postpone of expansion plans by various companies.

Meanwhile, Australian markets are closed on Thursday on account of National Mourning Day. Therefore, the entire focus will remain on the US dollar index (DXY)’s motion. Going forward, investors will keep an eye on the S&P Australian PMI data, which will release on Friday. The Manufacturing PMI is seen higher at 54.0 vs. the prior release of 53.8. While the Services PMI data is expected to land extremely lower at 47.7 against the former figure of 50.2.

After a slew of negatives from the covid and the central bank actions, Goldman Sachs (GS) revised its China Gross Domestic Product (GDP) forecasts for 2023 to 4.5% versus 5.3% previous projections. Bloomberg quotes GS economists led by Hui Shan while stating, “This year’s prediction of 3% was maintained.”

The update also expects that Beijing will stick to its stringent Covid Zero policies through at least the first half of next year.

Key quotes

Also read: AUD/USD clings to two-year low above 0.6600 after Fed showdown, Russia-inspired fears

• US Dollar Index takes the bids to refresh multi-year high as yields rebound.
• Fed’s 0.75% rate hike, fears of economic transition and dot-plot keeps DXY bulls hopeful.
• Headlines from Russia, China also underpin the US dollars safe-haven deamand.

US Dollar Index (DXY) takes the bids to refresh the two-decade top as it rises to 111.65 during Thursday’s Asian session. In doing so, the greenback’s gauge versus the six major currencies rises for the third consecutive day to poke the mid-2002 levels.

The quote’s latest rebound could be linked to the US Treasury yields as the bond coupons regain upside momentum after retreating from the multi-year high the previous day. That said, the US 10-year Treasury yields bounce back towards the 11-year high marked the previous day, up three basis points (bps) near 3.55% whereas the 2-year counterpart rises 0.75% intraday to 4.085% at the latest, near the highest levels in 15 years.

Previously, US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead. While the Fed matched market forecasts, the economic fears surrounding the rate hikes and expectations of another 0.75% increase in November kept the US Dollar on the front foot, despite marking heavy volatility around the announcements.

Also supporting the greenback’s safe-haven demand was Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch fears, which offered an initial run-up to oil prices before the latest downside. Recently, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula.

Amid these plays, Wall Street closed in the red and the S&P 500 Futures print mild losses by the press time.

Moving on, the risk catalysts and the second-tier data could entertain DXY bulls.

Technical analysis

US Dollar Index remains on the bull’s radar unless declining back below the 111.30 level comprising the late 2001 swing low.

Australia and New Zealand condemned Russian President Vladimir Putin's escalation of the war in Ukraine, saying his threats to use nuclear weapons to defend Russia were "unthinkable" and exposed his justification for the war as untrue, reported Reuters early Thursday.

The news quotes Australia's Foreign Affairs Minister Penny Wong and New Zealand's Prime Minister Jacinda Ardern to highlight the matter.

Key quotes

Market reaction

The news magnified the market’s risk-off mood and drowned the prices of the risk-barometer pair AUD/USD. That said, the quote drops to the fresh two-year low near 0.6600 by the press time.

• USD/JPY is inching higher to capture 145.00 amid Fed’s hawkish guidance on interest rates.
• A fight towards bringing price stability seeks sacrifices from growth rate and labor market.
• The Japanese government could intervene in currency markets at any moment.

The USD/JPY pair has extended its gains after overstepping the immediate hurdle of 144.00 in the early Tokyo session. The asset is looking to recapture Wednesday’s high at 144.70, considering the strength of the greenback bulls. For the first time in the past 24 years, the major is aiming to smash the critical hurdle of 145.00. The asset is expected to achieve the same on hawkish guidance by the Federal Reserve (Fed).

Fed’s September monetary policy meeting resulted in a rate hike by a third consecutive 75 basis points (bps). This pushed the terminal rate to 3.00-3.25%. Fed chair Jerome Powell has denied recession signals for now but has elevated targets for Unemployment Rate.

The central bank has warned over declining employment opportunities and has put forward a gloomy outlook on the growth rate.  The show-stopper announcement was dictating a peak for the terminal rates, which spilled blood on Wall Street and sent risk-perceived currencies into bearish territory. The Fed believes that the interest rates will top around 4.6% and the institution will hike them to 4.4% by the end of 2023.

The roadmap of fighting the inflation chaos is full of sacrifices by the growth rate, labor market, household sector, and durable goods demand.

On the Tokyo front, the interest rate decision by the Bank of Japan (BOJ) will clear the further path for the asset. The BOJ is expected to shift to a ‘neutral’ stance and won’t announce more stimulus. The inflation rate is responding effectively and is expected to continue its modest increment. The odds of intervention in the Fx moves by the BOJ have bolstered after the commentary from Japan’s former Vice Finance Minister Tatsuo Yamasaki.

Japan’s former Vice FM Yamasaki cited that the Japanese administration is ready to intervene in currency markets at any moment if needed, news wires from Bloomberg. He further added that the government doesn’t need to wait for a green light from the US to support the yen.

• EUR/USD remains depressed at two-decade low, prints three-day downtrend.
• Clear break of two-month-old support, the biggest bearish MACD signal in a month favors sellers.
• 61.8% Fibonacci Expansion (FE) lures bears ahead of the 20-year bottom.

EUR/USD bears keep the reins at the 19-year low after breaking the key support line from mid-July. That said, the major currency pair holds lower ground near 0.9830 during Thursday’s Asian session.

Not only a downside break of the previous key support, now resistance around 0.9860, but the strongest bearish signal since late August also keeps the EUR/USD sellers hopeful of refreshing the multi-year low.

In doing so, the 61.8% Fibonacci Expansion (FE) of the pair’s June-September moves, near 0.9730, will be in focus.

If at all the EUR/USD ignores the nearly oversold RSI (14) and drops below 0.9730, the south-run could aim for the year 2002 bottom surrounding 0.9610.

Alternatively, recovery remains elusive until the quote stays below the support-turned-resistance line near 0.9860.

It’s worth noting that the EUR/USD rebound past 0.9860 could enable the buyers to aim for the weekly high of 1.0050.

Even so, the 50-DMA and the descending resistance line from June, respectively near 1.0090 and 1.0140, could challenge the EUR/USD bulls afterward.

EUR/USD: Daily chart

Trend: Further downside expected