XtreamForex | Daily Technical Analysis

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AUD/USD Nears 0.6400: Focus on US Core PCE and Aussie CPI
The AUD/USD pair is currently undergoing a retracement, with its value hovering around the 0.6420 mark during the Asian trading session on Monday. This pullback comes after the pair experienced some upward momentum last week, buoyed by a combination of positive Australian PMI data and a weaker US Dollar.

Australia’s PMI data provided a mixed picture, with the Services PMI showing a modest improvement, rising to 50.5 in September from 47.8 in August. On the other hand, the Manufacturing PMI declined slightly from 49.6 to 48.2. The Composite Index, which combines both sectors, managed to move into expansion territory, climbing from 48.0 to 50.2.

The recent minutes from the Reserve Bank of Australia’s (RBA) September meeting hinted at a dovish stance. While the RBA acknowledged the possibility of additional tightening measures if inflation persists, they also emphasized the case for maintaining the current monetary policy. This delicate balance in the RBA’s approach underscores the importance of upcoming economic data, particularly Australia’s Consumer Price Index (CPI) and Retail Sales figures, which could significantly impact the AUD/USD pair’s trajectory.

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US Yields Surge, Asia Stocks Fall Amid Fed’s Hawkish Stance

US Treasury yields hit a fresh 16-year high, reaching 4.552%, marking levels not seen since October 2007. This surge was driven by the Federal Reserve and other major central banks signaling that interest rates would remain elevated for an extended period. Consequently, the US dollar held near a 10-month high, with the US dollar index reaching 106.10, its highest since November 30, before settling at 106.00.

In response to the soaring yields and a strong dollar, Asia-Pacific stock markets faced declines. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped by 0.33%. Tokyo’s Nikkei fell by 0.7%, South Korea’s Kospi slid 1%, and Hong Kong’s Hang Seng slipped 0.3%. Mainland Chinese blue chips opened flat.

US stock futures pointed to a 0.3% decline, following a 0.4% rise in the S&P 500 overnight. Traders now consider the likelihood of another quarter-point Federal Reserve rate hike by January to be a toss-up, and they have postponed expectations for rate cuts until the summer.

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AUD Stays Above 0.6350 Amid Weak Retail Sales
The Australian Dollar (AUD) recently found itself in a precarious position, as it dipped to a 10-month low. However, despite this challenging situation, the AUD/USD pair managed to maintain its stance above the crucial 0.6350 mark. This resilience came in the wake of disappointing news regarding Australia’s Retail Sales data, signaling a complex financial landscape for the Aussie Dollar.

One notable factor contributing to the economic puzzle is the fluctuating monthly Consumer Price Index (CPI) in Australia. Following a decline in July, the CPI rebounded, largely attributed to the relentless surge in energy prices. This unexpected rise in inflation has stirred speculation about the Reserve Bank of Australia (RBA) possibly implementing another interest rate hike. Surprisingly, even with these promising CPI figures, the AUD struggled to gain significant traction in the forex market.

One of the major culprits behind the Australian Dollar’s struggle is the palpable increase in risk aversion sentiment among investors. This apprehension has exerted substantial downward pressure on the currency. Additionally, the AUD’s potential upside is curtailed by the drop in commodity prices, a crucial driver of the AUD/USD pair.

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Canadian Dollar Seeks Upside Against USD

The Canadian Dollar (CAD) is currently making slight gains against the US Dollar (USD) as the Greenback takes a breather from its recent ascent. This subtle shift in the forex market is influenced by various factors, including the temporary stabilization of oil prices, which is a significant driver of the Canadian economy. At present, the USD/CAD pair is trading relatively flat for the day, experiencing a marginal decline of 0.2% and hovering near the consolidation level of 1.3500.

In terms of economic data, the Canadian calendar remains light, with the highlight of the week being Friday’s release of Gross Domestic Product (GDP) figures for the month of July. Projections suggest a modest 0.1% increase compared to the previous month’s -0.2% contraction. It’s important to note that oil prices and the broader US Dollar Index (DXY) will continue to exert substantial influence over the CAD’s performance in the foreseeable future.

Over the course of September, the Canadian Dollar exhibited notable strength, registering an impressive 2.3% gain against the USD. This bullish performance was largely underpinned by the surging prices in the oil market, given that Canada is a major exporter of crude oil. However, in the short term, the USD/CAD pair is currently down by 1.5%, with the robust performance of the DXY prevailing over the fluctuations in crude oil prices.

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AUD Ends Winning Streak Amid RBA Policy Focus
The Australian Dollar (AUD) put anAUD Ends Winning Streak Amid RBA Policy Focus

BOJ Debates Exiting Easy Policy, 10-Year JGBs Weaken

Nikkei Rises in Asian Trade; China, India on Holiday

end to its recent winning streak on Monday, marking the third consecutive day of losses. The AUD/USD pair had received support earlier, primarily driven by positive Chinese PMI data released over the weekend. However, the US Dollar (USD) showed resilience following moderate economic data released on the previous Friday.

Australia’s TD Securities Inflation data for September indicated a decrease in inflation compared to August. The Reserve Bank of Australia (RBA) is anticipated to maintain the current interest rate in the upcoming policy meeting on Tuesday. However, the Consumer Price Index (CPI) in Australia for the same month displayed an improvement compared to July, primarily due to rising energy prices. This increase in inflation could potentially influence the RBA’s policy decision.

The US Dollar Index (DXY) continued to strengthen in the second trading session after the release of moderate economic data from the United States (US). Core Personal Consumption Expenditures (PCE) Price Index for August met expectations but was lower than July’s figures. US Core PCE MoM data fell below market consensus, while the Michigan Consumer Sentiment Index for September showed improvement compared to previous figures.

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Gold Price Plunges to March Low on Elevated Fed Rate Expectations

The price of gold has sharply declined, hitting its lowest level since March due to expectations of a Federal Reserve interest rate increase. The Fed’s concerns about persistent inflation and the possibility of another rate hike in 2023, combined with strong US macroeconomic data, have heightened the likelihood of further policy tightening. This has led to an increase in US Treasury bond yields and pushed the US Dollar to its highest point since November 2022, diverting investors from non-yielding gold.

Gold has been on a continuous downward trend for seven consecutive days, bringing it down to $1,815 during the recent Asian trading session. Interestingly, this decline has occurred despite the generally weaker performance of equity markets, which would typically boost gold’s appeal as a safe haven. It suggests that the prevailing direction for gold remains downward. However, it’s worth noting that extreme oversold conditions on the daily chart warrant caution among bearish traders.

In the realm of market developments, the gold price is suffering due to growing expectations of a more hawkish stance by the Federal Reserve. This streak of declining gold prices is the longest since August 2022, with Fed officials emphasizing the need for a prolonged period of restrictive monetary policy to bring inflation back to the 2% target. Fed Governor Michelle Bowman is open to further rate hikes if incoming data suggests insufficient progress on inflation, and Fed Vice Chair Michael Barr emphasizes the importance of maintaining sufficiently restrictive rates to achieve their goals. Cleveland Fed President Loretta Mester also warns of inflation risks skewed toward the upside, necessitating higher rates to continue the disinflation process.

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USD Index Holds Steady Above 107.00, Focus on US Data
The USD Index (DXY) has been exhibiting a seesaw pattern, hovering above the 107.00 mark on Wednesday, as it grapples with a mix of gains and losses. This performance comes amid a keen focus on upcoming US economic data and remarks from Federal Reserve officials.

The DXY finds itself in a consolidative phase around the levels last witnessed in 2023, just above the 107.00 threshold. This situation unfolds against the backdrop of rising US yields across the yield curve and a modest uptick in overall risk sentiment. The index’s recent bullish momentum has been further fortified by hawkish commentary from Federal Reserve policymakers, as well as growing speculation of an additional interest rate hike by the central bank before the year draws to a close.

In the upcoming US trading session, a slew of critical economic data releases is set to command the market’s attention. Investors will be closely monitoring the release of the weekly Mortgage Applications data by the Mortgage Bankers Association (MBA), the ADP Employment Change report, final readings of the Services Purchasing Managers’ Index (PMI), Factory Orders figures, and the always pertinent ISM Services PMI. These data points are anticipated to provide valuable insights into the state of the US economy and potentially impact the direction of the USD.

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USD/CAD Falters Near 1.3730; Eyes on US, Canada Jobs Data

The USD/CAD pair is experiencing a slight dip in the vicinity of 1.3730 as market participants eagerly anticipate labor market data from the US and Canada. The US Dollar (USD) has been on a losing streak, which has led to the CAD’s current position.

In September, the US ISM Services PMI dropped from 54.5 to 53.6, matching predictions. However, the ADP Employment Change for the same month saw an increase of just 89,000, falling short of the anticipated 153,000 and hitting its lowest point since January 2021.

The US Dollar Index (DXY) is also receding from an 11-month high due to a decline in US bond yields, currently hovering around 106.50. Despite this, market wariness about the trajectory of the US Federal Reserve’s (Fed) interest rates could provide some support to the USD/CAD pair.

Expectations of prolonged higher interest rates from the Fed had driven US yields to multi-year highs before they began to bounce back. The 10-year US Treasury yield, which reached a peak of 4.88% on Wednesday—the highest since 2007—was at 4.71% at the time of writing.

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GBP/USD Holds Steady Above 1.2200 Amid Geopolitical Tensions

The GBP/USD currency pair has been exhibiting some resilience in the face of geopolitical tensions and economic uncertainty. After opening with a modest bearish gap below 1.2200 levels at the start of a new week, the pair managed to recover, moving closer to a one-week high touched on the preceding Friday. Spot prices are currently fluctuating around the 1.2220-1.2225 region, primarily influenced by the performance of the US Dollar (USD).

The USD, traditionally seen as a safe-haven currency, received a slight boost due to a global shift towards safer assets. This trend was triggered by escalating geopolitical tensions in the Middle East. The Hamas militant group in Gaza launched attacks on Israeli towns, an event that shocked the world due to its unprecedented nature. Israel responded with airstrikes on Gaza and declared war against the Palestinian enclave of Gaza. This conflict resulted in hundreds of casualties on both sides, further intensifying global anxieties.

However, the USD’s bullish momentum is held back by uncertainties about the future path of the Federal Reserve’s (Fed) rate hikes. These uncertainties lend some support to the GBP/USD pair, preventing it from a steep decline.

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Gold Maintains One-Week High Amid Israel-Palestinian Conflict Gains
The gold market has experienced a week of consistent gains, with prices holding steady above the $1,860 mark. These gains are primarily attributed to the ongoing geopolitical tensions between Israel and Palestine, which have heightened global risk sentiment. Investors seeking a safe haven have turned to the precious metal as a refuge amidst the uncertainty.

Another factor contributing to the upward trajectory of gold prices is the retreat in U.S. Treasury bond yields. This retreat is a consequence of shifting expectations regarding further rate hikes by the Federal Reserve (Fed). Recent comments from Fed officials, including Dallas Fed President Lorie Logan and Fed Vice Chair Philip Jefferson, have signaled a more cautious approach to future rate increases. The rise in long-term U.S. Treasury bond yields has been seen as a useful tool in the fight against inflation. This change in the Fed’s tone has led to a decrease in U.S. Treasury bond yields and has also put pressure on the U.S. Dollar. These factors collectively contribute to the continued rise in the price of gold.

However, it’s important to note that the market is still factoring in the possibility of at least one more rate hike by the Fed before the end of the year. This expectation may limit the downside for U.S. bond yields and the U.S. Dollar. As a result, investors are closely monitoring key events and data releases this week.

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