US stocks advanced higher on Tuesday, extending their previous rally and rose for the third day as investors awaited midterm election results and monitored the selloff in crypto markets.

Bitcoin plummeted to a fresh 2022 low at $18,355 amid the collapse of FTX and Binance’s decision to save the crypto exchange. The mini-crash in Bitcoin has weighed on the stock market and caused a sharp drop as investors don’t like to see any disruptions in any risk asset.

On top of that, the results of the US mid-term elections would take a couple of days, which could have long-lasting effects on the American dollar. A history of robust performance following midterm results has provided support to the outlook for equity markets.

In the Eurozone, the euro cheers the upbeat Eurozone data despite some discouraging news, as the European Commission said there is no way to create a gas price cap as requested by EU leaders at the end of October. Eurozone’s Retail Sales rose by 0.4% MoM in September.

The benchmarks, S&P 500 and Dow Jones Industrial Average both climbed higher on Tuesday as the S&P 500 closed higher with investors eyeing potential gridlock from midterm election results ahead of the release of US inflation figures. The S&P 500 was up 0.6% daily and the Dow Jones Industrial Average also advanced higher with a 1.0% gain for the day.

Ten out of eleven sectors in the S&P 500 stayed in positive territory as the Materials and Information Technology sectors are the best performing among all groups, rising 1.68% and 0.92%, respectively. The Nasdaq 100 meanwhile climbed higher with a 0.8% gain on Tuesday and the MSCI World index was up 0.8% for the day.

Main Pairs Movement

The US dollar declined lower on Tuesday, remaining under bearish pressure and plummeted to fresh monthly lows against most of its major rivals during the US trading session as the markets await the outcome of the US mid-term elections. The positive tone of US equities and easing government bond yields both exerted bearish pressure on the greenback amid the optimism surrounding US Mid-Term Elections. The important election results would take a couple of days.

GBP/USD edged higher on Tuesday with a 0.26% gain after the cable retreated from a daily high and dropped to the 1.1520 area amid risk-on market sentiment. On the UK front, Bank of England Chief Economist Huw Pill said the central bank has more to do with tightening the monetary policy. Meanwhile, EUR/USD holds on to its gains ahead of the US close and climbed above the 1.0070 mark amid the market’s optimism surrounding the US election outcome. The pair was up almost 0.54% for the day.

Gold surged with a 2.20% gain for the day after reaching levels that were last seen in September around the $1,714 mark during the late US trading session, as the weaker US dollar across the board helped the precious metal to find demand. Meanwhile, WTI Oil was sharply down with a 3.14% loss for the day amid concerns over China’s oil demand. Crude oil prices have retreated to the $88.50 area.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD managed to climb back to the level above the 1.0000 threshold as the US dollar fell below the 110 level, which is the first time in the last two weeks, during the US trading session. The outcome of the US mid-term elections could have long-lasting effects on the American dollar, particularly if Democrats are not able to retain control of both houses. Republicans do not need much to seize control of Congress. If that’s the case, they may oppose President Joe Biden’s massive expenses, which would exacerbate the risk of an economic downturn. Equities will likely collapse, but it does not seem the dollar could benefit much from it.

In Eurozone, France’s trade deficit widened to € 17.49B in September and Retail Sales in Italy expanded 0.5% MoM in the same month. Meanwhile, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair.

From the technical perspective, the four-hour scale RSI indicator continued to advance to around 68 figured closed to 70, overbuy zone, which suggests that the pair was amid strong bullish momentum. As for the Bollinger Bands, the European currency remained firmly above the 20-period moving average, which is a signal that the pair was surrounded by an upside tendency.

Resistance:  1.0000, 1.0094

Support: 0.9813, 0.9730, 0.9636

GBPUSD (4-Hour Chart)

The GBPUSD successfully rebounded to a level above 1.5500 as the US dollar struggles to find demand as a haven on Tuesday as risk flows continue to dominate the financial markets, providing a boost to the pair. The pounds were priced at 1.1576 level as of writing. The greenback has dropped across the board in the US trading session, and US stocks advance with all eyes on the outcome of the US mid-term elections.  A hitherto rangebound market has led to a significative US dollar pullback as the first surveys started hinting at a Republican victory. The scenario might create a gridlock in the US Congress that would be welcomed by the market as it will hinder the approval of new regulations.  Nevertheless, it’s worth noting that the outcome of the US midterm election is likely to be unveiled later in the week, opening the door for choppy market action in the short term.

From the technical perspective, the four-hour scale RSI indicator edged lower to 58 figures as of writing, suggesting that the pair’s positive traction slowdown. As for the Bollinger Bands, the pair kept pricing above the 20-period moving average but was capped by the upper band two times in a row, signalling that the upside momentum is softer. Hence, unless there is a surprising CPI figure, the pound was more favoured to the downside path in the near term.

Resistance: 1.1645, 1.1732, 1.1878

Support: 1.1439, 1.1159, 1.0955

XAUUSD (4-Hour Chart)

Gold surged to above the $1710 mark and aimed for October’s monthly high of $1729.87, with XAUUSD pricing at $1715 marks as of writing. The midterm elections in the United States increased risk appetite and triggered a sharp decline in US Treasury yields during US trading hours, which, in turn, caused a USD sell-off. The US Dollar index (DXY) tumbled by 0.72% for the day and fell to below 109.5 level, which is the first time since 27th October. Investors are likely to refrain from betting on an extended risk rally while awaiting the outcome of the United States (US) midterm elections. If Republicans take the majority in the House and the Senate, additional gains in the US stocks could be witnessed. However, a split Congress could force market participants to adopt a cautious stance amid heightened uncertainty surrounding the fiscal policy. Meanwhile, the expectations for the Federal Reserve’s December meeting remain tilted towards hiking 50 bps, as shown by the CME FedWatch Tool at 52%. The speculations for a 75 bps increase are 48%, unchanged from a day ago.

From the technical perspective, the four-hour scale RSI indicator surged to 74 figures as of writing, which has entered into the overbought zone, suggesting that some selling transactions could be expected. As for the Bollinger Bands, the gold was priced around the upper band and the size of the upper and lower bands became larger, signalling the yellow metal was still surrounded by strong positive traction. Therefore, we think the price would wander around the $1710 area to consume some selling pressure and then move up to challenge the $1725 mark in the near term.

Resistance: 1725, 1745

Support: 1665, 1641, 1615

Economic Data

US stocks rallied higher on Monday, preserving their upside traction for the second day and extending their previous rally ahead of midterm elections and inflation data later this week. The renewed speculation that the US Federal Reserve will ease the pace of quantitative tightening regardless of Chair Jerome Powell´s hawkish comments and easing restrictive measures in China has underpinned the market sentiment. Therefore, the risk-on mood acted as a tailwind for the equity markets on the first day of the week.

Markets focus now shifts to the release of the US Consumer Price Index (CPI) report for October, which will be closely watched after the core consumer price index rose more than forecast to a 40-year high in September. In the Eurozone, the upbeat EU data and hawkish comments from the European Central Bank (ECB) officials have provided support to the shared currency, as they said that the central bank shouldn’t stop rate hikes as long as underlying inflation has not peaked.

The benchmarks, S&P 500 and Dow Jones Industrial Average both climbed higher on Monday as the S&P 500 gained for a second day ahead of US midterms and closed near session highs with the US dollar falling with Treasuries. The S&P 500 was up 1.0% daily and the Dow Jones Industrial Average also advanced higher with a 1.3% gain for the day. Eight out of eleven sectors in the S&P 500 stayed in positive territory as the Communication Services and Energy sectors are the best performing among all groups, rising 1.82% and 1.73%, respectively. The Nasdaq 100 meanwhile climbed higher with a 1.1% gain on Monday and the MSCI World index was up 1.1% for the day.

Main Pairs Movement

The US dollar declined lower on Monday, extending its previous slide and refreshed daily lows below the 110.10 mark during the US trading session as Wall Street picked up momentum ahead of the close. Market participants believe that a slowdown in the pace of rate hikes by the Federal Reserve (Fed) is certain, making the American currency end up losing further ground against its major rivals. The upbeat market mood spurred by a seasonal US mid-term elections rally has also undermined the greenback.

GBP/USD outperformed on Monday with a 1.19% gain after the cable touched a daily high near the 1.1540 mark amid renewed US dollar weakness. On the UK front, uncertainty in the US political scenario ahead of US midterm elections and the US Consumer Price Index (CPI) report looming both helped the British pound to find demand. Meanwhile, EUR/USD preserved its upside momentum and climbed above the 1.0000 mark ahead of Eurozone Retail Sales and US inflation data. The pair was up almost 0.60% for the day.

Gold declined with a 0.37% loss for the day after failing to edge higher and retreated to the $1,675 mark during the late US trading session, as the positive market mood is weighing on the safe-haven metal despite the US dollar’s weakness. Meanwhile, WTI Oil dropped with a 0.89% loss for the day as China stays committed to zero covid policy. Crude oil prices have retreated to the $91.00 area.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD advances for the second session in a row and gains more than two cents since last week’s lows around 0.9730, always against the backdrop of the persistent sell-off in the greenback. The pair was priced at 0.9990 level and aiming to 1.0000 psychological level. Indeed, the dollar remains offered as market participants continue to gauge the mixed results from Friday’s Payrolls and recent Fedspeak leaning towards an impasse in the Fed’s normalization process. The persistence of the positive traction in the pair so far comes in line with the mixed performance in US yields and some loss of momentum in the German 10-year bond yields after two daily advances in a row. On the other side, tepid Chinese data weighed on market sentiment and drew support for the safe-haven greenback, but the US dollar quickly resumed its decline tendency. Despite the number of new coronavirus cases on the rise, investors are once again pricing in easing restrictive measures.

From the technical perspective, the four-hour scale RSI indicator extended its rally from last week figured 65 as of writing, suggesting the pair remained upbeat market mood and continued to move higher. As for the Bollinger Bands, the euro was pricing in the upper area and the size between upper and lower bands got larger, which is a signal that the pair was amid strong bullish momentum despite being capped by the psychological 1.0000 level at the time of writing.

Resistance: 1.0000, 1.0094

Support: 0.9813, 0.9730, 0.9636

GBPUSD (4-Hour Chart)

The GBPUSD extended its gains during the North American session due to upbeat market sentiment spurred by a seasonal US mid-term elections rally. At the same time, investors brace for the results of the latter and the October US Consumer Price Index. Even though the Bank of England (BoE), said that they would hike rates, but not at the level money market futures priced in, the pair was pricing at 1.15156 as of writing with 1.26% on daily basis. Furthermore, the Guardian reported that British Finance Minister Jeremy Hunt was planning to announce 60 billion Pounds of tax rises and at least 35 billion Pounds of spending cuts. The BoE said that they have not taken potential austerity measures or tax increases into account when deciding on the policy action. Hence, the BoE’s dovish stance could be reaffirmed in case the UK government decides to run a tighter fiscal policy. However, the US Dollar market demand is likely to continue to drive the pound’s movement in the near term.

From the technical perspective, the four-hour scale RSI indicator steadily climbed to 64 figures as of writing, suggesting that the pair was amid strong bullish momentum. As for the Bollinger Bands, the price was priced near the upper band. Hence, we think the pounds would confront some resistance around the upper band of 1.1550 and then challenge the 1.1645 level in the near term.

Resistance: 1.1645, 1.1738

Support: 1.1410, 1.1163, 1.0934

XAUUSD (4-Hour Chart)

Gold was put sideways and was priced at $1676.8 marks following touched the daily high of $1681.9 marks. The US dollar started the day on the back foot as the market mood improved at the beginning of the week and ahead of the release of US inflation figures. The US Consumer Price Index is expected to have eased in September from 8.2% YoY to 8% in October. The core reading, which excludes volatile food and energy prices, is foreseen at 6.5%, barely down from 6.6%. Furthermore, a combination of factors underpinned the market risk sentiment. The comments by the Chinese National Health Commission, which has reiterated the Government’s commitment to the Zero-COVID policy and warned about the possibility of severe restrictions ahead, as the winter flu season approaches. However, this has not altered the market mood, as in absence of first-tier macroeconomic releases, the positive Friday’s Non-Farm Payrolls report is still driving market sentiment on Monday.

From the technical perspective, the four-hour scale RSI indicator edged lower to 64 figures as of writing, suggesting that the positive traction has been lower. As for Bollinger Bands, the yellow metal was stability pricing in the upper area the following retreat back below the upper band, signalling that the pair witnessed some selling transactions around $1684 marks. Therefore, the bullish could persist to challenge the $1700 psychological level if breaking through the $1684 resistance with strong positive traction.

Resistance: 1684, 1701, 1729

Support: 1654, 1641, 1615

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Since the Federal Reserve announced its September rate decision, consumer price growth in the US has accelerated across a wide range of goods and services. This signifies that underlying inflationary pressures are growing stronger.

Fed officials will announce another rate hike in December, with analysts expecting the central bank to also increase interest rates further.

Here’s what to expect for the week ahead:

US Midterm Elections (November 8)

The US will hold its midterm elections on November 8.

Voters will go to the polls to decide who will hold key offices in their respective states and cities. The result of this election is expected to have a major impact on the US economy, and analysts are keeping close tabs on the situation.

US Consumer Price Index (November 10)

US CPI rose by 0.4% month-on-month in September, the highest reading in three months.

Analysts expect consumer prices to increase by a further 0.7%.

UK Gross Domestic Product (November 11)

UK economic growth slowed by 0.3% month-on-month in August after rising by 0.1% in July.

Analysts expect GDP growth to be 0.1% for September.

US Prelim UoM Consumer Sentiment (November 11)

The University of Michigan’s latest consumer sentiment survey in the US showed a reading of 59.9.

Economists forecast the index to come in at 60 for this month.

US stocks advanced higher on Friday, regaining upside momentum and ending their previous slide as investors weighed mixed jobs figures and awaited next week’s inflation data for more clues on when the Federal Reserve would be able to slow down its pace of rate hikes. The Nonfarm Payrolls in the US rose by 261,000 in October, which came in much higher than the market expectation of 200,000. However, further details revealed that the Unemployment Rate edged higher to 3.7% from 3.5%, signalling that the labour market is easing amid the most aggressive Federal Reserve tightening cycle.

Therefore, the theory of slower rate hikes in December has been brought back with signs of a potential easing in the labour market conditions, which further undermined the US dollar. Markets focus now shifts to the release of the US Consumer Price Index (CPI) report for October, which will be important to forecast market moves.

In the Eurozone, the European Central Bank (ECB) President Christine Lagarde said on Friday that they will not let high inflation become entrenched and have to raise rates to levels that will deliver the 2% medium-term inflation target.

The benchmarks, S&P 500 and Dow Jones Industrial Average both climbed higher on Friday as the S&P 500 regained positive traction and halted a four-day slide. The S&P 500 was up 1.4% daily and the Dow Jones Industrial Average also advanced higher with a 1.3% gain for the day. All of the eleven sectors in the S&P 500 stayed in positive territory as the Materials sector and the Financials sector are the best performing among all groups, rising 3.41% and 1.87%, respectively. The Nasdaq 100 meanwhile climbed the most with a 1.6% gain on Friday and the MSCI World index was up 1.9% for the day.

Main Pairs Movement

The US dollar tumbled on Friday, witnessing heavy downside momentum and has difficulty finding its feet near the 110.5 level during the US trading session despite the robust US Nonfarm Payrolls (NFP) data. The downbeat US unemployment rate report and wage inflation data have shown the first signs of easing in the US labour market, which has tamed expectations of further aggressive tightening by the Federal Reserve and exerted bearish pressure on the greenback.

GBP/USD surged higher on Friday with a 1.96% gain after the cable extended its rally to daily highs around the 1.1380 mark amid broad-based US dollar weakness. On the UK front, investors are awaiting more developments on tightening fiscal policy measures in Britain led by UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt. Meanwhile, EUR/USD staged a goodish rebound and refreshed its daily high above the 0.9960 mark amid a weaker US dollar and an improvement in market sentiment. The pair was up almost 2.10% for the day.

Gold advanced with a 3.21% gain for the day after soaring to a three-week high above the $1,680 mark during the late US trading session, as the speculations that the Fed would tighten in smaller rate increases have weighed on the US dollar and lifted the Gold higher. Meanwhile, WTI Oil surged with a 5.04% gain for the day as crude oil prices hit three-week highs above the $92.00 area.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD has gathered bullish tractions and climbed above 0.9900 level as of writing, reaching fresh weekly highs, as US Dollar stays under strong selling pressure in the risk-positive market environment and fueled the pair’s rally although US Nonfarm Payrolls surprised to the upside in October. Earlier, the US Bureau of Labor Statistics released the October jobs report. Nonfarm Payrolls rose by 261K, compared to the expected 200K. However, a strong NFP report failed to attract buying for the greenback, the DXY index tumbled with 1.75% daily losses and dropped to a level below 111.0, underpinning the pair. Further data saw the Unemployment Rate ticked higher to 3.7% (from 3.5%) and the key Average Hourly Earnings, a proxy for inflation via wages, increased by 0.4% MoM and 4.7% from a year earlier. Furthermore, the sharp upsurge witnessed in the EURGBP cross on Thursday showed that the Euro(EUR) managed to capture some of the capital outflows out of the British pound. The Bank of England (BOE) said the peak rate is likely to be lower than 5.2% priced into markets and investors assessed that comment as a sign of a less aggressive tightening stance.

From the technical perspective,  the four-hour scale RSI indicator surged to 58 figures as of writing, suggesting that the pair amid strong bullish momentum. As for Bollinger Bands, the pair broke through the 20-period moving average and was pricing in the upper area. Therefore, we think the positive traction would persist in the near term to challenge the 1.0000 psychological level.

Resistance:  1.0000, 1.0094

Support: 0.9736, 0.9668, 0.9551

GBPUSD (4-Hour Chart)

The GBPUSD managed to advance to the boundaries of 1.1300 the figure at the end of the week, as the market amid improved risk sentiment and further declined the demand for the safe-haven greenback, where the pair was pricing at 1.1285 level as of writing. The broad-based appetite for the risk-associated universe lent the Quid extra legs on Friday and helped the pounds recoup part of the BoE-induced sell-off recorded on Thursday. The US Dollar remains well on the defensive despite the US economy creating more jobs than expected in October (261K), while the Unemployment Rate edged higher to 3.7%. In the UK docket, the Construction PMI improved from 52.3 to 53.2 in October, while BoE Chief Economist H.Pill suggested earlier in the session that markets should “re-anchor” their expectations around the policy rate following the recent political and financial crisis.

From the technical perspective, the four-hour scale RSI indicator rebounded to 43 figures as of writing, suggesting that the cables attracted some buying during the RSI stay in the oversold zone. As for the Bollinger Bands, the price was still priced lower than the 20-period moving average, which is a signal that the strength of the rebound is weaker. As a result, we think the pair was more favoured to the downside path and there would be a pullback to test the 1.1163 support.

Resistance: 1.1417, 1.1623

Support: 1.1163, 1.0953, 1.0632

XAUUSD (4-Hour Chart)

Gold continues to extend its rally in the October US Nonfarm Payrolls report afterwards and was priced at $1673 marks, up by more than 2.60% daily, as growing speculations that an uptick in the rate of unemployment might deter the Federal Reserve from aggressive tightening. Following the release of the Nonfarm Payrolls, the US Dollar falls further. The US economy added 261K jobs, above estimates of 200K, but what probably rocked the boat was that the Unemployment Rate increased by 3.7% from 3.5% in the previous month, signalling that the labour market is easing amid the most aggressive Federal Reserve cycle. In the meantime, US Treasury bond yields, particularly the 10-year benchmark note rate, almost parked at 4.156%, unchanged. However, what’s worth noting is the inversion of the 2s-10s yield curve, which is used as a leading indicator of upcoming recessions.  

From the technical perspective, the four-hour scale RSI indicator rallied dramatically to 67 figures as of writing, suggesting that the pair amid an upbeat market mood with heavy upside pressure. As for the Bollinger Bands, the gold was pricing above the upper band and the size between upper and lower bands became larger, which is a signal that the bullish tendency would last. Hence, we think the gold would manage to stabilise above the $1675 mark and aim for a $1700 psychological level.

Resistance: 1675, 1700, 1725

Support: 1632, 1615, 1600

Economic Data

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US stocks declined lower on Thursday, remaining under pressure and extended their post-Fed slide amid concern that a deeper recession could be possible as the Federal Reserve expected to hold rates at a higher level for longer to tame inflation. The Soaring government bond yields and risk-off market mood has exerted bearish pressure on the equity markets, as the 10-year US Treasury yields accelerated to 4.15% after hawkish guidance from the Fed yesterday.

On the economic data side, the US ISM Services PMI declined to 54.4 in October, which came in below the market expectation of 55.5 but failed to drag down the US dollar. Markets focus now shifts to the release of the US Nonfarm Payrolls report in October, which will provide cues about the Fed’s intentions toward December’s monetary policy. In the Eurozone, the divergence between the Fed and the European Central Bank given the dovish stance of the ECB’s governor Christine Lagarde could keep weighing on the euro, as Lagarde emphasised the meeting-by-meeting approach last week.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Thursday as the S&P 500 saw its fourth straight decline and was dragged down by big tech companies as Treasury yields climbed. The S&P 500 was down 1.1% daily and the Dow Jones Industrial Average also dropped lower with a 0.5% loss for the day. Six out of eleven sectors in the S&P 500 stayed in negative territory as the Information Technology sector and the Communication Services sector are the worst performing among all groups, losing 3.00% and 2.83%, respectively. The Nasdaq 100 meanwhile dropped the most with a 2.0% loss on Thursday and the MSCI World index was down 1.3% for the day.

Main Pairs Movement

The US dollar advanced higher on Thursday, extending its post-Fed rally and reached fresh weekly highs against most of its major rivals during the US trading session amid souring market sentiment. The greenback remains underpinned by Fed Chair Jerome Powell’s hawkish commentary as he said that rates would be higher than September’s forecast. Meanwhile, the release of the US NFP data on Friday will provide some clarity for further Fed’s monetary policy action.

GBP/USD tumbled heavily on Thursday with a 2.04% loss after the cable extended its slide to two-week lows below the 1.1160 mark amid BoE’s dovish language. On the UK front, the Bank of England’s Governor Bailey said that rates would be lower than market expectations and expects a long-lasting recession will hit the UK. Meanwhile, EUR/USD continued to be controlled by the bears and sank into the 0.9740 area amid a stronger US dollar and the ECB/Fed divergence. The pair was down almost 0.70% for the day.

Gold retreated with a 0.35% loss for the day after recovering some of its daily losses towards the $1,630 area during the late US trading session, as the hawkish commentary by the Fed lifts the greenback and weighs on Gold prices. Meanwhile, WTI Oil declined lower with a 2.03% loss for the day as crude oil prices retreat from the $90.00 area to levels near the $88.00 area.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD has managed to stage a rebound after having touched its lowest level in two weeks at 0.9730 earlier in the day, however, as the US dollar preserved its strength following the latest data releases, the pair stays in negative territory and was priced at 0.9775 as of writing.  The US central bank raised the interest rate as expected by 75 bps, while the accompanying statement signalled a potential pivot in the monetary policy. Nevertheless, Federal Reserve Chair Jerome Powell came out with relatively hawkish messages, which made investors change their minds and rush to price in another 75 bps coming in December. Moreover, Powell also implied that the ultimate level of rates would be higher than previously expected. Another side, the Bank of England also pulled the trigger for 75 bps as anticipated, but downwardly revised the growth forecast, expecting the recession will continue. Policymakers now expect the UK economy to contract by 1% in 2024, compared to 0.25% in the previous meeting. In domestic, ECB President Christine Lagarde was on the wires and noted that a recession would not be sufficient to tame runaway inflation.

From the technical perspective,  the four-hour scale RSI indicator slightly rebound from 30 to 32 figured as of writing, suggesting that the pair was surrounded by heavy bearish traction. As for Bollinger Bands, the EURUSD was wandering around the lower band and the gap between upper and lower bands get larger, which is a signal that the downward trend would persist in the near term. As a result, we think the pair would further decline and aim to monthly-low around 0.9664 level.

Resistance:  0.9861, 1.0000, 1.0094

Support: 0.9664, 0.9536

GBPUSD (4-Hour Chart)

The GBPUSD was pricing at the 1.1185 level as of writing and trying to stabilise above 1.1200 after having slumped to the 1.1150 area earlier in the day, with broad-based dollar strength continuing to weigh on the pair. FOMC Chair Jerome Powell’s hawkish remarks during the press conference provided a boost to the US dollar on Wednesday and forced GBPUSD to close in negative territory. Powell said that he expected the terminal rate to be revised higher than previously expected and noted that it was very premature to even think about pausing rate increases, which caused the surge of the US dollar index and dealt with negative traction on the cables. Apart from Fed, the Bank of England also raised its policy rate by 75bps as expected but noted that the peak rate was likely to be lower than 5.2% priced in markets, triggering a Sterling selloff. Moreover, BoE policymakers also downwardly revised the growth forecast, which the UK economy will contract by 1% in 2024, compared to 0.25% in the previous meeting. This indicated that the recession will last for a longer future and deepened investors’ fears about the UK economic situation.

From the technical perspective, the four-hour scale RSI indicator fell sharply below 30 figures as of writing, suggesting the strong negative traction further deepen, but a rebound could be expected due to RSI having entered the oversold zone. As for Bollinger Bands, the pounds were pricing below the lower band and the size between upper and lower bands became larger, signalling the overall downside tendency would continue for a while. Therefore, we think the downside path was more favoured after a slight rebound in the near term.

Resistance: 1.1432, 1.1629

Support: 1.0953, 1.0632, 1.0392

XAUUSD (4-Hour Chart)

Gold managed to regather some strength and was priced at $1632 at the moment after having touched the 2022 low of $1614 during the European session, as the US demand was affected by post-Fed strength and mixed US data.  XAUUSD declined following the hawkish commentary of Federal Reserve Chairman Jerome Powell, saying that the “ultimate level of rates would be higher than previously expected,” spurring a jump in US Treasury bond yields. The yield on the 2-year Treasury note peaked at 4.745%, its highest since 2007, while that on the 10-year note hit an intraday high of 4.22% after Powell noted any discussion on rate hike pausing would be premature, which underpinned the safe-haven greenback and undermined the non-yielding yellow metal. However, data from the United States flashed that business activity continues to expand while the labour market remains tight. The Institute for Supply Management (ISM) reported its Service PMI, which decelerated to 54.4 from 56.7 in September, below estimates of 55.5. Even though the index remained in expansion territory, it’s decelerating, signal Fed officials are looking for.

From the technical perspective, the four-hour scale RSI indicator rebounded from the critical oversold level of 30 to 41 figured as of writing, suggesting the strong downside momentum slowdown. As for Bollinger Bands, the gold was pricing back to the lower area and the size between upper and lower bands became larger, which is a signal the pair would move with relatively large volatility. Hence, we think the yellow metal will hover in a wide range from the $1615 mark to $1660 in the near term.

Resistance: 1675, 1700, 1725

Support: 1632, 1615, 1600

Economic Data

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US stocks tumbled heavily on Wednesday, witnessing fresh downside momentum and surrendered all of their daily gains after the Fed chief Powell said the Fed still has some ways to go in its policy cycle as rates could peak at higher levels than previously thought. The US Federal Reserve announced that it raised the policy rate by 75 bps to the range of 3.75-4% as expected and suggested policymakers would soon slow the pace of QT.

However, Fed Chair Jerome Powell’s speech spurred turmoil in the market as he said that a restrictive policy stance should stay for some time and the ultimate level of rates would be higher than previously expected. The comments revived the odds of a fifth 75 bps in December and weighed heavily on global equity markets. In the Eurozone, the Euro might be under pressure due to interest-rate differentials between the Fed and the European Central Bank (ECB), as the United States will enjoy rates at 4.50% by the end of 2022, while the Eurozone will likely be at 2%.

The S&P 500 and Dow Jones Industrial Average both slumped dramatically on Wednesday as the S&P 500 suffered its worst rout on a Fed decision day since January 2021. The S&P 500 was down 2.5% daily and the Dow Jones Industrial Average also dropped lower with a 1.6% loss for the day. All of the eleven sectors in the S&P 500 stayed in negative territory as the Consumer Discretionary sector and the Information Technology sector is the worst performing among all groups, losing 3.79% and 3.47%, respectively. The Nasdaq 100 meanwhile dropped the most with a 3.4% loss on Wednesday and the MSCI World index was down 1.7% for the day.

Main Pairs Movement

The US dollar advanced higher on Wednesday, regained upside strength and pared all of its earlier losses around the 112.00 area during the US trading session after Fed Chair Jerome Powell surprised with a hawkish speech. He mentioned that slowing the pace of rate hikes will become necessary at some point but interest rates in the United States would go higher than September’s projections. Therefore, the hawkish statement increased volatility despite a slightly dovish FOMC monetary policy statement.

GBP/USD declined lower on Tuesday with a 0.80% loss after the cable retreated from daily highs and holds lower ground near a one-week low amid renewed US dollar strength. On the UK front, the Bank of England is less likely to impress the GBP/USD buyers even by announcing the 75 bps rate hike amid the fears of the UK’s recession. Meanwhile, EUR/USD surrendered its daily gains and plunged 150 pips from weekly highs amid a stronger US dollar and a hawkish Federal Reserve. The pair was down almost 0.60% for the day.

Gold dropped with a 0.77% loss for the day after extending its intra-day side to the $1,632 area during the late US trading session, as Powell’s hawkish commentary undermined the precious metal. Meanwhile, WTI Oil advanced higher with a 1.84% gain for the day as oil price pares recent losses around the $89.00 area.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD keeps hovering eventually in a range from 0.9850 to 0.9950 level as investors stay on the sidelines while preparing for the Fed’s policy announcements. The central bank is expected to raise interest rates by 75bps for the fourth consecutive meeting and prepare market players for a slower pace of quantitative tightening sometime shortly. With the mounting speculations that this would be the last 75 bps hike, and the December meeting will bring a 50 bps move, the US data showed a different opinion. The US inflation is still stubbornly high, while growth has probed resilient. Furthermore, employment-related data released these days has shown the sector is strong enough to bear with QT. The US ADP survey just released showed that the private sector added 239K new job positions in October, beating expectations of 195K, which shows the central bank could easily maintain its aggressive path for a couple more meetings. Investors need to keep eye on what Chair Jerome Powell’s stance is, which would highly change the direction of the equity market and the US Dollar.

From the technical perspective, the four-hour scale RSI indicator fell sharply to 41 as of writing, suggesting that the EURUSD was surrounded by heavy selling pressure during the first half of the US trading session. As for the Bollinger Bands, the pair was capped by a 20-period moving average and U-turned to below 0.9870 level. Therefore, we think the pair was more favoured to the downside path in the near term to challenge the lower band support around the 0.9844 level.

Resistance:  1.0000, 1.0092

Support: 0.9751, 0.9664, 0.9548

GBPUSD (4-Hour Chart)

The GBPUSD has continued to extend losses after having dropped below 1.1500 in the second half of the day on Wednesday, as US Dollar managed to regather upside momentum ahead of Federal Reserve’s policy announcement, forcing the pair to stay under modest bearish pressure. The Fed is on track to raise 75 basis points once again in November. However, the decision itself is unlikely to trigger a significant reaction as investors stay focused on the US central bank’s communique on the December policy step. Heightened expectations about a smaller 50 bps Fed rate hike in December made it difficult for the greenback to extend its rally in the past couple of weeks. In case FOMC chairman Jerome Powell notes that a 50 bps rate hike will be on the table at the last policy meeting of the year, Wall Street’s main indices could rise dramatically and trigger a US Dollar selloff in the late US trading session. Earlier, the pound was struggling to make a decisive move in either direction as FTSE 100 index and US stock index futures traded virtually unchanged on the day, reflecting a cautious market stance.

From the technical perspective, the four-hour scale RSI indicator dropped to 43 as of writing, suggesting that GBPUSD is amid strong downside traction. As for the Bollinger Bands, the pair was falling from a 20-period moving average to the 1.1460 level at the time of writing. As a result, we think the downside trend of the pound would persist unless breaking through the 1.1634 resistance.

Resistance: 1.1633, 1.1738

Support: 1.1281, 1.1114, 1.0955

XAUUSD (4-Hour Chart)

Gold has lost its bullish traction and retreated below the $1650 mark after having climbed toward $1660 earlier in the day, as investors may have decided to book their profits while gearing up for the Fed’s rate decision. Although the main event will be the release of the monetary policy statement, the market has already priced in a 75 basis points hike. ll eyes now remain on the expected 75 bps Fed rate hike decision, with Chair Jerome Powell’s press conference to grab the limelight, as investors eagerly await any hints of a smaller rate increase from December. The speculation about a signal to softer hikes from December has been increasing over the last weeks, and the market is split about the size of the next move. With extremely sensitive about the Fed’s forward guidance, any hint might trigger a significant deal of volatility. Meanwhile, the benchmark US 10-year T-bond yields hold a steady high level above 4%, which weighs on the non-yielding yellow metal.

From the technical perspective, the four-hour scale RSI indicator remained at 50 as of writing, suggesting that gold has no clear direction with investors staying cautious. As for the Bollinger Bands,  the yellow metal rebounded from the 20-period moving average, $1645 level, and was moving with little volatility ahead of Fed’s decision, which is a signal that gold has no clear path in the near term. Hence, we think investors need to focus on the following Fed’s conference to look for clues about the future direction.

Resistance: 1675, 1700, 1725

Support: 1632, 1615, 1600

Economic Data

US stocks suffered daily losses on Tuesday, failing to preserve their upside traction and finished lower as the upbeat US data bolstered speculation that Federal Reserve policy could remain aggressively tight despite the threat of a recession. The Fed’s 75 bps rate hike might keep weighing on equity markets in absence of signals favouring a slower lift to rates in December, as an unexpected rebound in US job openings keeps the pressure on the Fed. The US JOLTS Job Openings rise to 10.7 million in September, which came in higher than the market expectation of 10 million and provided firm support to the US dollar.

The US central bank will announce its monetary policy during the US session today and it will be crucial to watch for fresh impulse, as the Fed is widely anticipated to hike rates by 75 bps and send the main rate to 3.75%-4%. In the Eurozone, the European Central Bank (ECB) policymakers said that rates in the Euro area should peak at a level that ensures that inflation returns to the 2% target over the medium term.

The benchmarks, S&P 500 and Dow Jones Industrial Average both retreated lower on Tuesday as Wall Street finished with decent losses amid upbeat data revealing that the United States economy remains in expansionary territory. The S&P 500 was down 0.4% daily and the Dow Jones Industrial Average also dropped lower with a 0.3% loss for the day. Six out of eleven sectors in the S&P 500 stayed in negative territory as the Communication Services sector and the Consumer Discretionary sector are the worst performings among all groups, losing 1.81% and 1.35%, respectively. The Nasdaq 100 dropped the most with a 1.0% loss on Tuesday and the MSCI World index was up 0.2% for the day.

Main Pairs Movement

The US dollar was nearly unchanged on Tuesday, regained upside strength and recovered most of its daily losses around the 111.50 area during the US trading session amid a risk-off market mood. The market’s anxiety ahead of the key Fed meeting and firmer US Treasury yields continued to act as a tailwind for the safe-haven greenback. Market players now gear up for the US Federal Reserve’s interest rate decision.

GBP/USD edged higher on Tuesday with a 0.13% gain after the cable retreated slightly from daily highs but maintained its positive bias above the 1.1480 mark amid renewed US dollar strength. On the UK front, the Bank of England is widely expected to hike their borrowing rates by 75 bps this week. Meanwhile, EUR/USD trimmed its daily gains and refreshed its daily low under the 0.9860 mark amid a stronger US dollar across the board. The pair was down almost 0.05% for the day.

Gold advanced with a 0.88% gain for the day after extending its intra-day rally to the $1,656 area during the European trading session, as the precious metal keep being dragged down by increasing hawkish Fed bets. Meanwhile, WTI Oil advanced higher with a 2.13% gain for the day after the solid recovery in oil prices lost traction near the $88.50 area.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD abandons the area of daily highs around the 0.9950 level and makes an abrupt U-turn to revisit the sub-0.9900 zone following the better-than-expected prints from the US ISM Manufacturing for the month of October (50.2), compared to the market expectation of 50.  Besides that, additional releases in the US calendar also underpinned the rebound in the dollar, like Construction Spending unexpectedly expand 0.2% MoM in September, the final S&P Global Manufacturing PMI at 50.4, also surpassing estimates, and the JOLTs Job Opening increase to 10.717M in September. In fact, the results do nothing but reinforce the view of a resilient US economy at a time when some Fed’s rate-setters have hinted at the potential start of a debate over the probability of slowing the pace of the subsequent rate hikes as soon as at the December meeting.

From the technical perspective, the four-hour scale RSI indicator dropped sharply to 41 as of writing, suggesting the pair was surrounded by heavy selling pressure. As for the Bollinger Bands, the EURUSD was falling from the 20-period moving average to around the lower band 0.9870 area, and the gap between upper and lower remained the same size, signalling that the pair amid strong bearish momentum but the lower drew support for it. Therefore, we think the downside trend is more favoured in the near term.

Resistance: 1.0000, 1.0092

Support: 0.9751, 0.9664, 0.9548

GBPUSD (4-Hour Chart)

The GBPUSD has lost its upside traction and retreated around the 1.1450 level during the American trading session on Tuesday, as the US dollar managed to regather its strength on upbeat data. A series of better-than-expected macroeconomic releases have boosted confidence in the momentum of the US economy, easing concerns of a potential slowdown triggered by previous disappointing releases and clearing the path for the Federal Reserve to extend its aggressive tightening path beyond November. This has sent the greenback and US treasury bonds surging. Beyond that, the JOLTS job openings have displayed the strength of the US labour market, despite the Fed’s efforts to cool it off. JOLTS job vacancies increased to 10.7 million in September, up from 12.2 million in August, and against market expectations of a decline to 10M. Furthermore, Wall Street’s main indices turned negative as of writing, undermining the risk sentiment and providing an additional boost to the greenback.

From a technical perspective, the four-hour scale RSI indicator fell dramatically to 42, suggesting that the pair were surrounded by strong bearish traction. As for the Bollinger Bands, the pounds were dropping from the 20-period moving average to the lower band and the size between the upper and lower bands remained unchanged, signalling that the pair was more favoured to the downside path in the near term.

Resistance: 1.1633, 1.1738

Support: 1.1281, 1.1114, 1.0955

XAUUSD (4-Hour Chart)

Gold advanced and rebounded from a weekly low of $1630.60 to the $1648 mark as of writing, as diminished US Dollar demand throughout the first half of the day. However, the greenback recovered some ground in the American trading session, following a slightly better-than-expected ISM Manufacturing PMI, as the October index came in at 50.2, better than the 50 expected by the markets. In addition, the reading of job openings increased to 10.7 million on the last business day of September, according to the US Bureau of Labor Statistics. Given that US data was positive, a Fed pivot could lose some weight, as it justifies additional tightening, with the chance of hiking 75 bps from 86 to 88 per cent shown by the CME FedWatchTool. As for December’s decision, the odds are 50% chances of lifting rates by 50 or 75 bps. Furthermore, speculative interest pulled out long-dollar bets as US Treasury bond yields retreated, with that on the 10-year note bottoming at 3.92%. Nevertheless, it quickly changed course after upbeat US data and news indicating that the US Department of Treasury announced a series I bond that will pay a 6.89% annual interest rate through April 2023, which weighs on the XAUUSD.

From the technical perspective, the four-hour scale RSI indicator wandered around 50 as of writing, suggesting that the pair has no clear direction. As for the Bollinger Bands, the XAUUSD was pricing on the 20-period moving average and the size of upper and lower bands got closer, which is a signal that the price would hover in a narrow range from $1640 to $1660 marks in the near term.

Resistance: 1675, 1700, 1725

Support: 1632, 1615, 1600

Economic Data