After the latest FOMC meeting, during which the focus remained on the Federal Reserve's reliance on incoming data to shape its future interest rate decisions, particularly with regard to the potential duration of elevated interest rates, this week has witnessed a flurry of economic indicators that shed light on the viability of the Fed's forecast for a "soft landing."
In September, inflation in the Eurozone slowed significantly, with the headline CPI falling to 4.3% year-over-year and the core CPI easing to 4.5% year-over-year. Concurrently, the September decline in economic confidence indicated the continuation of modest growth patterns. In light of these developments, we expect the European Central Bank to maintain the Deposit Rate at its present level of 4.00% when it announces its monetary policy at the end of October.
The Federal Reserve also recently unveiled an overview of the Distributional Financial Accounts, presenting second-quarter estimates of wealth distribution among U.S. households across various demographics, such as wealth, income, age, education, and ethnicity.
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Forex Technical Outlook for 02 October 2023 to 06 October 2023
Let’s see the list of events to look at this week:
- BOJ Gov Ueda Speaks on Monday
- ISM Manufacturing PMI on Monday
- Fed Chair Powell Speaks on Monday
- Cash Rate and Rate Statement on Tuesday
- CHF CPI m/m on Tuesday
- RBNZ Official Cash Rate & Rate Statement on Tuesday
- ADP Non-Farm Employment Change on Tuesday
- ISM Services PMI on Tuesday
- The US Non-farm payroll on Friday
Let’s see the market outlook from the weekly forecast:
In the previous weekly forecast, EUR/USD failed to form a bullish breakout and pushed down, continuing the bearish pressure. For this week, the downward momentum could extend until any strong bullish reversal appears.
The US Dollar grabbed investors' attention throughout the week, eliminating all technical price actions. As a result, the EUR/USD price passed red for the consecutive eleven weeks.
The overall market direction is still bearish in the weekly timeframe as the recent price trades below all moving averages. The dynamic 100 SMA works as an immediate resistance while technical indicators move south below the neutral line. As per the current reading, the Relative Strength Index (RSI) remains at the 37.00 level, suggesting more downside pressure.
In the daily timeframe, the overall market shows an active impulsive downside pressure, as the 20-day SMA shows a sharp downside movement. Meanwhile, the Momentum Indicator continued pushing down at the negative zone, while the RSI showed bearish pressure by remaining at the oversold zone.
Based on the EUR/USD weekly timeframe, 1.0400 is the crucial level to look at, which would be the primary target of the existing downside pressure. Below this level, the next support is at 1.0340.
On the other hand, a strong bullish recovery should come with a daily candle above the channel resistance could indicate a trend change, targeting the 1.0738 level.
The US Dollar’s strength from the additional rate hike possibility continued pushing the GBP/USD price down even if the UK data shows a positive sentiment.
In the weekly timeframe, the GBP/USD hovers at the 55-week Simple Moving Average (SMA) level at the 1.2200 area. A bullish price action above this crucial level could be a temporary long opportunity even if the broader market direction is bearish.
A stable recovery above the 20-day SMA is needed in the bullish price action before aiming for the 1.2400 psychological level.
Although the bullish correction is pending, the overall market direction would be bearish throughout the week, where the near-term support level is at 1.2050 area. A bearish continuation and a daily candle below the 1.2050 level could see the next support level at the 1.1920 level.
On the other hand, the downside pressure reached the descending channel support from where a strong bullish breakout is needed to form a stable trend.
The bullish pressure in the US Dollar continued pushing pressure on the Australian Dollar, which eliminated the partial gain throughout the week. However, downside pressure needs more confirmation as the current price trades within a consolidation.
In the AUD/USD weekly price, the overall market direction is corrective after an impulsive bearish trend. As the existing momentum indicates a re-distribution phase, investors might expect a bearish trend continuation in the coming days.
In the daily chart, the current market momentum is corrective, while the most active volume level is closer to the current price. Moreover, the dynamic 20 EMA is below the current price, with several violations. The 100-day SMA is also above the current price, where a minor upward correction is pending.
Considering the RSI divergence, a strong upside pressure with a daily close above 0.6521 could indicate a bullish reversal targeting the 0.6739 level.
On the bearish side, any downside reversal with a bearish momentum below the 20 EMA could be a short signal, targeting the 0.6250 level.
As the Bank of Japan is muted regarding economic policy, the US Dollar was the key player in this pair, where the USD was the ultimate winner.
In the weekly timeframe, the USD/JPY price is trading within a strong bullish trend, with no sign of a bearish recovery. Moreover, the 20 SMA is below the upward price pressure, supported by an upward slope in the 100 SMA.
The existing high volume level formation indicates a bullish re-accumulation in the daily price, while the 20-day SMA works as an immediate support level. However, the divergence from the RSI indicates a reversal, which needs a valid price action before confirming the trend change.
In the weekly USD/JPY forecast, a downside recovery is possible as the current price trades at the 161.8% Fibonacci Extension level from the existing bearish swing.
Moreover, the bullish break above the 150.00 level could advance the price towards the 152.50 level.
The rate hike possibility from the Fed pushed pressure on the Gold price, influencing the XAU/USD price to close with a strong bearish month.
The 14-day Relative Strength Index (RSI) shows a strong downside pressure as the current price trades at the oversold zone.
A massive bearish candle is visible on the weekly chart, whereas the current monthly close came with a strong bearish continuation.
In the daily chart, downside pressure is potent from the existing impulsive trend, while the 20-day EMA is above the current price with a downward slope.
In this context, the bearish possibility is potent, where the main aim is to test the 1809.00 support level. Moreover, a bearish pressure below this level could see the 1800.00 critical level.
On the contrary, a bullish recovery with a daily candle above the 1884.00 level could eliminate the bearish pressure at any time.
Changpeng Zhao, also known as CZ in the cryptocurrency community and CEO of Binance, responded promptly to the situation. He reassured users that the problem was limited to the user interface and did not impact trading operations. The problem, according to CZ, was caused by the introduction of new code, necessitating a rollback and data correction.
The engineering team estimated a one-hour resolution, but CZ advised users to expect a resolution within two hours. He emphasized that this recent incident was solely a technical glitch on Binance's part and did not indicate any underlying problems with Bitcoin itself. Crypto devotees and investors can rest assured, as the Bitcoin network's integrity remains intact.
This incident recalls a similar unusual occurrence in the world of cryptocurrencies in August when the price of XRP momentarily reached an astounding $50 on the Gemini exchange. During that time period, the price anomaly was attributed to a malfunction in the order journals of the exchange.
The current Bitcoin (BTC) price is nearly retesting the 20-week Exponential Moving Average (EMA).
Before sellers acquire a firm grip on the market, Bitcoin's price appears to have upward movement potential. In March 2022, Bitcoin experienced a notable bearish crossover between the 20-week Exponential Moving Average (EMA) and the 200-day Simple Moving Average (SMA). Bitcoin was able to recover above the 20-week EMA after this event, but it encountered resistance from the 200-day Simple Moving Average.
It's possible that short-sellers will wait until Bitcoin's price reaches approximately $28,000 before acting, anticipating that more long positions will accumulate at that level.