The Consumer Price Index (CPI) experienced a marginal decline of 0.4% in September, following a 0.6% increase documented in August. The core CPI increased consistently at 0.3% month over month, maintaining its upward trend. As the general trajectory suggests, inflation will likely continue to moderate, and we expect additional alleviation of price pressures. Nonetheless, the Producer Price Index (PPI) increase of 0.5% suggests that advancements regarding inflation may be incremental in nature.
August saw a 0.2% month-over-month increase in the gross domestic product of the United Kingdom, which partially mitigated a significant decline in July. Despite this, a general GDP contraction in the third quarter remains improbable. Although there was some progress in services output, the growth of consumer-facing services was stagnant, and industrial output continued to decline. In light of these underwhelming economic developments, we maintain our forecast that the United Kingdom will likely enter a recession by the fourth quarter of this year.
The latest assault by Hamas on Israel poses a substantial geopolitical dilemma with worldwide consequences. Although it is difficult to forecast the trajectory of the Israel-Gaza conflict, the declaration of war by Prime Minister Netanyahu against Hamas and his subsequent statements suggest that a rapid de-escalation might not occur soon.
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Forex Technical Outlook for 16 October 2023 to 20 October 2023
Let’s see the list of events to look at this week:
- Empire State Manufacturing Index on Monday
- NZD CPI q/q on Tuesday
- AUD Monetary Policy Meeting Minutes on Tuesday
- GBP Claimant Count Change on Tuesday
- CAD CPI on Tuesday
- CAD Core Retail Sales m/m on Tuesday
- RBA Gov Bullock Speaks on Wednesday
- AUD Unemployment Rate on Thursday
- GBP Retail Sales m/m on Friday
Let’s see the market outlook from the weekly forecast:
The EUR/USD price recovered at the beginning of the week but resumed the decline due to the geopolitical pressure. The pair bottomed at the 1.0447 level in early October and showed a rebound, but the latest price action shows a different outlook by ending the week with a strong bearish candle.
The weekly EUR/USD chart shows a strong bearish price action, where the pair remained stable below moving averages. The 100-week Simple Moving Average (SMA) is at the 1.0700 level, which could be the immediate level to test. Meanwhile, other technical indicators resumed their selling pressure, pushing the price towards the fresh 1-year low.
The price moved above the 1.0617 static level in the daily chart but failed to maintain momentum. The downside pressure continued after having a strong bearish daily candle below the dynamic 20 EMA. Moreover, other technical indicators showed a downside pressure, indicating an oversold downside pressure.
Based on the current weekly EUR/USD forecast, the next resistance level in this pair could be at the 1.0640 level, which is below the 1.0700 psychological threshold. The downside momentum is valid as long as the price trades below this resistance level. A bearish daily close below the 1.0447 level could even lower the price towards the 1.0320 price area.
In recent days, the Pound Sterling showed a strong bullish recovery against the US Dollar, but the weekly decrease period came with a bearish recovery. Now, it is time to see how GBP/USD can resume its bearish trend ahead of the UK employment and CPI report release.
The wedge breakout at the weekend ended October 6 came with extensive bullish pressure but failed to hold the winning momentum. As a result, sellers recaptured the bearish trend with a downward slope in the 21-day SMA, which is currently working as an immediate resistance. Moreover, the 14-period Relative Strength Index (RSI) moved to the bearish territory with more room to reach the 30.00 overbought level.
As per the current bearish continuation, an emerging 50-day SMA will cross the 200-day SMA level from above. Therefore, a successful crossover could validate the bearish trend as a death cross formation.
On the bullish side, a stable bullish market above the 20-day EMA could indicate a meaningful uptrend towards the 100-day SMA level at the 1.2450 level. Conversely, the 1.2100 level is the crucial area to look at as a bearish daily close below this level could be a bearish trend, targeting the 1.2052 support level.
The US Dollar’s extensive buying pressure pushed the AUD/USD price down throughout the week, but recent price action shows a strong consolidation.
The weekly AUD/USD price showed a corrective pressure in recent weeks but the bullish possibility has become questionable after having a bearish weekly close. The 20-week SMA is working as an immediate resistance, where the RSI is below the 50.00 line.
In the daily chart, a bearish trend extension is possible where the primary target level would be the 0.6191 level. However, the trend extension could reach the 261.8% Fibonacci extension level, which is marked at the 0.6033 level.
On the bullish side, a strong recovery with a daily candle above the 0.6445 level could increase the price toward the 0.6740 resistance level.
The USD/JPY bullish continuation opportunity is still valid as the recent price seems stable above the dynamic Cloud support.
The weekly USD/JPY price shows a bullish trend trading opportunity as the latest bullish candlestick was backed by a long, wicked weekly candle. Moreover, the dynamic 20 EMA is bullish, whereas the current RSI is in the bullish zone.
In the daily chart, the future Ichimoku cloud is bullish, whereas the Senkou Span A and B show upward pressure. Moreover, the dynamic Kijun Sen is the immediate support from which bullish traction is present.
Based on this outlook, a bullish daily candle above the 150.00 psychological level could be a trend trading opportunity, where the main aim is to test the 152.00 area. On the bearish side, a deeper correction towards the 148.10 support could be possible, but the bearish recovery and a daily candle below the cloud support could be a short opportunity.
As a result of increased demand for safe-haven assets prompted by escalating geopolitical tensions, gold gained favorable momentum early in the week. As expectations of a dovish posture from the Federal Reserve (Fed) contributed to a decline in US Treasury bond yields, XAU/USD maintained its ascent and snapped a two-week losing streak.
The economic calendar for the following week does not feature any noteworthy data releases that can potentially impact the pair's movement significantly. As a result, market participants will diligently observe statements made by Federal Reserve officials, bond market developments, and geopolitical occurrences.
The 14-day Relative Strength Index (RSI) moved above the 50.00 line, while the recent price is trading above 20 and 50-day Simple Moving Average levels. The ongoing geopolitical tension, with a rebound in treasury yields, was the main reason for the price increase in this pair.
As the monthly candle moved with an immediate rebound with a 1000 pips upside movement, we may expect a bullish trend continuation for the coming week. A bullish daily candle above the 1960.00 level would primarily validate the bullish pressure, targeting the 2000.00 area.
On the bearish side, any strong downside pressure with a stable market below the 1900.00 level would indicate the seller's presence in the market. In that case, the downside momentum could continue toward the 1875.00 support level before reaching the 1850.00 area.
Although the decrease in spot trading volumes observed on prominent cryptocurrency exchanges signifies a lack of demand for cryptocurrencies as a whole, the situation seems to be especially dire for Ether. Trading volumes have been unsatisfactorily low in the United States despite the recent introduction of a number of Ether futures Exchange Traded Funds (ETFs), suggesting that institutional interest remains subdued.
This absence of enthusiasm is to be expected, given the consistent decline in trading volumes of Ether futures since March. The Block data indicates that Ether futures trading volumes decreased from $770 billion in March to approximately $250 billion in September. Staggered on-chain metrics have also been observed, including active users, transfer volumes, new addresses, and cumulative transfer volume.
This phenomenon has led to decreased petrol prices and an inflationary trend in the supply of Ether. The Ether supply has increased to just over 119.98 million, according to Glassnode, from less than 119.9 million at the end of August. Nevertheless, ETH staking yields persistently hover around 4%, in contrast to the nearly 5% provided by long-term US government bonds, which are regarded as assets devoid of risk. As a result, investors may choose the security of the bond market in exchange for a comparatively lesser yield on Ether, which entails greater risk.
Bitcoin emerges as a more advantageous option in the short term. Positive developments anticipated for Bitcoin in 2024, such as the SEC's possible approval of spot Bitcoin ETFs and the forthcoming halving in April, contribute to Bitcoin's bullish narrative. Amidst the current uncertainties and difficulties Ether encounters, the present moment may be deemed suitable for redirecting attention toward the preeminent cryptocurrency, Bitcoin.
In the daily chart of BTC/USD, a bearish continuation is possible as the recent price moved below the ascending channel support. Moreover, the dynamic 20 EMA works as a bearish rejection, while the current RSI is below the 50.00 line.
In that case, a bearish trend contention is potent, where the main is to reach the 24,964.00 support level. On the other hand, an immediate bullish recovery could indicate a range extension, targeting the 30,000.00 level.