The broader market expectation for the US CPI was to come between 8.0% to 8.1%, but the actual result came to 8.2%.
The higher-than-expected CPI increased the possibility for the Fed to raise the interest rate by additional 75 bps instead of 50. However, much data is due before the December meeting, and it is not the right time to say that the US economy has reached the recession.
Forex Technical Outlook for 17 October 2022 to 21 October 2022
The inflation-driven sentiment will dominate the market for sure. Moreover, the UK CPI number will grab investors' attention, while the modest pickup by the Bank of Japan could offer a decent price change in the USDJPY price.
China will also release its GDP estimate for the third quarter, where a better-than-expected result could relieve some losses for Asian currencies.
Let’s see the important events from this week:
- Empire State Manufacturing Index on Monday
- New Zealand CPI m/m on Tuesday
- AUD Monetary Policy Meeting Minutes on Tuesday
- China GDP q/y on Tuesday
- The UK CPI On Wednesday
- CAD CPI on Wednesday
- AUD Unemployment Rate on Wednesday
Let’s proceed with the US Dollar Index (DXY) technical analysis:
The long-term bullish trend is valid in the US Dollar Index as the price continued pushing higher with no creation of new lows.
The latest daily candle formed a bullish two-bar reversal from the 20 DMA support level, which could extend the buying possibility toward the 114.77 swing high.
EUR/USD passed a volatile week with several indecision candles in the daily chart, which increased the possibility of a bullish correction this week.
Before the CPI release, the broader context was towards the US Dollar, but as the CPI came in line with the Fed’s expectation, the market started to rebound.
This technical analysis of EUR/USD shows an extremely corrective momentum in the MACD Histogram as it remained at the neutral area for a considerable time. Moreover, the dynamic 20-day EMA is closer to the price, indicating a possibility of initiating a new minor trend.
The major trend in the EUR/USD daily chart is still bearish, as the 100 SMA is above the price. The possibility of a bullish correction towards the 100 SMA with a mean reversion is possible if bulls can overcome the 1.0097 key resistance level. There is a potential divergence between the price and MACD EMAs as the price made a new lower low while the MACD lines keep pushing higher.
Based on the daily price of EUR/USD, further selling pressure in the intraday chart from the 0.9818 area could bring a strong bearish opportunity, where the main aim is to test the 0.9532 support level.
The alternative approach is to find a bullish daily candle above the 0.9818 level before aiming toward the 1.0366 resistance level.
- EUR/USD support levels to look at: 0.9534
- EUR/USD resistance levels to look at: 0.9818 & 0.9970
GBP/USD extended the selling pressure last week, but the market sentiment changed after the US Consumer Price Index data was released. Based on the current structure, the primary aim for this pair is changed to bullish as it is trading above the 1.0923 critical support level.
This technical analysis indicates how the high volume level changed and moved below the current price. Moreover, the latest bullish pressure above the dynamic 20 DMA appeared with a bullish two-bar engulfing pattern at the 1.0923 support level.
The 100 SMA is more than 1000 pips higher than the current price, which indicates that bulls have more room for upside. Moreover, the MACD Histogram turned bullish above the neutral line, while MACD lines formed a bullish crossover.
Based on the daily GBP/USD price prediction, a bullish breakout from the trendline resistance could offer a bullish opportunity targeting the 1.1730 resistance level. On the other hand, the broader market context is still bearish, while a bearish pressure with a daily close below 1.0923 could extend the bearish momentum.
- GBP/USD support levels to look at: 1.0923
- GBP/USD resistance levels to look at: 1.1369
The selling pressure in the AUD/USD price extended from the rectangle pattern breakout, increasing the possibility of reaching the 0.6000 key psychological level. However, existing bearish pressure should resume after a minor bullish correction as a profit-taking.
This technical analysis indicates the long-term trend as bearish as the 100 SMA is way above the price. The highest trading volume level in the last two months is also above the current price. However, a bullish correction is a potential mean reversion as the gap between 20 DMA, and the price has extended.
The MACD Histogram shows an extreme bearish trend continuation pattern with no sign of a bullish crossover in MACD EMAs.
Between 17 October 2022 to 21 October 2022, AUD/USD has a higher possibility of extending the current selling pressure if the intraday price shows a strong bearish rejection from the 0.6260 to 0.6548 area.
On the other hand, a bullish breakout above the 0.6347 level is needed to indicate a new swing high before aiming toward the 0.6548 level.
- AUD/USD support levels to look at: 0.6000
- AUD/USD resistance levels to look at: 0.6347 & 0.6548.
As per the previous USD/JPY weekly price forecast, the price made 400 pips of gains by reaching above the 148.00 psychological level. Currently, the USD/JPY price is trading at 30 years high, with no possibility of a bearish correction.
This technical analysis shows how the MACD Histogram shows a sellers’ failure in the market to lower the price below the 144.12 support level. Moreover, MACD EMA’s formed a bullish crossover above the neutral line, aiming for the 2.00 overbought area.
The fixed range high volume level from the August high to the September low is still below the price, while the 20 DMA crossed above this.
The primary trading approach in this pair is to find bullish opportunities until the price reaches the 150.00 level. On the other hand, bears should wait for strong exhaustion before going long. A new high volume level above the price could increase the bearish momentum.
- USD/JPY support areas to look at: 144.16
- USD/JPY Resistance levels to focus: 150.00
The Consumer price index eliminated the bullish possibility in the XAU/USD price, making the 1734.79 to 1713.00 area as a valid supply zone. Therefore, below the 1734.79 resistance, the main aim of this pair is to find short opportunity.
This technical analysis shows MACD lines’ failure to move above the neutral line and form a bearish crossover. The long-term trend is strongly bearish, as shown in the 100 SMA line.
The dynamic 20 DMA is above the price and is an immediate resistance level. In that case, the main aim of this pair is to find a short opportunity after a bullish correction. The main target area of the bearish possibility is the 1615.14 support level.
On the other hand, the bullish trading opportunity is valid if a daily candle closes above the 1685.00 level. In that case, the buying possibility might extend towards the 1734.00 area.
- XAU/USD support level to look at: 1615.14
- XAU/USD resistance levels to look at: 1684.10.
Bitcoin investors have seen increased volatility after the Thursday US Consumer Price Index release. The initial move came with strong bullish pressure, but once the CPI reached 8.2%, above the 8.1% expectation, the BTC/USD price tumbled to the $18,190.00 level.
The latest CPI report increased the possibility of a rate hike by the Fed with a stronger US Dollar. Moreover, the selling pressure in the stock market also affected the crypto markets, followed by a strong correlation.
Bitcoin strongly correlates with the stock market, where the current correlation coefficient is 0.90. The interesting factor is that BTC reacted with a strong fluctuation in this correlation in the last CPI releases.
On 13 July 2022, the hotter-than-expected CPI pushed BTC sellers to join the market and make a 33% rally. Based on the last 4 CPI releases, the recent drop has a higher possibility of making another rally in the BTC price.
This technical analysis shows an extremely corrective position in the MACD Histogram, backed by a strong bearish trend.
The 20 DMA shows a sellers’ presence in the market from the post-CPI sentiment, where a bearish pressure below the 18,153.43 level could offer a bearish opportunity, targeting the 15,800.00 level.
The alternative approach is to find a daily candle above the 19,944.68 level and open a long position, targeting the 22,742.43 resistance level.
- BTC/USD support level to look at: 18,153.43
- BTC/USD resistance level to look at: 19,944.68.
The hotter-than-expected CPI could extend the USD bulls, hurting other major currencies. Therefore, investors may experience decent trend trading opportunities in the coming days, until there is a strong reversal sentiment.