In September, the US Consumer Price Index, Retail Sales and Unemployment all beat expectations where the last week’s data indicated that the US economy is yet to find the equilibrium point of the previous 18 months.
The labor and non-labor supply shortage may indicate inflationary pressure. The CPI released showed the inflation to pick up in September after a short-term slowdown in August. Moreover, the rising cost for essential items keeps the September gain questionable while the energy price moved higher 1.3% and remained up by 24.8% over the last 12 months. As a result, investors may experience more upside pressure in inflation in the coming months, where Oil and Natural gas high price would be the leading influencer. This week, the industrial production will hint more about the US economy besides the Housing Starts and Existing home sales. Overall, investors may experience a broader correction in the US Dollar price that may influence it to get weaker against the basket of currencies.
Forex Technical Outlook for 18 October 2021 to 22 October 2021
Last week, the UK had a mixed sentiment where the August GDP showed a gain of just 0.4% a month. Moreover, the supply disruption keeps the UK economic growth questioned while the labor market remains strong. This week, the key event includes CPI y/y that may remain stable at 3.2%. In addition, there are Eurozone PMIs on Friday, China’s GDP on Monday, and Canadian CPI on Wednesday, among other essential releases.
Despite the US Dollar’s weakness, the USD Index remained stable above the 93.76 dynamic support after making a new yearly high at 94.56 level. However, the intraday volatility at the yearly high price might make the upcoming bullish pressure questionable, where a bearish daily close below 93.67 may resume a bearish correction in the price. Therefore, on the upside, a break above the 94.56 with a bullish daily candle is essential to see.
EUR/USD passed a bullish week where a strong bullish daily candle on Wednesday pushed bulls to test the dynamic resistance of 20 EMA. Moreover, the bullish pressure was supported by the Hidden Divergence with MACD, where the Histogram turned bullish, following the corrective pressure on Thursday and Wednesday. However, the price is still below the 1.1600 key resistance level, from where a new intraday swing low may initiate bearish pressure.
The above image shows that the price is trading at the 1.1600 key resistance area where the dynamic 20 EMA works as minor resistance. Based on the current context, bulls should wait for the price to break above the dynamic 20 EMA with a green candle, increasing the bullish pressure towards the 1.1700 area. On the other hand, a new swing low in the intraday candle may resume the current bearish trend towards the 1.1500 area.
GBP/USD showed an impressive recovery with the positive Brexit sentiment that pushed bulls to break the bearish structure with a bullish daily close above the 1.3724 resistance level. The bullish pressure came with a daily close above the dynamic 20 EMA that opened a room to test the 1.3890 level in the coming days.
As per the above image, the MACD Histogram turned positive and made consecutive highs, a sign of strong bullish pressure. However, investors may experience a bearish correction and test of the 1.3586 to 1.3600 area, a strong demand level. Therefore, bulls may experience a bearish correction where any bullish rejection from the dynamic 20 EMA would increase the bullish pressure in the coming days. On the other hand, the bullish possibility will be valid until the price comes below the 1.3586 level with a bearish daily close.
AUD/USD bulls were influenced by the RBNZ interest rate hike that indicated a substantial recovery of the Asian economy. However, the AUDUSD price is still below the 0.7423 resistance level, where the gap between the dynamic level and the price has expanded.
As per the above image, we can see that the AUDUSD closed the week with an indecision candle on the 0.7423 resistance level. Therefore, investors may experience a bearish correction at the weekly birth period, but any bullish rejection from 0.7350 to 0.7300 would be a good buying opportunity targeting a 0.7600 area. On the other hand, any bearish daily candle below 0.7300 may invalidate the current sentiment and increase the selling pressure towards the 0.7200 level.
Although the US Dollar was corrective against other significant currencies, it remained strong against the JPY. The gap between the US and JPY treasury Yield influenced the US Dollar to keep a stable position against the JPY besides the volatility from the upcoming election in Japan.
The above image shows that the USD/JPY increased with impulsive bullish pressure and found a top at 2019 high. Therefore, any bearish pressure from the 114.54 level may increase the possibility of a bearish correction in the price that may extend towards the 112.00 level. However, the major trend is bullish, where any intraday bullish price action has a higher possibility of working out until the price moves below the 112.00 level.
After a range breakout, XAU/USD found the 1795.00 level as resistance from where a strong bearish daily candle closed last Friday. The price has been trading within a range between 1795.00 to 1723.40 for a considerable time where the most recent price is above the dynamic 20 EMA. Therefore, as the price failed to break above the 1795.00 level with a bullish daily candle, it is more likely to come down towards the 1723.00 area.
The above image shows that the MACD Histogram is making lower highs where the price closed the week at the 20 EMA. Therefore, any bearish rejection from 1770.00 to 1785.00 level would be a good selling opportunity for the coming days. However, a bullish daily candle above the 1800.00 level may alter the current market structure and initiate a bullish move.
BTC/USD bulls remained strong by violating all odds and moved the price above the 60,000.00 level with a bullish daily close. Therefore, many crypto enthusiasts believe that the BTC price could test the 75,000 psychological level for the first time in history. Technically, the price is currently at the overbought area, where a bearish correction is pending. Therefore, any bullish rejection from the 58,000.00 to 54,000.00 level would be a good buying opportunity.
The above image shows that the gap between the dynamic 20 EMA and the price is higher where the MACD Histogram remains bullish. In this context, the buying opportunity is valid until the price crashes below the 54,000.00 level with a bearish daily close.
Overall, the US Dollar weakness has a higher possibility of extension in the coming days, where most of the major pairs may experience a bullish move. However, investors should closely monitor how the CPI numbers are released this week, which may be a major price driver for major currencies.