In the US, the recent mortgage rate increases are bringing the housing market closer to a recession. In September, home sales reached their lowest level since 2010. While single-family construction remains relatively robust, builders' confidence in sustaining sales wanes.
On the Asian side, China's economy substantially grew in the third quarter. Considering data from the third quarter, it appears that China's economy could potentially attain the official growth target of 5% for this year. Despite this, China's fundamental and structural issues persist, and one-quarter of robust growth is insufficient to resolve them.
Numerous market participants eagerly await the next event that could cause interest rates to increase. With ongoing conflicts in the Middle East and the possibility of inflation due to higher commodity prices and increased government expenditure during wartime, the future of the rates market is uncertain.
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Forex Technical Outlook for 23 October 2023 to 27 October 2023
Let’s see the list of events to look at this week:
- GBP Claimant Count Change on Tuesday
- French Manufacturing & Services PMIs on Tuesday
- German Manufacturing and Services PMIs on Tuesday
- RBA Gov Bullock Speaks on Tuesday
- The UK Manufacturing and Services PMIs on Tuesday
- AUD CPI on Wednesday
- BOC Overnight Rate & Rate Statement on Wednesday
- Euro Refinancing Rate & Policy Statement on Wednesday
- The US Unemployment Claims on Thursday
- Revised UoM Consumer Sentiment on Friday
Let’s see the market outlook from the weekly forecast:
The EUR/USD price recovered from the prolonged bearish pressure despite the risk-averse sentiment on the US Dollar. The war between Israel and Hamas is the main event for EUR/USD this week, where the recent oil Embargo from Iran could be a negative sentiment for the Euro.
In the technical outlook, EUR/USD did not form a bottom as it remains at the 1.0600 psychological threshold. As per the weekly chart, the last candle remains within the previous candle’s body, holding the downside momentum below moving averages.
The 100-week SMA remains closer to the price, while the Momentum indicator remains strongly bearish. Moreover, the Relative Strength Index (RSI) shows an oversold condition, suggesting a bullish possibility.
The price remains mildly bearish in the daily chart, below the 20-day EMA, while the larger MA is still above the 1.0820 level. The Momentum Indicator is bullish, while the RSI remains corrective at the 47.00 level.
On the bullish side, the EUR/USD price peaked at the 1.0639 level, which was the primary indication of a bullish reversal. In that case, a bullish weekly close above 1.0760 would be a strong bullish possibility in this pair. On the other hand, there is a sharp downside pressure, and a bearish daily close below the 1.0500 mark could be a short opportunity, targeting the 1.0320 to 1.0300 area.
The Gaza-Israel tension with the uncertain US Bond market remained the main event in the past week. As a result, the GBP/USD passed a volatile week due to uncertainties with no sign of a clear fundamental direction.
GBP/USD weekly price shows a wedge-driven bullish pressure that seems temporary from the current context. Despite the bullish pressure, the price failed to hold the momentum above the 50-day Moving Average.
On the bearish side, a consolidation and a bearish daily candle below the 1.2091 level could be a strong bearish opportunity, targeting the 1.1900 psychological level. Moreover, a deeper downside correction could lower the price towards the 1.1803 support level.
On the bullish side, a daily close above the 20-day EMA could be a long opportunity, targeting the 1.2335 level before reaching towards the 1.2443 level, which is the 200-day SMA area.
Despite the US Dollar’s weakness, AUD/USD closed sideways, which is a sign of a weaker sellers presence in the market. In that case, investors should monitor the Australian CPI report this week, which could be a strong price director for AUD.
The latest week started with a bullish momentum but ended up with an inside bar formation. As the previous candle is bearish, a downside continuation is potent, supported by a bearish 20-week SMA.
In the daily chart, the recent price action has become corrective with the RSI Divergence formation. Although it is a sign of a bullish reversal, investors should find more clues before opening a long position.
The latest high volume level since July 2023 is above the 0.6391 static resistance level, which is a sign of a sellers’ presence in the market.
Based on this outlook, a bullish daily candle above the 0.6426 high volume level could be a potential bullish opportunity in this pair, increasing the price towards the 100-day SMA level.
On the bearish side, any bearish rejection from the 20 EMA could be a short opportunity, targeting the 0.6200 level.
The weaker US Dollar failed to show a strong bearish pressure in the USD/JPY price as the Japanese Yen is still muted regarding the extended loss. As the broader market direction is bullish, any upside correction in the US Dollar Index (DXY) could be a long opportunity in this pair.
In the weekly chart, the USD/JPY price closed with a bullish consecutive weekly candle backed by a strong trend from the 20-week SMA. Moreover, the broader market direction is bullish, where any positive fundamental development could trigger the US Dollar’s bullishness.
In the daily chart, a bullish U-shape recovery is seen where the current resistance is at the 150.20 level. Moreover, the 20 EMA backs the bullishness, while the 100-day SMA is the major support.
Based on this outlook, bulls have a higher winning possibility, where a D1 candle close above the 150.30 level could increase the price toward the 152.00 level. However, a deep bearish correction towards the 148.21 level is possible, but a bearish daily candle below the 147.27 level could eliminate the bullish possibility.
After making the largest weekly gain, XAU/USD continued increasing for the second consecutive week. Moreover, a bullish V-shape recovery in the weekly price came with a counter-impulsive momentum, which could be a strong bullish signal. However, investors should monitor high-impact releases, while the current Israeli-Hamas conflict will be the key event.
In the daily XAU/USD price, the Relative Strength Index (RSI) moved above the 70.00 line, which indicates a technically overbought condition. In that case, a minor downside correction is pending, where the 1960.00 level would be a key price level to look at as it is the 23.6% Fibonacci Retracement level from the latest swing.
Moreover, the dynamic 20 EMA and 100 SMA show a bullish continuation possibility as the recent price remains stable above these levels.
On the bearish side, the 1930- 1920 area could be the potential support level, where the 100 SMA works as a confluence level. In that case, a bearish daily candle below this level could discourage bulls from joining the market, increasing the possibility of reaching the 1900.00 level.
On the bullish side, the next resistance for this pair is the 2000.00 psychological level. Therefore, a bullish D1 candle above this level could trigger the long opportunity, targeting the 2040.00 level.
While technical analysis suggests some persisting momentum, on-chain metrics indicate a potential reversal is imminent. The Market Value to Realized Value (MVRV) over the last 7 and 30 days suggests that the recent increase in Bitcoin's price may have driven these indicators into a risky zone.
This index determines the average weekly and monthly profit or loss of investors who acquired BTC over the prior week and month. The 7-day MVRV is currently at 3.53%, indicating that 3.53% of recent BTC investors are in the black. Likewise, the 30-day MVRV indicates that roughly 6% of long-term holders are experiencing gains.
Using historical information, the 7-day and 30-day MVRV indicators are now within the "danger zone." Typically, investors are inclined to profit in these zones, leading to frequent short-term corrections.
If past performance is any indication, such a correction could bolster adverse sentiments and satisfy the second requirement for a trend reversal, possibly resulting in a lower high.
Daily active addresses have declined since September 15, when they peaked at 1.23 million. The on-chain outlook for BTC appears bleak, except for sporadic increases in transaction volumes.
In the BTC/USD daily chart, the overall market pressure is bullish as the 20 EMA reaches the 100-day SMA with an upward slope. Moreover, the conjunction happened below the 28,083.23 static support level, which is a sign of strong bullish pressure.
In the indicator window, the RSI is bullish but reached the 70.00 overbought level, which signals a bearish correction possibility. In that case, a sharp decline with a D1 candle below the 26,500.00 level could be a strong bearish opportunity in this market, targeting the 25,000.00 level.
On the bullish side, any strong bullish rejection from the 20 EMA or static 28000.00 level could be a long opportunity, targeting the 31,200.00 level.