Asia-Pacific Shares Fall on Global Recession Fears

The major Asia-Pacific share markets fell on Wednesday as swelling borrowing bolstered fears of a global recession, frightening investors into the arms of the safe-haven dollar and driving the Chinese Yuan to record lows. Investors were taking their cues from another rise in U.S. Treasury yields with the benchmark 10-year breaching 4% for the first time since 2010.

Down Across the Board

In Japan, the benchmark Nikkei 225 Index settled at 26173.98, down 397.89 or -1.5%. Hong Kong’s Hang Seng Index is at 17277.98, down 582.67 or -3.26% and South Korea’s KOSPI Index is at 2169.29, down 54.27 or -2.45%.

China’s benchmark Shanghai Index finished at 3045.07, down 48.79 or -1.58% and Australia’s S&P/ASX 200 Index settled at 6462.00, down 34.2 or -0.53%.

Odds of Global Recession Increasing

“It is now clear that central banks in advanced economies will make the current tightening cycle the most aggressive in three decades,” said Jennifer McKeown, head of global economics at Capital Economics. “While this may be necessary to tame inflation, it will come at a significant economic cost.”

“In short, we think the next year will look like a global recession, feel like a global recession, and maybe even quack like one, so that’s what we’re now calling it.”

China Stocks Track Global Peers Lower, Yuan Tumbles to Record Lows

China stocks fell on Wednesday and Hong Kong Shares neared 11-year lows, as fears grew that rapid interest rate hikes would tip the global economy into recession.

Meanwhile, China’s onshore Yuan touched the weakest level against a rising dollar since the global financial crisis of 2008, while its offshore counterpart hit the lowest on record, pressured by expectations of more Federal Reserve rate hikes.

Currency traders said the local currency was reacting to broad greenback strength in global markets as the dollar hit a fresh two-decade peak against a basket of currencies. The dollar has been buoyed by safe-haven demand and a hawkish Fed in recent days.

The declines come even as China’s central bank on Monday announced fresh steps to slow the pace of the Yuan’s recent fall by making it more expensive to bet against the currency.

Short-Term Outlook

It’s very difficult to buy Asia-Pacific stocks right now with global investors on edge as surging borrowing costs stoke fears of widespread recession, with most of the world’s major central banks putting their focus squarely on tightening policies to contain super-heated inflation.

For a look at all of today’s economic events, check out our economic calendar.

US Dollar Supported as Fed Officials Call for More Rate Hikes to Fight Inflation

The U.S. Dollar is trading flat early Wednesday after posting a choppy, two-sided trade the previous session despite hawkish commentary from several Federal Reserve policymakers.

The greenback is edging lower against the Euro and Japanese Yen, but is slightly higher against the British Pound. The subdued price action is the result of traders monitoring central bank activity and the impact on the growth of the global economy from their aggressive efforts to drive down inflation.

At 23:52 GMT, December U.S. Dollar Index futures are trading 114.095, unchanged. On Tuesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $30.68, up $0.02 or +0.05%.

Daily December U.S. Dollar Index

Dollar Supported by Hawkish Fed Members

With the dollar index hovering just below a two-year high at 114.445, the trading activity suggests higher prices could continue especially with Federal Reserve officials ignoring the pain in the stock market while calling for the need of further rate hikes.

Minneapolis Federal Reserve Bank President Neel Kashkari was the latest hawk to voice his opinion when he said on a WSJ Live interview Tuesday that the Fed needs to keep tightening until it has evidence underlying inflation is heading down, then should pause and “let the tightening work its way through the economy” to see if it has done enough.

Early Monday, Susan Collins, the new president of the Federal Reserve Bank of Boston, endorsed Fed projections released last week that signaled its benchmark interest rate would rise to 4.6% by next year, up sharply from about 3.1% now.

Later, Cleveland Fed President Fed President Loretta Mester said, “When there’s a lot of uncertainty, it can be better for policymakers to actually act more aggressively, because aggressive action and pre-emptive action can prevent the worst-case outcomes from happening.”

Avoiding Recession Will Be a Challenge

The comments from the three Fed policymakers contributed to the ongoing debate about how badly the Fed’s rate hikes – the fastest in more than 40 years – will hurt the economy. By increasing its benchmark rate, the Fed is making mortgages, auto loans and credit cards more expensive for consumers and businesses.

Boston Fed President Collins acknowledges the rising worries about a recession, but she believes, “the goal of a more modest slowdown, while challenging, is achievable.”

Other Fed officials hope their rate hikes will achieve a “soft-landing” by slowing consumer and business spending enough to bring down inflation but not so much as to cause a recession. However, many economists are increasingly skeptical that such an outcome is likely. They think the U.S. could face a recession next year.

Fed Chairman Jerome Powell even acknowledged that “the chances of a soft landing are likely to diminish” as the Fed steadily raises borrowing costs.

“No one knows whether this process will lead to a recession or, if so, how significant that recession would be,” Powell said.

Short-Term Outlook

There needs to be a slowdown in the economy to get inflation under control and the Fed sees rate hikes as the means to achieve this. This will be supportive for the U.S. Dollar until the Fed slows the size and the pace of the rate hikes, allowing other policymakers like the European Central Bank to catch up.

Even a U.S. recession is not likely to be enough to weaken the dollar because other economies are already headed there like the Euro Zone. Furthermore, a global recession will likely enhance the greenback’s appeal as a safe-haven asset.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Futures (GC) Technical Analysis – Sellers Take Breather Near 2-1/2 Year Low

Gold is recovering nicely on Tuesday after hitting its lowest level in more than 2-1/2 years the previous session. A dip in U.S. Treasury yields and a slight pullback in the U.S. Dollar are helping to alleviate some of the downside pressure on the precious metal that is being fueled by expectations for aggressive U.S. Federal Reserve rate hikes.

At 16:00 GMT, December Comex gold futures are trading $1645.90, up $12.50 or +0.77%. The SPDR Gold Shares ETF (GLD) is at $152.46, up $1.23 or +0.81%.

Key Market Moving Events

Treasury yields fell across the board on Tuesday, with the yield on the 2-year and 10-year notes coming off recent highs. That is helping to underpin gold prices, but should in no way be construed as the start of a change in trend.

With last week’s Fed rate hike “old news”, the quiet period for Federal Reserve speaker commentary has been lifted.

On Monday, a number of Fed speakers reiterated that driving down persistent inflation was a top priority. Cleveland Fed president said that “aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming out.”

In economic news on Tuesday, U.S. Durable Goods Orders came in lower than expected, but Consumer Confidence surprisingly jumped to 108.0, better than the 104.0 forecast.

In other news, the Home Price Index (HPI) fell 0.6% and the S&P/CS Composite-20 HPI came in at 16.1%, lower than expected. However, New Home Sales came in at 685K units versus a 500K unit estimate.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1627.70 will signal a resumption of the downtrend. A move through the April 1, 2020 main bottom at $1618.00 will reaffirm the downtrend. Taking out $1746.60 will change the main trend to up.

The minor trend is also down. A trade through $1696.90 will change the minor trend to up. This will shift momentum to the upside.

The minor range is $1696.90 to $1627.70. It 50% level at $1662.30 is the nearest resistance.

The major support is a long-term Fibonacci level at $1609.30. The major resistance is the long-term 50% level at $1709.10.

Daily Swing Chart Technical Forecast

Trader reaction to $1642.50 is likely to determine the direction of the December Comex gold futures contract into the close on Tuesday.

Bullish Scenario

A sustained move over $1642.50 will indicate the buying is getting stronger. This could trigger a late session surge into the pivot at $1662.30.

Bearish Scenario

A sustained move under $1642.50 will signal the presence of sellers. This could lead to a retest of yesterday’s low at $1627.70, followed by the long-term main bottom at $1618.00.

A failure to hold $1618.00 will indicate the selling pressure is getting stronger with the next target the long-term Fibonacci level at $1609.30.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Underpinned by Softer Dollar, Possible OPEC+ Supply Cuts

U.S. West Texas Intermediate crude oil futures are moving higher on Tuesday as traders attempt to claw back some of yesterday’s loss. After plunging to a nine-month low the previous session, prices are rebounding, supported by supply curbs in the U.S. Gulf of Mexico due to rapidly approaching Hurricane Ian.

A slightly softer U.S. Dollar is also helping to create demand for the dollar-denominated asset. Meanwhile, there are reports circulating that the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, may take action to stem the drop in prices by cutting supply. The group meets to set policy on October 5.

At 10:45 GMT, November WTI crude oil is trading $77.89, up $1.18 or +1.54%. On Monday, the United States Oil Fund ETF (USO) settled at $63.18, down $2.14 or -3.28%.

In other news, the American Petroleum Institute’s report will be released at 20:30 GMT. It is expected to show a 300,000-barrel increase in crude stocks.

Daily November WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the January 24 main bottom at $75.70 will reaffirm the downtrend. A move through $86.68 will change the main trend to up.

On the downside, the nearest support is a long-term 50% level at $74.26.

Daily Swing Chart Technical Forecast

Trader reaction to $78.28 is likely to determine the direction of the November WTI crude oil market on Tuesday.

Bullish Scenario

A sustained move over $78.28 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into a minor pivot at $81.47. Overcoming this level will indicate the buying is getting stronger with $86.68 the next potential target.

Bearish Scenario

A sustained move under $78.28 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into $75.70, followed by $74.26. The latter is a potential trigger point for an acceleration to the downside with the January 3, 2022 main bottom at $70.00 the next major target.

Side Notes

Hurricane Ian is not expected to hit any oil platforms at this time, but oil companies are evacuating platforms as a precaution.

The key issue is supply at this time. News that could cause supply disruption will be bullish. There is also chatter that the U.S. Dollar is overbought and needs to come down. A steep break in the U.S. Dollar could send crude oil prices sharply higher.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Bounces Off Record Low as Speculators Bet on BoE Emergency Rate Hike

The British Pound closed lower against the U.S. Dollar on Monday after touching a record low during the Asian session. The loss could have been worse if not for a solid intraday technical bounce that brought the currency back above the session’s mid-point.

On Monday, the GBP/USD settled at 1.0686, down 0.0170 or -1.59%. The Invesco CurrencyShares British Pound Sterling Trust ETF (FXB) finished at $102.79, down $1.69 or -1.62%.

The Sterling dropped to an all-time low as investors worried Britain’s new economic plan will hurt the country’s finances, while the Bank of England said it was watching financial markets “very closely” following sharp moves in asset prices.

Traders are reacting negatively to the unveiling of new Finance Minister Kwasi Kwarteng’s historic tax cuts, funded by the biggest increase in borrowing since 1972. British government bond prices collapsed. One of the reason upsetting investors is that the government is going to be funding the tax cuts as interest rates are rising, which is making to make the plan very expensive.

BoE Might Take Emergency Action to Shore Up the British Pound

The pound largely rebounded from its overnight losses, as traders speculated the BoE might take emergency action to stem the currency’s fall, but retreated a second time after BoE Governor Andrew Bailey said the central bank was watching the markets, but did not signal any immediate action.

“There is a good chance that the BoE will now be forced to hike rates aggressively in the coming November meeting if an emergency intervention isn’t made before,” Fiona Cincotta, senior financial markets analyst at City Index said.

Daily GBP/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.0349 will signal a resumption of the downtrend. A move through 1.1738 will change the main trend to up.

The minor range is 1.0349 to 1.0930. It pivot is 1.0640.

The short-term range is 1.1738 to 1.0349. Its retracement zone at 1.1043 to 1.1207 is the next major upside target and potential resistance zone.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 1.0640 is likely to determine the direction of the GBP/USD early Tuesday.

Bullish Scenario

A sustained move over 1.0640 will indicate the presence of buyers. If this is able to generate enough upside momentum the look for a possible near-term surge into the short-term 50% level at 1.1043. Since the main trend is down, look for sellers on the first test of this level. Overcoming it, however, could extend the rally into the short-term Fibonacci level at 1.1207.

Bearish Scenario

A sustained move under 1.0640 will signal the presence of sellers. If this creates enough downside momentum then look for a retest of 1.0349. Since this is a historical low, taking it out could trigger an acceleration to the downside.

Side Notes

Look for volatility as traders may continue to float the idea of an emergency rate hike by the Bank of England in order to slowdown the selling pressure.

For a look at all of today’s economic events, check out our economic calendar.

ECB’s Lagarde Reiterates Need to Raise Rates Several Times Even if Growth Slows Substantially

The Euro collapsed to a new 20-year low early Monday dragged down by a plunging British Pound, a right-wing victory in Italy’s general elections and expectations that aggressive rate hikes by the major central banks would send the global economy into recession.

On Monday, the EUR/USD settled at .9608, down 0.0080 or -0.83%. The Invesco CurrencyShares Euro Trust ETF (FXE) finished at $88.70, down $0.78 or -0.87%.

Monday’s Recap

Fear hit the Euro trade on Monday after the British Pound plunged to a record low early in the session in Asia, following last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.

In other news, Giorgia Meloni became Italy’s first woman prime minister as the head of its most right-wing government since World War Two after leading a conservative alliance to triumph at Sunday’s election.

According to Giada Giani, Economist at Citi, “Meloni’s first key decision will be the appointment of the finance minister, with a pro-Europe, fiscally-cautious personality looking a likely choice for now. We do not expect an immediate push for a major fiscal relaxation, but we do see risks over the medium term that the right’s policy agenda will clash with EU objectives.”

ECB’s Lagarde Says She Won’t Fix ‘Policy Errors’

The European Central Bank won’t use its latest emergency scheme to buy the bonds of countries that make “policy errors”, its President Christine Lagarde said on Monday in response to a question about Italy’s likely next government.

Asked in the European Parliament whether the ECB could deploy its Transmission Protection Instrument to help Italy, Lagarde wouldn’t name any country but said the scheme was only there to support fiscally prudent countries while others should apply for a bailout.

Lagarde was referring to the fact that Meloni’s government is inheriting one of the Euro Zone’s heaviest debt burdens at a time of rising borrowing costs and looming recession.

ECB President Lagarde Warns Against Inflation from Fiscal Stimulus

Lagarde, who is battling the highest inflation in the Euro Zone’s history, also said countries using their budget to protect citizens from high food and energy costs must be careful not to fuel further price growth.

“It is essential that fiscal support used to shield those households from the impact of higher prices is temporary and targeted,” Lagarde told a parliamentary hearing in Brussels. “This limits the risk of fueling inflationary pressures, thereby also facilitating the task of monetary policy.”

Lagarde also repeated the ECB’s most recent message that interest rates will need to rise over the next several policy meetings even as growth slows substantially.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Extending Losses on Weakening Demand, Higher Inventories

U.S. natural gas futures are trading lower at the mid-session on Monday after testing a more-than-two-month low earlier in the session. The catalyst behind the move are a weakening demand outlook and higher inventories.

At 16:00 GMT, November natural gas futures are trading $6.874, down $0.118 or -1.69%. The United States Natural Gas Fund ETF (UNG) is at $23.68, down $0.39 or -1.62%.

Cooler Days are Forecast

Data provider Refinitiv forecasted 76 cooling days (CDDs) over the next two weeks, down from their estimate of 88 CDDs on Friday. CDDs, used to estimate demand to cool homes and businesses, measure the number of degrees a day’s average temperature is above 65 Fahrenheit (18 Celsius).

Moderating temperatures and a little bit of a resurgence injections are driving prices lower, said Thomas Saal, senior vice president for energy at StoneX Financial Inc.

“The intensity of the falling is a result of high volatility in the market. It went up pretty fast so it is obviously going down pretty fast.”

US Southeast Facing Demand Destruction from Hurricane

Tropical Storm Ian has strengthened into a hurricane and is expected to produce significant wind and storm surge impacts in western Cuba, the National Hurricane Center (NHC) said in its latest advisory on Monday.

Hurricane Ian could bring rain to the southeast United States, likely leading to some demand destruction, Saal said, but added that prices would find some good technical support near $6.40-$6.50.

Ian’s projected path also threatens demand destruction in the form of power outages and cooler temperatures for Florida and the Southeast later this week, NatGasWeather said.

Hurricane Ian on Path to Miss Major Infrastructure

“The track of Ian shifted slightly westward over the weekend and a little closer to oil and gas platforms in the Gulf of Mexico, but still leaving the densest oil and gas infrastructure along the Gulf Coast mostly unaffected,” NatGasWeather said. The storm shifted a little to the East on Monday, however, even further away from oil and gas infrastructure. This shift along with the expected demand destruction is weighing on prices today.

Perhaps softening the blow to the market after the hurricane passes later this week was the possibility of lower production. Whether the major infrastructure is hit or not by the storm, production in the Gulf of Mexico is expected to drop as oil and gas platforms are evacuated.

Daily November Natural Gas

Short-Term Outlook

The short-term fundamentals are bearish with average daily production hovering near all-time records. Lower heating demand expectations are in the cards around the second week of October. And Hurricane Ian is likely to miss key infrastructure while causing demand destruction.

The technical picture also turned bearish last week when the November natural gas futures contract crossed to the weak side of a key support zone at $7.213-$7.753. This is now new resistance.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Poised to Break into Bear Market Territory; Weaker Dollar Key to Turning Stockmarket Around

U.S. stock index futures are edging lower on Monday, shortly before the cash market opening as traders brace for more selling pressure. The weakness is being fueled by worries that the Federal Reserve’s aggressive push to curb inflation may tip the American economy into recession.

At 12:23 GMT, the blue chip Dow Jones Industrial Average is trading 29462.00, down 207.00 or -0.70%. The benchmark S&P 500 Index is at 3678.15, down 30.25 or -0.82% and the tech-heavy NASDAQ Composite is at 11296.15, down 80.00 or -0.70%.

Weakening investor sentiment is being fueled by surging global interest rates and turmoil in the foreign currency markets.

S&P 500 Breathing on Bear Market Low

In the cash market, investors will be closely watching the S&P 500 for any break below its bear market low. The S&P’s low close for the year in June was 3,666.77. It closed Friday at 3,693.23 after trading briefly below that close. The benchmark’s intraday low for the year is 3636.87. Any trade below those levels could drive more selling in the market.

Tumultuous Forex Trade Could Create Havoc for Stocks

The British Pound plunged to a record low on Monday against the U.S. Dollar. Sterling at one point fell to an all-time low of $1.0382. The move is being fueled by a combination of the Federal Reserve’s aggressive hiking campaign and last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.

The consensus doesn’t believe there will be a currency intervention on the Sterling, but the onus is now on the central bank to do more to tight policies to stabilize the British Pound.

Unless there is severe financial distress due to the weakening currency, the Bank of England will wait until its next meeting to show decisive action to raise rates aggressively in the next couple of meetings.

Cyclical Stocks Trading Lower on Worries Over Fed-Driven Recession

In premarket trading on Monday, cyclical stocks traded convincingly lower on worries that a series of sharp interest rate hikes by the Fed could rattle the economy.

Boeing Co, Chevron Corp, Caterpillar Inc and JPMorgan Chase & Co fell more than 1% each, while growth stocks including Apple Inc, Microsoft Corp, Amazon.com Inc and Tesla Inc shed between 0.4% and 0.5%.

Short-Term Outlook

Going into today’s trading session, I believe investors should be focused on the U.S. Dollar. It’s hard not to have concerns about long-term stock market performance with the dollar accelerating, global yields soaring and the breakdowns across the global FX.

However, a concerted effort by the major central banks to bring the U.S. Dollar could trigger a dramatic reversal in equity prices.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Forex Technical Analysis – Edging Higher as Intervention Impact Diminishes

The Dollar/Yen is edging higher on Monday as U.S. Treasury yields rose, widening the spread with Japanese Government bonds. The Forex pair is still trading below levels it hit last week before Japanese authorities intervened, but most investors believe the impact of the move will eventually be absorbed.

At 11:46 GMT, the USD/JPY is trading 144.222, up 0.857 or +0.60%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $65.20, down $0.47 or -0.72%.

The Japanese Yen has depreciated nearly 20% this year, sinking to 24-year lows, largely as aggressive U.S. interest rate hikes push the dollar higher.

Traders were expecting some intervention at some point, given the increasing verbal intervention from high ranking government and central bank officials. Additionally, two weeks ago, the Bank of Japan (BOE) conducted a rate check which is usually a precursor to an intervention.

Nonetheless, analysts are saying currency interventions are rarely successful with most expecting the move to provide a temporary reprieve for the Japanese Yen.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing. However, momentum has been trending lower since the intervention on September 22.

A trade through 145.900 will signal a resumption of the uptrend. A move through 131.734 will change the main trend to down.

The minor trend is down. This is controlling the momentum. A trade through the invention low at 140.353 will reaffirm the shift in momentum.

The minor range is 145.900 to 140.353. Its 50% level at 143.127 is support.

Another minor range is 135.809 to 145.900. Its 50% level at 140.855 essentially provided support after the intervention.

Daily Swing Chart Technical Forecast

Trader reaction to 143.127 is likely to determine the direction of the USD/JPY on Monday.

Bullish Scenario

A sustained move over 143.127 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into 145.900, followed by 146.780.

Bearish Scenario

A sustained move under 143.125 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into 140.855, followed by 140.353. This is a potential trigger point for an acceleration to the downside into 138.156.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Negative Sentiment Continues to Weigh on Kiwi

The New Zealand Dollar is trading nearly flat after testing its lowest level since March 2020 earlier in the session. The Kiwi is being pressured by a number of events including an aggressive Federal Reserve, the threat of a global recession and sliding risk sentiment due to ominous developments in the war between Russia and Ukraine.

At 07:41 GMT, the NZD/USD is trading .5742, down 0.0003 or -0.04%.

With the Federal Reserve and a host of other major central banks tightening policy last week, the specter of a global recession looms ever closer. This has unnerved investors who are flocking to the safety of the U.S. dollar.

Furthermore, since inflation is lower in New Zealand than the United States, the Reserve Bank of New Zealand (RBNZ) is not likely to raise rates at the same pace as the U.S. Federal Reserve. This is making the U.S. Dollar a more attractive investment.

Weekly NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .5694 will signal a resumption of the downtrend. The main trend will change to up on a move through .6162. This is highly unlikely. However, due to the prolonged move down in terms of price and time, the market is ripe for a closing price reversal bottom.

The minor trend is also down. A trade through .6002 will change the minor trend to up. This will shift momentum to the upside.

The nearest resistance is a pair of 50% levels at .5860 and .5928.

Daily Swing Chart Technical Forecast

Trader reaction to .5745 is likely to determine the direction of the NZD/USD on Monday.

Bearish Scenario

A sustained move under .5745 will indicate the presence of sellers. Taking out the intraday low at .5694 will indicate the selling pressure is getting stronger. If this generates enough downside momentum then look for the selling to possibly extend into the March 19, 2020 main bottom at .5469 over the near-term.

Bullish Scenario

A sustained move over .5745 will signal the presence of counter-trend buyers. If this creates enough upside momentum, the Kiwi could rally into the first pivot at .5860.

Side Notes

A close over .5745 will form a potentially bullish closing price reversal bottom. This won’t change the main trend to up, but if confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – Declining Risk Sentiment Fueling Move into .6464 – .6402

The Australian Dollar is down early Monday, pressured by a drop in global market sentiment as investors fret over the U.S. Federal Reserve’s hawkish rate policy to tame inflation that will drag major economies into recession.

The Aussie is trading near its lowest level in over two years as an aggressive Fed, worries about global growth, and geopolitical concerns from Russia’s war in Ukraine bolstered the safe-haven dollar.

At 02:35 GMT, the AUD/USD is trading .6514, down .0021 or -0.33%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) finished at $64.68, down $1.12 or -1.70%.

Risk-off sentiment continues to prevail after last week’s Federal Reserve interest rate hike with Chairman Jerome Powell vowing policymakers would “keep at” their battle to beat inflation. Meanwhile, the Reserve Bank of Australia (RBA) is not likely to keep pace with the Fed making the U.S. Dollar a more attractive investment.

Last Wednesday, the Fed raised its benchmark rate by 75 basis points. The RBA is forecast to raise its benchmark by only 50 basis points. The pace of the U.S. rate hikes has narrowed the yield premium of Australian government debt over U.S. Treasuries. This trend is likely to continue as long as the Fed stays hawkish, boosting the attractiveness of the U.S. Dollar.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .6488 will signal a resumption of the downtrend. A move through .6747 will change the main trend to up.

The minor range is .6747 to .6488. Its 50% level at .6618 is the nearest resistance. On the downside, the nearest support is the long-term Fibonacci level at .6464.

Daily Swing Chart Technical Forecast

Trader reaction to .6536 is likely to determine the direction of the AUD/USD on Monday.

Bearish Scenario

A sustained move under .6536 will indicate the presence of sellers. If this creates enough downside momentum then look for a break into the long-term Fibonacci level at .6464. Look for a technical bounce on the first test of this level, however, if it fails then look for the selling to possibly extend into the May 15, 2020 main bottom at .6402.

Bullish Scenario

A sustained move over .6536 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into the minor pivot at .6618.

Side Notes

A close over .6536 will form a potentially bullish closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 day counter-trend rally.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Daily Forecast – BOJ Intervention Not Enough to Overcome Hawkish Fed Policy

The Dollar/Yen finished higher on Friday after posting a volatile reversal to the downside the previous session after Japanese authorities intervened in the markets to support the currency for the first time since 1998.

Some traders attributed the lack of follow-through to the downside due a bank holiday in Japan. Others said the move took place because most investors believe the intervention would not have a lasting impact on the Japanese Yen.

On Friday, the USD/JPY settled at 143.365, up 1.073 or +0.75%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) closed at $65.20, down $0.47 or -0.72%.

The USD/JPY tanked more than 2% the previous session after it had traded more than 1% higher on the BOJ’s decision to stick to its super-loose policy stance, bucking a global tide of monetary tightening by central banks fighting soaring inflation.

“We have taken decisive action,” vice finance minister for international affairs Masato Kanda told reporters, responding in the affirmative when asked if that meant intervention.

Intervention Impact Won’t Last

The intervention wasn’t a total surprise. The week earlier the Bank of Japan (BOJ) completed a rate check, which is usually a precursor of an intervention. The timing and the reason for the intervention – to strengthen the Yen – was a surprise, however.

Usually, interventions are reserved for currency manipulation that could be detrimental to a country’s economy. In this case, the rise in the USD/JPY may be hurting Japan’s economy, but the currency is not being manipulated.

The Yen is being crushed because of the divergence in policy between the U.S. Federal Reserve and the Bank of Japan. The Fed is aggressively hiking interest rates in an effort to drive down inflation. The BOJ is holding policy at ultra-low levels.

With the Fed raising rates and the BOJ holding on to negative rates, the spread between U.S. Treasurys and Japanese Government bond yields is widening, making the dollar a more attractive currency.

That’s it in a nutshell.

US Treasury Acknowledges BOJ’s Intervention

According to reports, the U.S. Treasury acknowledged the BOJ’s move but stopped short of endorsing the intervention.

Two months ago U.S. Treasury Secretary Janet Yellen said of the Yen’s depreciation that Washington remained convinced that currency intervention was warranted only in “rare and exceptional circumstances”, and that the market should determine exchange rates for G7 countries.

Short-Term Outlook

Prior to the intervention, bullish traders were being tentative about adding to their long positions as the USD/JPY approached 145. Now that the intervention is out of the way and with analysts saying Japanese officials are not likely to try to drive the Yen higher over the near-term, buyers are likely to get more confident and resume the uptrend.

The intervention was the most powerful tool the BOJ had available and they used it. It was essentially a weapon of last resort that Japan had left to arrest sharply Yen declines that were pushing up import costs and threatening to hurt consumption.

In our opinion, the intervention was a doomed step with the Dollar/Yen likely to resume its rally since the market forces are being driven by hawkish Fed policy. Our opinion won’t change until the Fed gives the all-clear signal or until the Bank of Japan turns hawkish.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – Pressured as Fed Rates Hikes Outpace RBA, RBNZ Increases

The Australian and New Zealand Dollars closed lower on Friday as domestic bonds suffered big losses as investors scrambled to catch up with the U.S. Federal Reserve’s interest rate outlook. The two currencies were beat up badly throughout the week after several major central banks, including the Fed and the Bank of England, hiked their benchmark rates, pressuring commodity prices and demand for higher-risk equities.

On Friday, the AUD/USD settled at .6536, down 0.0080 or -1.23% and the NZD/USD finished at .5745, down 0.0083 or -1.44%. Additionally, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) closed at $64.68, down $1.12 or -1.70%.

Aussie, Kiwi Getting Hit from All Sides

The weakness in the Aussie and Kiwi late in the week was fueled by Fed members’ projections for aggressive rate hikes and persistently high rates over the next year or so. The forecasts that were released after an aggressive 75 basis point by the U.S. central bank, unleashed another round of greenback buying that put other assets on the run.

As a result, crude oil plunged as rate hikes raised global recession and related demand concerns. Gold, which pays no income to hold it, also suffered as rising U.S. Treasury yields reduced its investment appeal. This put added pressure on the commodity-linked Aussie and Kiwi.

Tightening Government Debt Yields Weigh on Aussie, Kiwi

Rising U.S. Treasury yields also put upward pressure on Australian and New Zealand Government debt yields, driving their respective bond prices lower. The spread between the U.S. Government debt yields and that of Australia and New Zealand also tightened, further weakening demand for the Australian and New Zealand Dollar.

U.S. Treasury yields climbed on Friday and the yield on the 2-year Treasury note notched a new 15-year high as markets assessed the Federal Reserve’s latest rate hike and what it means for the economy going forward. Meanwhile, the yield on the 10-year hit an 11-year high of 3.829%.

The climb in yields came as markets weighed the implications of the Federal Reserve’s latest policy decisions as it signals its willingness to accept a recession ahead if it means an end to surging inflation.

Looking Ahead…

The Fed lifted rates by an expected 75 basis points last Wednesday and signaled a longer trajectory for policy rates than markets had price in.

Now it’s the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand’s (RBNZ) turn to raise rates next month.

The problem is Australia and New Zealand have different levels of inflation so their respective central banks can’t raise rates as much as the U.S. Federal Reserve without risking tremendous damage to their economies.

The markets have largely priced in 50 basis point rate hikes in October with 25 basis points in November and December for the RBA and RBNZ. With these rate hikes expected to come in below the Fed’s hike, the pressure will remain on the AUD/USD and NZD/USD.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Bearish Demand Outlook Leads to Test of 10-Week Low

U.S. natural gas futures are trading at their lowest level since July 15 late Friday on expectations temperatures will remain mild into early October, pressuring both heating and cooling demand and allowing utilities to inject large amounts of gas into storage over the next few weeks.

That change in the weather after a brutally hot summer was also boosting the amount of wind power available, allowing generators to cut back on the amount of gas they burn to produce electricity, Reuters reported.

At 17:03 GMT, November natural gas futures are at $7.006, down $0.187 or -2.60%. The United States Natural Gas Fund ETF (UNG) is at $24.10, down $1.05 or -4.17%.

Lower LNG Demand Weighing on Prices

Demand is also expected to drop when the Cove Point liquefied natural gas (LNG) plant in Maryland shuts for a couple weeks of maintenance. Cove Point is consuming about 0.8 billion cubic feet per day (bcfd) of gas.

This is on top of the three month decline in demand due to the ongoing outage at the Freeport LNG export in Texas which has left more gas in the United States for utilities to inject into stockpiles for next winter.

Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 bcfd of gas before it shut on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November.

Gulf of Mexico Hurricane Poses Another Problem for Demand

The U.S. National Hurricane Center (NHC) warned that Tropical Depression 9 would strengthen into a hurricane as it moves from the Caribbean Sea to the Gulf of Mexico over the next few days and hits South Florida on Wednesday.

With much of the nation’s gas production located away from the Gulf of Mexico in shale basins like the Permian in West Texas and Appalachia in Pennsylvania, analysts said tropical storms were more demand-destroying events since they knock out power and cause LNG export terminals to shut.

Bearish EIA Weekly Storage Report

The U.S. Energy Information Administration (EIA) reported on Thursday that domestic natural gas supplies rose by 103 billion cubic feet (Bcf) for the week-ended Sept. 16. That compared with the consensus forecast for an increase of 92 Bcf.

Ahead of the report, Natural Gas Intelligence reported that the results of a Reuters poll ranged from predicted increases of 86 Bcf to 99 Bcf, with a median of 93 Bcf. Additionally, a Bloomberg survey spanned estimates of 80 Bcf to 104 Bcf, landing at a median expectation of an injection of 95 Bcf.

The estimates compare with the year-earlier injection of 77 Bcf and a five-year average of 81 Bcf.

Total working gas stocks in storage stand at 2.874 trillion cubic feet (Tcf), down 197 Bcf from a year ago and 332 Bcf below the five-year average, the government said.

Short-Term Outlook

Our short-term outlook is bearish from both technical and fundamental perspectives.

Technically, the main trend is down on the daily chart. Furthermore, November natural gas is trading on the weak side of a major support area, making $7.213 to $7.753 new resistance. The daily chart also indicates the next major down side target is all the way down at $5.465.

Fundamentally, demand is expected to come in lower because of favorable weather conditions, outages at two LNG plants and a hurricane that could lead to reduced cooling requirements.

For a look at all of today’s economic events, check out our economic calendar.

 

Oil Price Fundamental Daily Forecast – Crushed by Strong Dollar, Recession Concerns

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply lower late in the session on Friday. The more than 5% loss has driven the markets into their lowest levels in eight months as fears that rising interest rates will tip the global economy into a recession outweighed supply concerns fueled by geopolitical risks.

Additionally, the stronger U.S. Dollar also weighed on demand for the dollar-denominated assets as the greenback touched its highest level in more than 20 years.

At 16:30 GMT, November WTI crude oil futures are trading $79.06, down $4.43 or -5.31% and the December Brent crude oil futures contract is at $85.39, down $4.14 or -4.62%. The United States Oil Fund ETF (USO) is trading $65.32, down $3.65 or -5.29%.

WTI and Brent are also down 8% and 6% for the week, respectively, putting them both in a position to post their fourth straight weekly loss. Technicians also noted that WTI is poised to close at its lowest settlement since January 5 and Brent at its lowest level since January 13.

Products are also losing ground with U.S. gasoline and diesel futures off by more than 5%.

Rate Hike Fever Fueling Recession Risks

The U.S. Federal Reserve raised its benchmark interest rate by a super-sized 75 basis points on Wednesday. Joining the Fed in lifting rates was a group of central banks from around the world including the Swiss National Bank and the Bank of England.

The slew of interest rate hikes this week and the promise of more to follow is raising the threat of a global recession and that means lower demand, and an ultimate drop in prices.

While widespread monetary tightening is being blamed as the primarily factor driving down prices, the U.S. Dollar shares some of the blame. The greenback is on track to finish at its highest level against a basket of major currencies since May 2002. Crude oil is being pressured because a strong dollar reduces demand for dollar-denominated oil by making it more expensive for foreign buyers.

Euro Zone Recession Looms

The Euro Zone’s downturn in business activity deepened in September, a survey showed, suggesting a recession looms as consumers rein in spending and as governments urge energy conservation following Russia’s moves to cut off European supply.

Manufacturers were particularly hard hit by high energy costs after Russia’s invasion of Ukraine sent gas prices rocketing, while the bloc’s dominant services industry suffered as consumers stayed at home to save money.

“The third decline in a row for the Euro Zone PMI indicates business activity has been contracting throughout the quarter. This confirms our views a recession could have already started,” said Bert Colijn at ING.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Fundamental Daily Forecast – Investors Finding Out You Can’t Fight the Fed or Other Central Banks

Gold futures are lower on Friday, hitting their lowest level since April 2020, as soaring U.S. Treasury yields drove up demand in the U.S. Dollar. Rising yields tends to dampen interest in non-yielding bullion, while the stronger dollar makes gold more expensive to holders of foreign currencies.

At 12:15 GMT, December Comex gold is trading $1655.20, down $25.90 or -1.52%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $155.69, down $0.10 or -0.06%.

Rising Yields, Dollar Weigh on Demand

Briefly, the U.S. Dollar is trading at a new 20-year high against a basket of major currencies, up 0.75%. Meanwhile, the 10-year U.S. Treasury yield hit an 11-year peak. Additionally, although the war in Ukraine escalated this week with Russian President Putin bringing up the nuclear card, safe-haven buying of gold was dampened by soaring yields and the rising dollar.

Hawkish Central Banks Stoke Concerns of Global Recession

A number of central banks including the U.S. Federal Reserve and the Bank of England raised interest rates this week to tame inflation and also stoked concerns of a global recession.

The Fed raised its benchmark interest rate 75 basis points this week along with other major central banks, forming the backdrop for early warnings from international officials and analysts that rising rates for currencies like the dollar and Euro could tighten global financial conditions so much it leads to a global recession.

Along with the Fed’s action on Wednesday, its fifth interest rate increase since March, a half dozen banks from Indonesia to Norway followed suit with their own rate increases and often with guidance that more would follow.

They are fighting inflation rates ranging from Switzerland’s 3.5% to nearly 10% in Britain – the result of a rebound in demand since the pandemic subsided accompanied by sluggish supply, especially from China, and rising prices for fuel and other commodities in the wake of Russia’s invasion of Ukraine.

Short-Term Outlook

At 13:45 GMT, gold traders will get the opportunity to respond to U.S. September flash PMI data. The report is expected to give traders preliminary insight into the economic state of the manufacturing and services industries for the month. PMI data is used as a key inflation and recession concerns as it reflects whether industries are growing or shrinking, as well as supply and demand.

Analysts are expecting the services sector to inch higher after contracting sharply in August. Meanwhile, growth in the manufacturing industry is set to drop, after slowing down close to 2020 levels last month.

Federal Reserve Chairman Jerome Powell is also set to give a speech that could offer further insights into why the Fed raised rates 75 basis points and what to expect in the future.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Index (DX) Futures Technical Analysis – In Position to Test 112.700 as Treasury Yields Soar

The U.S. Dollar is soaring against a basket of major currencies on Friday amid as spike in U.S. Treasury yields as investors continued to adjust to the Federal Reserve’s interest rate hike. Traders are also reacting to the UK’s plan of a series of tax cuts in a bid to boost growth. Meanwhile, the market is bracing for the release of flash PMI data for September that is due to be released later in the day.

At 11:04 GMT, December U.S. Dollar Index futures are trading 111.905, up 0.800 or +0.72%. On Thursday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $29.84, up $0.03 or +0.10%.

US Treasury Yields Soar

The yield on the benchmark 10-year Treasury rose on Friday to an 11-year high as traders continued to adjust to last Wednesday’s Federal Reserve’s interest rate hike. The policy-sensitive 2-year Treasury yield also soared on the back of the Fed’s rate hike to a level not seen since October 2007.

Sterling Falls as Britain Sets Out New Economic Plan

British government bond yields surged by the most in a day in 13 years on Friday and the British Pound slid to a fresh 37-year trough against the dollar after UK finance minister Kwasi Kwarteng laid out a series of tax cuts in a bid to boost growth.

The bond market went into a tailspin, with yields on the two-year gilt – the most sensitive to any near-term shift in interest rate or borrowing expectations – up by more than a third of a percentage point. This was the biggest one-day rise since November 2009.

Looking Ahead…

September flash PMI data is set to be released on Friday, giving markets preliminary insight into the economic state of the manufacturing and services industries for the month. PMI data is used as a key inflation and recession concerns as it reflects whether industries are growing or shrinking, as well as supply and demand.

Analysts are expecting the services sector to inch higher after contracting sharply in August. Meanwhile, growth in the manufacturing industry is set to drop, after slowing down close to 2020 levels last month.

Federal Reserve Chairman Jerome Powell is also set to give a speech that could offer further insights into why the Fed raised rates 75 basis points and what to expect in the future.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 112.090 will signal a resumption of the uptrend. A move through 107.450 will change the main trend to down.

The minor trend is also up. A trade through 109.075 will change the minor trend to down. This will shift momentum to the downside.

The nearest support is a pair of 50% levels at 110.583 and 109.770.

Daily Swing Chart Technical Forecast

Trader reaction to 111.105 is likely to determine the direction of the December U.S. Dollar Index on Friday.

Bullish Scenario

A sustained move over 111.105 will indicate the presence of buyers. Taking out 112.090 will indicate the buying is getting stronger. This could trigger an acceleration into the December 2, 2002 main top at 112.700.

Look for sellers on the first test of 112.700, but taking it out could trigger an acceleration to the upside with the October 17, 2002 main top at 114.270 the next major target.

Bearish Scenario

A sustained move under 111.105 will signal the presence of sellers. If this creates enough downside momentum then look for a pullback into the first pivot at 110.583. If this level fails then look for the selling to possibly extend into the next pivot at 109.770. This is the last support before the minor bottom at 109.075.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Forex Technical Analysis – ‘One and Done’ BOJ Intervention Not Enough to Change Long-Term Trend

The Dollar/Yen is trading nearly flat on Friday after an intervention by the Bank of Japan (BOJ) fueled a volatile response by the Forex pair the previous session. The move but the Dollar/Yen on track for its first weekly loss in more than a month on Friday.

On Thursday, Japanese authorities intervened in foreign exchange markets for the first time since 1998. The timing of the move was impressive, coming after the BOJ announced it was sticking with its ultra-low interest rates and before today’s public holiday.

At 08:00 GMT, the USD/JPY is trading 142.456, up 0.084 or +0.06%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $65.64, up $0.69 or +1.05%.

With the BOJ’s monetary policy diverging with the rest of the major central banks, in order to have any success in driving the Japanese Yen higher, it’s going to have to continue to hit the market with a series of intervention moves, or the Yen will resume its downward trend.

This is not a situation whereby the currency is being manipulated. The weakness in the Yen is being driven by policy divergence. The U.S. Federal Reserve, for example, is raising rates and the BOJ is holding rates at ultra-low levels. As long as this trend continues, investors are going to seek the highest return. This means the U.S. Dollar will remain the most attractive asset.

Conditions could turn bearish for the USD/JPY if the BOJ shifts to a more hawkish policy while intervening. If this were to occur, the Forex pair would plunge.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum shifted to the downside on Thursday when the minor trend changed to down and the USD/JPY formed a potentially bearish closing price reversal top.

A trade through 140.353 will confirm the reversal top and indicate the selling pressure is getting stronger. A move through 145.900 will negate the potentially bearish chart pattern and signal a resumption of the uptrend.

On the upside, the nearest resistance is a pivot at 143.127. On the downside, the nearest support is a pivot at 140.855, followed by another at 138.156 and a retracement zone at 136.131 to 133.826.

Daily Swing Chart Technical Forecast

Trader reaction to 143.127 is likely to determine the direction of the USD/JPY on Friday.

Bearish Scenario

A sustained move under 143.127 will indicate the presence of sellers. Taking out the pivot at 140.855, followed by 140.353 will indicate the selling is getting stronger. This could trigger an acceleration into 138.156.

Bullish Scenario

A sustained move over 143.127 will signal the presence of buyers. If this creates enough short-term momentum then look for a retest of 145.900.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Sustained Move under .5804 Puts .5469 on Radar

The New Zealand Dollar is edging lower against its U.S. counterpart on Friday as it continues to struggle to gain traction despite expectations of another interest rate hike by the Reserve Bank (RBNZ) next month.

One problem is the hawkish U.S. Federal Reserve’s monetary policy. Even after last Wednesday’s super-sized 75 basis point rate hike, policymakers vowed to remain aggressive until inflation is under control.

Meanwhile the RBNZ is expected to boost its Official Cash Rate (OCR) by “only” 50 basis points at its October policy meeting. A smaller rate hike by RBNZ than the U.S. Federal Reserve will further tighten the interest rate differential between government bonds, making the greenback a more desirable currency than the Kiwi.

At 05:30 GMT, the NZD/USD is trading .5834, down 0.0011 or -0.19%.

Other factors putting pressure on the NZD/USD are geopolitical tensions, a drop in investor sentiment and falling commodity prices.

Additionally, while inflation is also a concern for New Zealand’s central bank, Deputy Reserve Bank Governor Christian Hawkesby said they have “growing confidence” that inflation will be significantly lower than it is at the moment” over 12 to 18 months.

Westpac senior economist Satish Ranchhod also sees inflation easing, however, at a slow pace. Inflation is “probably going to ease back over the coming months”, but the weaker New Zealand Dollar means “that decline is going to be much more gradual”.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .5804 will signal a resumption of the downtrend. A move through .6162 will change the main trend to up.

The minor trend is also down. A trade through .6002 will change the minor trend to up. This will also shift momentum to the upside.

The nearest resistance is a pivot at .5915, followed by a second pivot at .5983.

Daily Swing Chart Technical Forecast

Trader reaction to .5846 is likely to determine the direction of the NZD/USD on Friday.

Bearish Scenario

A sustained move under .5846 will indicate the presence of sellers. This could trigger a break into the 2-1/2 year low at .5804. Taking out this level could trigger a resumption of the move into the March 19, 2020 main bottom at .5469.

Bullish Scenario

A sustained move over .5846 will signal the presence of counter-trend buyers. If this creates enough upside momentum then look for a labored rally into the first pivot at .5915, followed by the second pivot at .5983.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – Weakens Under .6660, Strengthens Over .6671

The Australian Dollar is edging lower on Friday after rebounding from its lowest level since 2020 in the previous session. Traders are still on edge after the U.S. Federal Reserve raised its benchmark interest rate earlier in the week. However, Thursday’s technical reversal suggests traders are a little relieved the move was only 75 basis points since a full-percentage rate hike was also floated at the time.

At 05:00 GMT, the AUD/USD is trading .6619, down 0.0025 or -0.37%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $65.85, up $0.12 or +0.19%.

Short-term, the AUD/USD may be in a position to rally following Thursday’s closing price reversal bottom. However, the long-term still favors the U.S. Dollar because the Federal Reserve is expected to raise rates more aggressively than the Reserve Bank of Australia (RBA).

In economic news, the manufacturing sector in Australia continued to expand in September, and at a fractionally higher pace, the latest survey from S&P Global revealed on Friday with a Manufacturing PMI score of 53.9.

That’s up slightly from 53.8 in August, and it move further above the boom-or-bust line of 50 that separates expansion from contraction.

The survey also showed that the Services PMI improved from 50.2 in August to 50.4 in September, while the composite PMI rose from 50.2 to 50.8.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, Thursday’s closing price reversal bottom suggests momentum may be shifting to the upside. A trade through .6747 will change the main trend to up.

Taking out .6671 will confirm the closing price reversal bottom and could trigger the start of a 2 to 3 day counter-trend rally. A trade through .6574 will negate the closing price reversal bottom, and signal a resumption of the downtrend.

The minor range is .6747 to .6574. Its pivot at .6661 is the nearest resistance.

On the upside, the major resistance is a long-term 50% level at .6759. On the downside, the nearest support target is .6464.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at .6661 is likely to determine the direction of the AUD/USD on Friday.

Bearish Scenario

A sustained move under .6660 will indicate the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into .6574. Taking out this level could trigger the start of an acceleration to the downside with .6464 the next target.

Bullish Scenario

A sustained over .6661 will signal the presence of buyers. Taking out .6671 will confirm the closing price reversal bottom. This will shift momentum to the upside and could trigger an acceleration into the main top at .6747, followed by the major 50% level at .6759.

For a look at all of today’s economic events, check out our economic calendar.