The Week Ahead – Central Bank Chatter, Evergrande, and a Busy Economic Calendar in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 1st October. In the week prior, 39 stats had also been in focus.

For the Dollar:

Core durable goods orders for August kicks things off on Monday.

The focus will then shift to consumer confidence figures on Tuesday. We have seen market sensitivity to consumer confidence heightened in recent months.

On Thursday, the focus will then shift to final GDP numbers for the 2nd quarter and weekly jobless claims. Barring a marked revision to the GDP numbers, expect the jobless claims to be key.

At the end of the week, inflation, personal spending, and ISM Manufacturing PMI figures will also influence.

On the monetary policy front, we will expect increased sensitivity to FOMC member chatter in the week. FED Chair Powell and a number of FOMC members are scheduled to speak in the week.

In the week ending 24th September, the Dollar Spot Index rose by 0.14% to 93.327.

For the EUR:

It’s a relatively busy week on the economic data front.

German consumer sentiment and unemployment figures will be in focus on Tuesday and Thursday.

Consumer spending from both France and Germany will also draw interest on Tuesday and Friday.

Manufacturing PMI figures for Italy and Spain, and finalized PMIs for France, Germany, and the Eurozone wrap things up on Friday.

With inflation still a key area of interest, prelim member state and Eurozone inflation figures will also influence in the week.

On the monetary policy front, ECB President Lagarde is also scheduled to speak in the week. Expect any chatter on the economic outlook or monetary policy to move the dial.

For the week, the EUR fell by 0.04% to $1.1720.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Key stats include 2nd quarter GDP and finalized manufacturing PMIs due out on Thursday and Friday.

Expect any revision to prelim figures to influence.

On the monetary policy front, BoE Governor Bailey is due to speak on Wednesday. Following the BoE’s hawkish guidance last week, there will be plenty of interest in the Governor’s speech.

The Pound ended the week down by 0.45% to $1.3679.

For the Loonie:

It’s yet another quiet week ahead on the economic calendar.

RMPI figures will be in focus on Thursday ahead of GDP numbers on Friday.

Expect the GDP numbers to have a greater impact in the week. Much will depend on market risk sentiment, however.

The Loonie ended the week up 0.88% to C$1.2652 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week.

Retail sales figures due out on Tuesday will be the key stat of the week. On Thursday, private sector credit figures will also influence, however.

Away from the economic calendar, updates on government plans vis-à-vis lockdown measures will also be key, however.

The Aussie Dollar ended the week down by 0.23% to $0.7262.

For the Kiwi Dollar:

It’s another quiet week ahead.

Economic data is limited to business confidence figures due out on Thursday.

With the markets looking at the impact of the latest lockdown measures, expect interest in the numbers.

Key, however, will be updates from the New Zealand government on any plans to reopen.

The Kiwi Dollar ended the week down by 0.36% to $0.7015.

For the Japanese Yen:

Industrial production and retail sales figures will draw interest on Thursday.

Of greater significance, however, will be 3rd quarter Tankan survey numbers due out on Friday.

The Japanese Yen fell by 0.73% to ¥110.97 against the U.S Dollar.

Out of China

Private sector activity is back in focus.

NBS manufacturing and non-manufacturing PMIs along with the all-important Caixin Manufacturing PMI will test market risk sentiment on Thursday.

Another set of weak numbers will likely weigh heavily on riskier assets.

The Chinese Yuan ended the week flat at CNY6.4662 against the U.S Dollar.

Geo-Politics

Iran, China, and Russia remain the main areas of interest for the markets. News updates from the China, in particular, will need monitoring following last week’s holiday.

The Weekly Wrap – Economic Data, Monetary Policy, and Evergrande Delivered a Choppy Week

The Stats

It was a quieter week on the economic calendar, in the week ending 24th September.

A total of 39 stats were monitored, which was down from 61 stats in the week prior.

Of the 39 stats, 15 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There was just 1 stat that was in line with forecasts in the week.

Looking at the numbers, 10 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 29 reflected a deterioration from previous.

For the Greenback, monetary policy divergence delivered support in the week. In the week ending 24th September, the Dollar Spot Index rose by 0.09% to 93.281. In the previous week, the Dollar had risen by 0.66% to 93.195.

Out of the U.S

A quiet start to the week left the markets on hold ahead of Wednesday’s FOMC policy decision and projections.

Stats were limited to housing sector numbers that had a muted impact on the Dollar and beyond.

On Wednesday, the FED left policy unchanged as anticipated. The markets had expected a firm timeline on tapering, which didn’t materialize, however. While there were no fixed timelines, the projections revealed a divided camp on the interest rate front, with some pointing to rate hikes from 2022.

It was good enough to deliver Dollar support as central banks elsewhere shifted back due to the Delta variant.

On Thursday, economic data pegged back the Greenback, with the stats skewed to the negative.

In the week ending 17th September, initial jobless claims climbed from 335k to 351k.

Prelim private sector PMIs pointed to softer growth, albeit marginally.

In September, the Manufacturing PMI fell from 61.1 to 60.5, with the Services PMI declining from 55.1 to 54.4.

FED Chair Powell wrapped things up at the end of the week, with the FED Chair looking to soften market expectation of rate hikes near-term.

Out of the UK

It was a busy week.

On the economic data front, CBI Industrial Trend Orders rose from 18 to 22 in September.

The numbers had a muted impact on the Pound, however, with the BoE policy decision in focus.

Private sector PMIs came in softer in September, according to prelim figures, which pegged the Pound back.

The Manufacturing PMI fell from 60.3 to 56.3, with the Services PMI declining from 55.0 to 54.6.

In spite of weak numbers, the BoE was in action later in the day, delivering strong Pound support.

While leaving policy unchanged, the MPC noted that there was a stronger case for a rise in interest rates.

In the week, the Pound fell by 0.45% to end the week at $1.3679. In the week prior, the Pound had fallen by 0.71% to $1.3741.

The FTSE100 ended the week up by 1.26%, reversing a 0.93% loss from the previous week.

Out of the Eurozone

Private sector PMIs and German business sentiment were in focus, with the stats skewed to the negative.

In September, the French Manufacturing PMI fell from 57.5 to 55.2, with the Services PMI down from 56.3 to 56.0.

Germany’s Manufacturing PMI declined from 62.6 to 58.5, with the Services PMI falling from 60.8 to 56.0.

As a result, the Eurozone’s Manufacturing PMI fell from 61.4 to 58.7, and the Services PMI down from 59.0 to 56.3.

Germany’s IFO Business Climate Index fell from 99.6 to 98.8, with the Current Assessment sub-index down from 101.4 to 100.4. The Business Expectations sub-index declined from 97.5 to 97.3.

For the week, the EUR slipped by 0.04% to $1.1720. In the week prior, the EUR had fallen by 0.75% to $1.1725.

The CAC40 rallied by 1.04%, with the DAX30 and the EuroStoxx600 ending the week with up by 0.27% and 0.31% respectively.

For the Loonie

Retail sales were in focus in the 2nd half of the week.

In July, core retail sales fell by 1.0%, with retail sales down 0.6%. Core retail sales had risen by 4.7% in June, with retail sales having increased by 4.2%.

While the stats were Loonie negative, rising oil prices delivered support.

In the week ending 24th September, the Loonie rose by 0.88% to C$1.2752. In the week prior, the Loonie had fallen by 0.57% to C$1.2764.

Elsewhere

It was yet another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 0.45% to $0.7262, with the Kiwi Dollar ending the week down by 0.36% to $0.7015.

For the Aussie Dollar

There were no material stats to provide direction, leaving the RBA meeting minutes in focus.

Renewed lockdown measures supported the RBA’s view that there would be no rate hike until 2024.

The minutes did note, however, that the Delta variant impact was likely to be temporary, however.

For the Kiwi Dollar

Consumer sentiment and trade data were in focus, with the stats Kiwi Dollar negative.

In the 3rd quarter, the Westpac Consumer Sentiment Index fell from 107.1 to 102.7. While down, the decline was modest when compared with the impact of the first lockdown on sentiment.

A surge in imports led to a record trade deficit in August.

Month-on-month, the trade deficit widened from NZ$397m to NZ$2,144m. Compared with August 2020, the deficit widened from NZ$1,100m to $2,940m.

For the Japanese Yen

In August, core consumer prices were unchanged, year-on-year, after having fallen by 0.2% in July.

Service sector activity saw a softer contraction in September, which was also good news. The Services PMI rose from 43.5 to 47.4. Manufacturing sector activity did see slower growth, however, with the PMI falling from 52.7 to 51.2.

On the monetary policy front, the BoJ went largely unnoticed, with the September hold on monetary policy.

The Japanese Yen fell by 0.73% to ¥110.73 against the U.S Dollar. In the week prior, the Yen had risen by 0.01% to ¥109.93.

Out of China

There were no major stats in a shortened week.

On the policy front, the PBoC left loan prime rates unchanged, which was in line with expectations.

In the week ending 24th September, the Chinese Yuan was unchanged at CNY6.4662. In the week prior, the Yuan had ended the week down by 0.34% to CNY6.4661.

The CSI300 and the Hang Seng ended the week down by 0.13% and by 2.92% respectively.

Dollar Climbs as Evergrande Uncertainty Percolates

China Evergrande Group owes $305 billion and has run short on cash, missing a Thursday deadline for paying $83.5 million and leaving investors questioning whether it will make the payment before a 30-day grace period expires. A collapse of the company could create systemic risks to China’s financial system.

The safe-haven dollar had its biggest one-day percentage drop in about a month on Thursday after Beijing injected new cash into the financial system and Evergrande announced it would make interest payments on an onshore bond, boosting risk sentiment.

The offshore Chinese yuan weakened versus the greenback at 6.4641 per dollar.

The decline came a day after the greenback was lifted by Wednesday’s announcement from the U.S. Federal Reserve that it will likely begin to trim its monthly bond purchases as soon as November and flagged interest rate increases may follow suit sooner than expected as the central bank moves away from its pandemic crisis policies.

“We are in one of the situations, and this doesn’t always happen, where the dollar is the beneficiary of multiple ideas,” said Joseph Trevisani, senior analyst at FXStreet.com.

“The U.S. economy does look better than most of its competitors, there is lingering fear out there over Evergrande and what else is out there in the rather untransparent Chinese economy and political system, plus the Fed appears finally ready.”

The dollar index rose 0.237%, with the euro down 0.2% to $1.1713.

Kansas City Fed President Esther George said the U.S. labor market has already met the central bank’s test to pare its monthly bond purchases, and the discussion should now turn to how its massive bondholding could complicate the decision on when to hike rates.

Cleveland Fed President Loretta Mester echoed the sentiment for a tapering this year, and said the central bank could start raising rates by the end of next year should the job market continue to improve as expected.

In prepared remarks in a listening session with a wide swath of economic players, Fed Chair Jerome Powell did not elaborate on his own economic or monetary policy outlook, which he had outlined at the close of the two-day Fed meeting on Wednesday.

Sterling weakened a day after hawkish comments from the Bank of England on Thursday pushed the pound to its biggest one-day percentage gain since Aug. 23.

The Japanese yen weakened 0.43% versus the greenback at 110.77 per dollar, while Sterling was last trading at $1.3666, down 0.36% on the day.

Cryptocurrencies slumped after China’s most powerful regulators increased the country’s crackdown on the digital assets, with a blanket ban on all crypto transactions and crypto mining.

Bitcoin, the world’s largest cryptocurrency, last fell 5.89% to $42,256.47.

Smaller coins, which generally move in tandem with bitcoin, also dropped. Ether last fell 8.08% to $2,899.10 while XRP last fell 7.2889413% to $0.93.

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

(Reporting by Chuck Mikolajczak; Editing by Dan Grebler and Sonya Hepinstall)

USD/CAD Daily Forecast – Strong Oil Provides Some Support To Canadian Dollar

Canadian Dollar Tries To Rebound Against U.S. Dollar

USD/CAD is currently trying to settle back below the support at 1.2690 while the U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index has recently made an attempt to settle above the resistance level at 93.40 but failed to develop sufficient upside momentum. In case the U.S. Dollar Index manages to settle above this level, it will head towards the resistance near the yearly highs at 93.75 which will be bullish for USD/CAD.

Today, U.S. reported that New Home Sales increased by 1.5% month-over-month in August compared to analyst consensus which called for growth of just 0.5%.

Foreign exchange market traders also kept an eye on the developments in U.S. government bond markets as Treasury yields moved to multi-week highs. Currently, the yield of 10-year Treasuries is trying to settle above 1.45%. In case this attempt is successful, it will continue to move towards the psychologically important 1.50% level which will be bullish for the U.S. dollar.

While the U.S. dollar is supported by higher Treasury yields, its gains against Canadian dollar are limited as WTI oil moved to new highs and made an attempt to settle above the $74 level.

Technical Analysis

usd cad september 24 2021

USD to CAD has recently made an attempt to settle above the resistance at 1.2730 but lost momentum and declined below the 20 EMA at 1.2690. The nearest support level for USD to CAD is located at 1.2650.

In case USD to CAD declines below the support at 1.2650, it will head towards the next support level which is located at the 50 EMA near 1.2625. A successful test of this level will push USD to CAD towards the support at 1.2590.

On the upside, USD to CAD needs to get back above the 20 EMA to have a chance to develop upside momentum in the near term. The next resistance level is located at 1.2710. If USD to CAD manages to settle above this level, it will move towards the resistance at today’s highs at 1.2730.

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

USD/CAD: Loonie Snaps Three-Day Winning Streak as Evergrande Uncertainty Supports Greenback

The Canadian dollar snapped its three-day winning streak against its U.S. counterpart on Friday as concerns about the future of beleaguered property developer Evergrande Group have rattled markets around the globe, helping the greenback rebound from its steep descent.

After its biggest drop in nearly a month overnight, the dollar enjoyed a brief pause as questions lingered about developments involving property developer China Evergrande Group.

Due to its huge debt, China Evergrande Group has run short on cash, missing a deadline for making payments of $83.5 million on Thursday, making investors anxious whether it will make the payment within the 30-day grace period.

China’s financial system would face systemic risks if the company collapses. That provided greenback’s safe-haven appeal with a further boost. However, at the time of writing the dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.10% lower at 93.370.

“Next week, Canada sees the release of July’s GDP numbers. Growth has been the missing piece in an otherwise very robust data-flow for CAD, as a surprise 2Q contraction in activity was the main reason for the Bank of Canada to pause tapering,” noted Francesco Pesole, FX Strategist at ING.

“Still, even if we see a below-consensus GDP read, the very encouraging signals coming from the jobs market and higher inflation should remain enough to convince the BoC to start tapering again in October. We think CAD may stay among the best performers within the pro-cyclical space next week, although its fate remains very much tied to developments in the Evergrande saga.”

The USD/CAD pair rose to 1.273 today, up from Thursday’s close of 1.2655. The Canadian dollar lost over 1.2% last month and further depreciated over 0.6% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge higher on supply concerns. U.S. West Texas Intermediate (WTI) crude futures were trading 0.59% higher at $73.71 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

Last but not the least, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of at least one rate hike next year. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

“The CAD was one of the few major currencies that gained ground against the USD over the course of the week with the backdrop of financial troubles at Evergrande, China’s second-largest property developer, and Powell’s hawkish turn at his post-announcement presser offset by a fifth consecutive rise in crude oil prices and generally higher Gov of Canada yields versus its G10 counterparts,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“Canada’s federal election on Monday came and went with limited impact on the CAD as the status quo of a Liberal minority government propped up by the NDP was maintained. The stimulative policy is set to continue for the foreseeable future while certain Liberal plans like pushing for $10/day childcare could unlock an important economic impulse—although there remains much to be done on this front legislatively.”

Silver Price Daily Forecast – Test Of Support At $22.10

Silver Is Under Pressure Ahead Of The Weekend

Silver has recently made an attempt to settle below the support at $22.10 while the U.S. dollar gained ground against a broad basket of currencies.

The U.S. Dollar Index managed to gain significant upside momentum and moved to the resistance level at 93.40. Treasury yields managed to get to multi-week highs which was bullish for the U.S. dollar and bearish for precious metals. In case the U.S. Dollar Index manages to settle above the resistance at 93.40, it will move towards the next resistance level at 93.75 which will be bearish for silver and gold price today.

Meanwhile, gold continues its attempts to settle below the support level at $1750. It looks that gold gets some support from safe-haven buying, but it remains to be seen whether it will be sufficient enough to push gold back above $1750. In case gold finally manages to settle below the support at $1750, it will head towards the next support level at $1720 which will be bearish for silver.

Gold/silver ratio received strong support near the 77 level and rebounded above the 78 level. In case gold/silver ratio gets to the test of the 79 level, silver will find itself under more pressure.

Technical Analysis

silver september 24 2021

Silver has recently tried to settle below the support at $22.10 but failed to develop sufficient downside momentum and rebounded towards $22.30.

In case silver finally manages to settle below $22.10, it will head towards the next support level which is located at $21.90. A move below this level will push silver towards the support at $21.65.

On the upside, silver needs to settle back above $22.30 to have a chance to gain upside momentum in the near term. The next resistance level is located at $22.60.

If silver gets above $22.60, it will move towards the resistance at $22.90. A successful test of the resistance at $22.90 will open the way to the test of the next resistance level which is located at $23.20.

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

Will Biden’s Neo-Populist Economic Doctrine Support Gold?

Inflation, bond yields, monetary policy… that’s all interesting and crucial to understand trends in the gold markets – but, hey, what’s up in politics? A lot has happened recently on this front. In particular, last month, the world was shocked by the chaotic withdrawal of US troops from Afghanistan. The messy pullover and the quick takeover of the country by the Taliban is not only the end of Biden’s honeymoon but also America’s great failure. Some analysts even say that the fall of Kabul is another Saigon time for the US. Indeed, it goes without saying that the collapse in Afghanistan is a huge blow to America’s reputation. So, it could weaken the faith in Uncle Sam and its currency, which could be positive for gold in the long run.

However, the end of the US mission in Afghanistan doesn’t pose any direct threats to America (although terrorism could thrive under the Taliban regime) or to the greenback. So, I don’t expect any substantial, long-lasting moves in gold prices (always remember that geopolitical events cause only short-lived fluctuations, if any).

Another recent important development in the US policy was that the Senate passed a $1 trillion bipartisan infrastructure bill, which is a big step in pushing Biden’s economic agenda through Congress. The economic effect will probably be smaller than expected, as public stimulus rarely works as intended. So, I don’t expect any material impact on gold prices, especially given that this additional government spending has already been priced in.

However, I would like to point out that Biden has scaled back his infrastructure plans from $2.2 trillion and agreed to spend these funds over a longer period. It means that the US fiscal policy, although still unprecedentedly easy, is normalizing somewhat (see the chart below), at least compared to Democrats’ initial huge plans (however, they are still working on a budget resolution that would allow them to approve a complementary $3.5 trillion spending plan). A normalization of the fiscal policy is bad for gold prices, especially when coupled with the Fed’s tightening cycle.

Let’s step back — it turns out that it’s quite fruitful to look at Biden’s economic agenda from a bit broader perspective. It becomes clear that Biden – despite his hatred for Trump – actually continues Trumponomics. Nouriel Roubini calls Biden’s doctrine “neo-populist” and sees the paradox in the fact that it “has more in common with Trump’s policies than with those of Barack Obama’s administration, in which the current president previously served”.

Indeed, every president from Bill Clinton to Obama favored trade liberalization and a strong dollar while respecting the Fed’s independence. They were also understanding the importance of the moderate fiscal policy (although the practice differed, especially after the financial crisis of 2007-9). They were far from being laissez-faire advocates, but at least they didn’t question the economic orthodoxy.

Then Trump stepped in, inaugurating a trade war with China, and imposing tariffs on goods from other countries as well. He also questioned the Fed’s actions, which supported a weak greenback and ballooned fiscal deficits even before the epidemic started.

Biden’s rhetoric is softer and his actions less erratic, but he has maintained Trump’s tariffs, pursuing similar nationalist and protectionist trade policy. He even widened the already large budget deficit, continuing the spending spree financed by public debt. Although Biden doesn’t openly favor a weak dollar, the current administration is far from pursuing a strong-dollar policy. He also supported large direct cash transfers to citizens that Trump started in response to the pandemic. Last but not least, Biden fights with Big Business, introducing some anti-monopoly policies.

What does it all mean for the gold market? Well, the continuation of neo-populist economic doctrine and shifting away from sound economics (I wrote about this earlier this year) implies generally looser monetary and fiscal policies. Larger debts create a risk of a debt crisis, while downplaying the inflationary pressures (as for populists, price stability is less important than employment gains, rising wages, or reducing inequalities) increases the odds of inflation crisis or even stagflation (big government and huge indebtedness could hamper the pace of GDP growth).

As we know from Latin America, the rules of populists and MMT-like policies never end well. And, as we know from the 1970s, constant stimulation of the economy (because there is still some slack) and neglecting the dangers of inflation could be disastrous. So, Bidenomics should be generally supportive of gold.

Having said that, investors should remember that many more factors influence gold prices than just the President’s actions. A part of Biden’s presidency will coincide with the economic expansion from the pandemic recession and normalization of the interest rates that will likely create downward pressure on the yellow metal.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

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

Arkadiusz Sieron, PhD
Sunshine Profits: Effective Investment through Diligence & Care.

 

Take Five: “Auf Wiedersehen Merkel, hallo…?”

1/GERMANY’S ‘MUTTI’ BOWS OUT

Sunday’s German election is a close call and stakes for Europe’s biggest economy couldn’t be higher. After 16 years of steady, centre-right leadership, Chancellor Angela Merkel will be stepping down.

Polls suggest the centre-left Social Democrats (SPD) will form a coalition with the Greens and the liberal FDP, dubbed the traffic light alliance because of the parties’ red, green and yellow colours.

But the number of undecided voters is at its highest in recent memory, so other outcomes are possible. The SPD’s Olaf Scholz is the voters’ choice to succeed Merkel, but coalition talks could take weeks, even months. Initial market reactions to the election outcome could prove premature.

-German candidates clash in last TV debate before vote as SPD lead narrows

2/DATA DIVE

The Federal Reserve has cut its 2021 U.S. growth forecasts and projects a 5.9% rate, versus 7% previously. Upcoming data will show if the coronavirus continues to undermine the recovery.

Consumer confidence in September is on tap, after August readings came in well short of estimates, dropping to a six-month low.

Markets will get a fresh view on the housing market in the form of data on home prices and home sales, while the personal consumption expenditures (PCE) index will offer a glimpse of inflation. A Reuters poll forecasts a 3.7% annual rise in the Fed’s favourite inflation gauge, a touch above 3.6% in July.

-Fed signals bond-buying taper coming ‘soon,’ rate hike next year

3/CAUTION! FRAGILE CHINA

The woes of debt-saddled Chinese developer Evergrande are gnawing at global markets. Unsurprising because the property sector has a bearing, direct or indirect, on a quarter of the country’s huge economy.

The developer has more payment deadlines next week, but the bigger picture, the sheer size of the Chinese economy, implies the risk is high of a global growth hit — commodity prices, emerging market currencies and even European elevator-makers have all felt the heat.

BIS data shows Chinese banks had around $1.6 trillion of cross-border liabilities as of early 2021. Given their exposure to real estate, through mortgage loans and lending to property companies, any implosion could send ripples worldwide.

-China’s Evergrande problem today may dent global growth tomorrow

4/HIGH HICP

The ECB reportedly expects inflation to hit 2% by 2025. Despite analysts’ scepticism, surging power prices and the seep-through elsewhere, including into inflation expectations, could mean it may not be too far off that mark.

In that light, advance readings of German and euro zone HICP — the harmonised index of consumer prices used by the ECB — due Thursday and Friday respectively — are of interest. German HICP hit a 13-year high of 3.4% in August, while consumer inflation at 3.9% was the highest since 1993.

Euro area consumer inflation expectations have doubled this year, surveys suggest, while bloc-wide HICP hit 3% in August, the highest since 2012. Power price rises have already impacted headline readings and September may show another increase.

– ECB braces for sticky inflation; eyes end of emergency stimulus, sources say

5/PICKING A PREMIER

Japan’s ruling party votes for its new leader on Wednesday, with the victor set to be the next prime minister. And it’s a tight race.

Of the four candidates, vaccine minister Taro Kono is the ostensible frontrunner, while former foreign minister Fumio Kishida is the challenger. Sanae Takaichi and Seiko Noda, also former ministers, are each vying to be the first woman in the top job but are considered long shots.

Kono is favoured by the Liberal Democratic Party’s rank-and-file, but his reputation as a maverick makes party veterans wary. Kishida is more traditional, but is hobbled by a bland image.

Should Kono not win an outright majority, the top two will contest a run-off, where Kishida is expected to have an edge.

Investors seem to be betting on Kono. Renewable energy and office tech shares that could benefit from his policies have outperformed shares in medical services, where Kishida advocates higher spending.

-Economic policy stances of candidates to be Japan’s next PM

-Investors raise bets on Kono in Japan leadership race

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

(Reporting by Sujata Rao, Dhara Ranasinghe and Marc Jones in London; Lewis Krauskopf in New York and Kevin Buckland in Tokyo; Compiled by Sujata Rao; Editing by Hugh Lawson)

EUR/USD Daily Forecast – Resistance At 1.1750 Stays Strong

U.S. Dollar Tries To Rebound Against Euro

EUR/USD faced resistance at 1.1750 and pulled back while the U.S. dollar gained some ground against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get back above the resistance at 93.10 and is trying to develop additional upside momentum. In case this attempt is successful, it will head towards the next resistance at 93.40 which will be bearish for EUR/USD.

Today, foreign exchange market traders will focus on Ifo Business Climate report from Germany. The report is expected to show that Business Climate declined from 99.4 in August to 98.9 in September. In the U.S., New Home Sales are projected to increase by 0.5% month-over-month in August.

It should be noted that Treasury yields have moved to multi-week highs, which may provide additional support to the U.S. dollar, although it remains to be seen whether traders are ready for big moves ahead of the weekend.

Technical Analysis

eur usd september 24 2021

EUR/USD has recently made another attempt to settle above the resistance level at 1.1750 but failed to develop sufficient upside momentum and pulled back. This resistance level has already been tested many times in recent trading sessions and proved its strength.

In case EUR/USD manages to settle above 1.1750, it will gain additional upside momentum and get to the test of the next resistance level which is located at the 20 EMA at 1.1765. A successful test of the resistance at the 20 EMA at 1.1765 will open the way to the test of the next resistance level at 1.1775. If EUR/USD gets above this level, it will move towards the resistance at the 50 EMA at 1.1795.

On the support side, the nearest support level for EUR/USD is located at 1.1720. If EUR/USD declines below this level, it will move towards the support at 1.1690. A move below this level will push EUR/USD towards the support at 1.1660. In case EUR/USD manages to settle below the support at 1.1660, it will head towards 1.1630.

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

GBP/USD Daily Forecast – British Pound Is Mostly Flat Ahead Of The Weekend

U.S. Dollar Stabilized After Yesterday’s Sell-Off

GBP/USD is currently trying to settle above the resistance at 1.3710 while the U.S. dollar is gaining some ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to settle back above the resistance at 93.10. In case this attempt is successful, the U.S. Dollar Index will move towards the next resistance level at 93.40 which will be bearish for GBP/USD.

Yesterday, the Bank of England left the interest rate unchanged and maintained the current program of asset purchases. UK Manufacturing PMI declined from 60.3 in August to 56.3 in September compared to analyst consensus of 59. UK Services PMI decreased from 55 to 54.6 while analysts expected that it would remain unchanged at 55.

Today, foreign exchange market traders will have a chance to take a look at New Home Sales report from U.S. Analysts expect that New Home Sales increased by 0.5% month-over-month in August after growing by 1% in July.

Traders will also keep an eye on the developments in U.S. government bond markets as Treasury yields have recently moved to multi-week highs. Currently, the yield of 10-year Treasuries is trying to settle above 1.45%. In case this attempt is successful, it will move towards the 1.50% level which will be bullish for the American currency.

Technical Analysis

gbp usd september 24 2021

GBP/USD continues its attempts to settle above the resistance level at 1.3710. In case GBP/USD manages to settle above this level, it will get to another test of the next resistance which is located at the 20 EMA at 1.3750.

A move above the 50 EMA will push GBP/USD towards the resistance at the 50 EMA at 1.3785. If GBP/USD gets above this level, it will head towards the resistance at 1.3800.

On the support side, a move below 1.3710 will open the way to the test of the support at 1.3690. In case GBP/USD manages to settle back below this level, it will move towards the support at 1.3665. A successful test of the support at 1.3665 will push GBP/USD towards the support at 1.3635.

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

Economic Data and Central Bank Chatter Put the EUR and the Dollar in Focus

Earlier in the Day:

It was relatively busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Japanese Yen were in action this morning.

For the Kiwi Dollar

Trade figures were in focus in the early hours.

In August, New Zealand’s trade deficit widened from NZ$397m to NZ$2,144m. Year-on-year, the deficit widened from NZ$1,100m to NZ$2,940m.

According to NZ Stats,

  • Imports rose by NZ$1.08bn, compared with August 2020, leading to a record monthly trade deficit.
  • Exports were little changed, falling by NZ$42m.
  • Vehicles, parts, & accessories imports were up NZ$415m, with mechanical machinery & equipment up NZ$223m.
  • Petroleum & petrol product imports increased by NZ$207m.

The Kiwi Dollar moved from $0.70713 to $0.70704 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.11% to $0.7077.

For the Japanese Yen

In August, core consumer prices remained unchanged in August, year-on-year, which was in line with forecasts. Core consumer prices had fallen by 0.2%, year-on-year, in July.

Of greater significance were prelim private sector PMIs.

In September, the Services PMI rose from 43.5 to 47.4, while the Manufacturing PMI declined from 52.7 to 51.2.

The Japanese Yen moved from ¥110.402 to ¥110.408 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.05% to ¥109.380 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was up by 0.23% to $0.7312.

The Day Ahead

For the EUR

It’s a quieter day ahead on the economic calendar. Business sentiment figures for Germany will be in focus in the early part of the European session.

Following the disappointing PMI numbers from Thursday, a larger than expected decline would test support for the EUR.

At the time of writing, the EUR was up by 0.07% to $1.1747.

For the Pound

It’s a particularly quiet day ahead on the economic calendar.

There are no material stats due out of the UK to provide the Pound with direction.

Following the BoE’s more hawkish stance on Thursday, risk sentiment would need to deteriorate to weaken the Pound.

At the time of writing, the Pound was up by 0.12% to $1.3736.

Across the Pond

It’s a relatively quiet day ahead. Key stats include new home sales figures, which should have a muted impact on the Dollar.

FED Chair Powell and other FOMC member are scheduled to speak later in the day, however, and could move the dial.

At the time of writing, the U.S Dollar Spot Index was down by 0.02% to $93.063.

For the Loonie

It’s a particularly quiet day ahead for the Loonie. There are no material stats due out of Canada later today.

The lack of stats will leave the Loonie in the hands of market risk sentiment and crude oil prices.

At the time of writing, the Loonie was up by 0.08% to C$1.2645 against the U.S Dollar.

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

Fed’s Powell Opens Door to Tougher Regulations as Renomination Decision Looms

At a press conference on Wednesday following the Fed’s latest meeting at which policymakers kept interest rates near zero as the U.S. economy continues to heal from the COVID-19 pandemic, Powell was unequivocal when asked how much he would defer to a new vice chair for supervision expected to be named this fall to oversee bank regulation.

“I respect that authority, I respect that’s the person who will set the regulatory agenda going forward. I would accept that and furthermore, it’s only appropriate for a new person to come in and look at the current state of regulation and supervision and suggest appropriate changes,” Powell said. “I welcome that.”

That viewpoint could offer President Joe Biden an opening to pursue a package deal in which Powell, a Republican, remains chair and current Fed Governor Lael Brainard, a Democrat and potential rival for the leadership who is favored by some progressives, takes over as the Fed’s regulation czar when the slot opens up at the end of October.

The public declaration could work in his favor given Powell, a former private equity executive and investment banker, has been regarded by some as too close to Wall Street and insufficiently tough on banks as he and current Vice Chair Randal Quarles, voted to ease regulations.

“I think he is likely the best politician who has ever been Federal Reserve chair,” said Jeff Hauser, founder of the progressive Revolving Door project, which nevertheless opposes Powell’s renomination in favor of Brainard. “He’s genuinely good at it.”

Powell’s gambit on regulation may also help bolster his credentials at a time when the central bank is under the microscope as the White House mulls his possible nomination for reappointment before his term expires in February.

TRADING FUROR

On paper, Powell remains the likely candidate for a second term. He enjoys bipartisan support in Congress, is reportedly backed by his predecessor as Fed chief and current U.S. Treasury Secretary Janet Yellen, and revamped the Fed’s approach to monetary policy last year to put greater priority on a broad and inclusive maximum employment goal, which was heralded by many supporters of Biden, including progressive, labor-focused economists.

But headaches, such as the revelation last week that two Federal Reserve regional bank presidents had engaged in controversial stock trades, leave little room for major error, particularly as Democratic Senator Elizabeth Warren, a key lawmaker, has demanded swift action to establish new ethics rules that would bar such dealings in the future.

“We need to make changes and we are going to do that,” Powell also said at the press conference as he expressed displeasure at the behavior of Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren.

“In terms of having confidence and that sort of thing, I think, no one is happy,” Powell said. Others remained less convinced by his commitment to comprehensive action.

“I think Chair Powell’s response to this trading scandal is a failure of leadership,” said Dennis Kelleher, president and chief executive officer of Better Markets, an advocacy group pushing for tighter financial regulation, who was a member of the transition team for then-President-elect Biden and Vice President-elect Kamala Harris.

“He’s not actually making changes regarding their outrageous conduct, he’s asked the staff to review the code of conduct for changes in the future.”

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

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

Dollar Slumps as Risk Appetite Rebounds

Investors’ risk appetite improved after Beijing injected fresh cash into its financial system ahead of an $83.5 million bond coupon by embattled property giant Evergrande, at risk of becoming one of the world’s largest-ever corporate defaults.

Worries about Evergrande’s payment obligations and what systemic risks to China’s financial system the property giant’s difficulties pose have weighed on global financial risk sentiment in recent sessions.

“Commodity currencies are broadly higher while havens are weaker, leaving the USD trading generally lower after a firm close following the FOMC (Federal Open Market Committee),” Shaun Osborne, chief currency strategist at Scotiabank, said in a note.

The U.S. Dollar Currency Index, which measures the greenback against a basket of six rivals, was 0.5% lower at 93.037. The index, which had risen 0.25% on Wednesday, was on pace for its biggest daily percentage drop in a month but remains close to the near 10-month high touched in late August.

The offshore Chinese yuan strengthened versus the greenback at 6.4599 per dollar.

The dollar found little support from data that showed the number of Americans filing new claims for jobless benefits unexpectedly rose last week amid a surge in California.

Thursday’s improved mood boosted risk-sensitive commodity currencies, with the Australian dollar rising 0.9% and the New Zealand dollar up 1.0%.

The improved risk-appetite was reflected in Wall Street’s major equity indexes, with the S&P 500 on track for a gain of more than 1% and its largest two-day percentage gain since late July.

On Wednesday, the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected.

While positive for the dollar, the boost from the Fed’s announcement was undercut by hawkish messages from several central banks in Europe, and as Norway became the first developed nation to raise rates.

Norway’s crown jumped to a 3-1/2 month high versus the euro on Thursday after the central bank raised its benchmark interest rate and said more hikes will follow in the coming months.

Sterling extended its rise on Thursday after the Bank of England said two of its policymakers had voted for an early end to pandemic-era government bond buying and markets brought forward their expectations for an interest rate rise to March.

In emerging markets, the Turkish lira plummeted to a record low after a surprise interest rate cut of 100 basis points to 18% that came despite inflation hitting 19.25% last month

Meanwhile, bitcoin extended its recovery from a sharp fall earlier this week, rising 2.42% to a 3-day high of $44,642.78.

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

(Reporting by Saqib Iqbal Ahmed and Chuck Mikolajczak; Additional reporting Sujata Rao and Saikat Chatterjee in London and Tom Westbrook in Singapore; Editing by Bernadette Baum, Will Dunham and Hugh Lawson)

Stocks Surge, Dollar Sags as Investor Risk Appetite Expands

Wall Street’s S&P 500 surged well over 1% following solid gains for European markets.

MSCI’s gauge of stocks across the globe jumped 1.06%. As it gained for a third session, the index had recovered all its losses from Monday, when it posted its biggest percentage drop in two months.

Safe-haven trades faded after benefiting earlier in the week, with gold prices dropping.

“We are seeing markets rally on the premise that while the situation in China particularly with Evergrande is not going away, the outcome is not perhaps going to be as severe or prompt some form of contagion that was originally feared,” said Craig Fehr, investment strategist at Edward Jones.

“You combine that with the fact that the tone that the Fed struck yesterday at its meeting suggests that while a reduction in stimulus is certainly coming, the Fed is not particularly eager to start tightening policy dramatically in the near term.”

The Fed said on Wednesday it will likely begin reducing its monthly bond purchases as soon as November and signalled interest rate increases may follow more quickly than expected as the U.S. central bank’s turn from pandemic crisis policies gains momentum.

In Hong Kong, shares of debt-laden property group Evergrande jumped 18% ahead of a key debt payment deadline. Fears the group’s distress could spill into the broad economy helped spark an equity sell-off to start the week.

On Wall Street, the Dow Jones Industrial Average rose 544.68 points, or 1.59%, to 34,803, the S&P 500 gained 59.11 points, or 1.34%, to 4,454.75 and the Nasdaq Composite added 146.28 points, or 0.98%, to 15,043.13.

The pan-European STOXX 600 index rose 0.93%.

Norway’s central bank raised its benchmark interest rate and said it expects to hike again in December, joining a short but growing list of nations moving away from emergency-level borrowing costs. Norway’s crown strengthened to its highest level since mid-June versus the euro.

In other currency trading, the dollar index fell 0.492% after hitting a one-month high earlier, with the euro up 0.49% to $1.1743. The Japanese yen weakened 0.34% versus the greenback at 110.15 per dollar.

Sterling was last trading at $1.3743, up 0.87% on the day, after the Bank of England said two of its policymakers had voted for an early end to pandemic-era government bond buying and markets brought forward their expectations of an interest rate rise to March.

Benchmark 10-year notes last fell 21/32 in price to yield 1.401%, from 1.331% late on Wednesday. Key Euro area bond yields also climbed after the hawkish signals from major central banks.

Oil prices rose, supported by growing fuel demand and a draw in U.S. crude inventories as production remained hampered in the Gulf of Mexico after two hurricanes.

U.S. crude gained 1.59% to $73.38 per barrel and Brent was at $77.25, up 1.39% on the day.

Spot gold dropped 1% to $1,749.66 an ounce.

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

(Additional reporting by Sujata Rao in London and Alun John in Hong Kong; Editing by Hugh Lawson, Alex Richardson, Steve Orlofsky and Catherine Evans)

USD/CAD Daily Forecast – Canadian Dollar Gains Ground As WTI Oil Moves To New Highs

U.S. Dollar Is Under Pressure Against Canadian Dollar

USD/CAD is currently trying to settle below the support at 1.2650 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index settled below the support at 93.10 and made an attempt to settle below the 93 level. A move below the 93 level will push the U.S. Dollar Index towards the support at the 20 EMA at 92.85 which will be bearish for USD/CAD.

Today, U.S. reported that Initial Jobless Claims increased from 335,000 (revised from 332,000) to 351,000 while Continuing Jobless Claims grew from 2.71 million (revised from 2.67 million) to 2.85 million.

Foreign exchange market traders also had a chance to take a look at flash readings of PMI reports for September. Manufacturing PMI declined from 61.1 in August to 60.5 in September while analysts expected that it would grow to 61.5. Services PMI decreased from 55.1 to 54.4 compared to analyst consensus of 55. The reports put additional pressure on the American currency.

Meanwhile, Canadian dollar received support as WTI oil managed to get above the $73 level. Currently, WTI oil is trying to settle above $73.50. In case this attempt is successful, WTI oil will move towards the $74 level which will be bullish for commodity-related currencies, including Canadian dollar.

Technical Analysis

usd cad september 23 2021

USD to CAD settled below the 20 EMA at 1.2690 and is trying to settle below the next support level at 1.2650. In case this attempt is successful, USD to CAD will move towards the support at the 50 EMA at 1.2625.

A move below the support at the 50 EMA will open the way to the test of the next support level at 1.2590. If USD to CAD gets below this level, it will head towards the support at 1.2550.

On the upside, the previous support at the 20 EMA at 1.2690 will serve as the first resistance level for USD to CAD. In case USD to CAD gets back above this level, it will head towards the next resistance at 1.2710. A successful test of this level will push USD to CAD towards the resistance at 1.2730.

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

USD/CAD: Loonie Hits One-Week High on Firm Oil Prices, Better-Than-Expected Retail Sales

The Canadian dollar hit over a one-week high against its U.S. counterpart, strengthening for the third straight day on Thursday as oil prices jumped and retail sales data for July were better-than-expected.

Compared with expectations for a decline of 1.2%, retail sales in Canada dropped 0.6% to $55.8 billion in July, while advance estimates showed a 2.1% increase in August. That boosted confidence among investors.

“The Fed caused a lot of volatility in the foreign currency market yesterday. Indeed, the greenback momentarily climbed to a monthly high as Jerome Powell announced that he was considering a key rate hike next year. USD/CAD traded at 1.2796 before dropping significantly back to 1.2660 following lower volatility as well as renewed hope surrounding the situation with Chinese real estate giant Evergrande,” noted analysts at Laurentian Bank of Canada.

“Despite the decline in the barrel, the loonie is benefiting from the weaker US dollar and the fact that much of the financial community was long gamma before Powell’s speech. In technical analysis, the next support level for the USD/CAD price is at 1.2636.”

The USD/CAD pair fell to 1.2631 today, down from Wednesday’s close of 1.277. The Canadian dollar lost over 1.2% last month and further depreciated over 0.3% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge higher as U.S. oil inventories fell. U.S. West Texas Intermediate (WTI) crude futures were trading 0.89% higher at $72.87 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.47% lower at 93.020. The greenback has largely ignored the announcement by the Federal Reserve on Wednesday that it will soon cease supporting pandemic-related stimulus.

“A potentially “hawkish” FOMC plus concerns over resolution of the US debt ceiling that creates a macro risk-off event could combine to deliver some near-term tactical gains in DXY,” noted analysts at Citi.

“Ultimately, such gains should be faded as – (1) pace of any Fed taper is likely gradual and the Fed, ECB, BoJ, PBoC support risk sentiment well into 2022; and (2) any potential government shutdown beyond September 30th is likely to be temporary. A 91.28 – 93.44 range in DXY remains the base case though FOMC/potential government shutdown could briefly take DXY above the March 2021 high at 93.44 towards 94.50.”

However, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of at least one rate hikes next year. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Silver Price Daily Forecast – Silver Mixed As Treasury Yields Rise

Silver Is Mostly Flat Despite Weaker Dollar

Silver is currently trying to settle back below the support at $22.60 while the U.S. dollar is under strong pressure against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get below the support level at 93.10 and is trying to settle below the 93 level. In case this attempt is successful, the U.S. Dollar Index will move towards the 20 EMA at 92.85 which may provide some support to silver and gold price today.

It should be noted that weaker dollar has so far failed to provide material support to precious metals today as Treasury yields moved closer to multi-week highs. Currently, the yield of 10-year Treasuries is trying to settle above 1.37%. In case this attempt is successful, it will move towards the key resistance at 1.38% which will be bearish for silver.

Gold is testing the support level at $1750. If this test is successful, gold will gain additional downside momentum and move towards the support at $1720 which will be bearish for silver.

Meanwhile, gold/silver ratio managed to settle below 77.50 and is moving towards the 77 level. A move below this level will open the way to the test of the support at 76.55 which will be bullish for silver.

Technical Analysis

silver september 23 2021

Silver failed to settle above the resistance at $22.90 and is testing the support at $22.60. A successful test of this level will push silver towards the next support at $22.30.

In case silver settles below $22.30, it will move towards the support at $22.10 A move below this level will open the way to the test of the next support at $21.90.

On the upside, silver needs to settle above the resistance at $22.90 to have a chance to develop upside momentum in the near term. The next resistance level is located at $23.20. If silver gets above $23.20, it will move towards the 20 EMA at $23.35.

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

EURUSD Elliott Wave Cycles Look For A Support

However, the USD has seen some nice recovery already ahead of the event so it might have been priced in, thus any reversal may not be a surprise.

EURUSD is coming down from 1.1905, now approaching August levels after the FED press conference yesterday when USD bounced after some hawkish approach regarding tapering. Notice that drop from 1.1905 can even be counted in five waves so it’s a bearish trend, but again it may cause some rally in the short-term, in minimum three waves if channel resistance is broken. We still think pair will stabilize sooner or later.

EURUSD 4h Elliott Wave Analysis

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Fed Points to Tapering ‘soon’, BoE Meeting in Focus

King dollar hit its highest level in a month this morning before retreating, while gold extended losses. Despite the rebound witnessed across equity markets, sentiment remains shaky with caution in the air. The debt woes of China Evergrande Group are likely to remain on the minds of investors for the rest of the week. Other risk events to watch out for range from the Bank of England rate decision and Eurozone PMI surveys on Thursday to numerous speeches from Fed officials on Friday.

FOMC prepares markets for tapering

As widely expected, the Federal Reserve left monetary policy unchanged in September. Although no official announcement of tapering was made, Fed Chairman Jerome Powell said the central bank could begin cutting bond purchases as soon as November with the process completed by mid-2022.

GDP growth for 2021 was revised lower to 5.9% from 7.0% in its June 2021 projections but growth in 2022 and 2023 was upwardly revised. Inflation is still described as “largely transitory” and was adjusted significantly higher once again.

But the focus was all on the dot plot for Fed officials’ interest rate projections. Back in June, seven officials were forecasting a rate rise in 2022. However, the latest dot plot shows nine officials, resulting in a split 9-9 on whether rates will be hiked next year. While this hawkish shift is likely to fuel rate hike expectations, it points to the market being much more sensitive to US economic data going forward.

After kissing the monthly high at 93.52, the Dollar Index slipped this morning with prices approaching the 93.20 level as of writing. Although the Fed meeting is done and dusted, the next few days could see increased volatility due to the US weekly initial jobless claims and numerous speeches from Federal Reserve officials.

BoE meeting in focus

The major risk event for sterling will be the Bank of England policy meeting this afternoon. Markets widely expect the central bank to leave monetary policy unchanged. However, much attention may be directed to what the bank has to say about the recent spike in inflation after consumer prices hit 3.2% in August, its highest rate since March 2012.

It is also worth keeping in mind that the BoE was split evenly last month on whether the minimum conditions for a rate hike had been met. All eyes will be on whether the two new committee members impact this balance.

Looking at the technical picture, GBPUSD remains bearish on the daily charts. Sustained weakness below 1.3670 could open a path back down towards the July low at 1.3570. Alternatively, a solid move above 1.3670 could mean an advance towards 1.3750 might be on the cards.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

EUR/USD Daily Forecast – Euro Gains Ground Ahead Of PMI Reports

Euro Moves Higher Against U.S. Dollar

EUR/USD is currently trying to settle above 1.1720 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index is currently moving towards the support level at 93.10. In case the U.S. Dollar Index manages to get to the test of this level, EUR/USD will gain additional upside momentum.

Today, foreign exchange market traders will focus on PMI data from EU. Analysts expect that Euro Area Manufacturing PMI declined from 61.4 in August to 60.3 in September. Euro Area Services PMI is projected to decrease from 59 to 58.5.

In the U.S., traders will take a look at Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims report is expected to show that 320,000 Americans filed for unemployment benefits in a week. Continuing Jobless Claims are expected to decline from 2.67 million to 2.65 million. U.S. Manufacturing PMI is expected to increase from 61.1 in August to 61.5 in September, while U.S. Services PMI is projected to decline from 55.1 to 55.

Technical Analysis

eur usd september 23 2021

EUR/USD is testing the resistance level at 1.1720. In case this test is successful, EUR/USD will move towards the next resistance at 1.1750.

A successful test of the resistance at 1.1750 will open the way to the test of the next resistance level which is located at the 20 EMA at 1.1765. In case EUR/USD gets above the 20 EMA, it will head towards the resistance level at 1.1775.

On the support side, the nearest support level for EUR/USD is located at 1.1690. This support level has already been tested several times in recent trading sessions and proved its strength.

In case EUR/USD declines below this level, it will move towards the support at 1.1660. A successful test of the support at 1.1660 will push EUR/USD towards the next support level at 1.1630. If EUR/USD manages to settle below this level, it will move towards the support at 1.1615.

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