The recent movement of the USD/JPY has been influenced primarily by political factors. The JPY has weakened significantly due to the growing risk that the current LDP-led coalition may lose its majority seats after this Sunday, 27 October snap election. Watch the 151.10 key short-term support on the USD/JPY. This is a follow-up analysis of our prior report “USD/JPY Technical: Potential bearish reversal in US dollar strength below 200-day moving average” published on 21 October 2024. Click here for a recap. Since our last publication, the bears have continued to gain a foothold in the Japanese yen as it weakened further against the US dollar and burst above the 151.95 key long-term pivotal resistance of the USD/JPY and its 200-day moving average. Growing internal political risk is inflicting damage on the JPY outlook in the near term There is now a growing risk that Japan may end up with a minority coalition government after this Sunday, 27 October snap general election for the lower house. Recent polls have indicated the possibility of the ruling Liberal Democratic Party (LDP)-Komeito coalition losing its majority in parliament and may also cause the newly appointed Prime Minister Ishiba to lose his premiership or force the LDP to look for additional coalition partner to stay in power. All in all, such political risk is likely to hamper the Bank of Japan (BoJ) current monetary policy normalisation plan to hike interest rates gradually after it ended its decades-long of negative interest rate in March and increased the overnight short-term interest rate to 0.25% in July. At this juncture, the main opposition party, the Constitutional Democratic Party of Japan has ruled out the prospect of forming a coalition with the LDP. Thus, smaller opposition parties, Japan Innovation Party and Democratic Party for the People are the only choices that LDP has as potential coalition partners to secure its power base. Both opposition parties favour expansionary fiscal and monetary policies to achieve sustained economic and wage growth. Hence, BoJ is likely to face a hurdle in enacting additional interest rate hikes next year if such economic proposals are taken into consideration by a newly formed LDP-led coalition. Fundamentals are still supporting further interest rate hikes in Japan Fig 1: Monthly Japan PPI, CPI & Tokyo CPI trends (y/y) as of Sep & Oct 2024 (Source: TradingView, click to enlarge chart) Even though the latest headline inflation in Tokyo slowed to 1.8% y/y in October, down from 2.2% a month earlier, the Tokyo core-core inflation rate (excluding food and energy) came in strong-than-expected as it rose to 1.8% y/y from 1.2% printed in September (see Fig 1). The Tokyo inflation data are considered a leading inflationary trend for the nationwide Japan CPI which BoJ will take into consideration at next week’s monetary policy meeting on 31 October when it also releases its latest quarterly growth and inflation trend forecasts. The market consensus is looking for BoJ to keep its short-term interest rate unchanged at 0.25% due to uncertainties surrounding the upcoming US presidential election on 5 November. Watch the 151.10 key short-term support on USD/JPY Fig 2: USD/JPY minor trend as of 25 Oct 2024 (Source: TradingView, click to enlarge chart) The pull-back of the USD/JPY that took form on Thursday, 24 October from a three-month high of 153.19 printed on Wednesday, 23 October has managed to stall at its 200-day moving average and slightly above the lower boundary of its minor ascending channel from 30 September 2024 low of 141.65 (see Fig 2). Watch the 151.10 key short-term pivotal support to maintain its current streak of impulsive upmove sequence for the next intermediate resistances to come in at 153.80 and 154.70/80 next. However, failure to hold at 151.10 invalidates the bullish tone to kickstart a potential mean reversion decline to expose the intermediate supports of 150.30 and 148.95 (also the 20-day moving average).

GBP/USD saw a bounce despite weak UK PMI data, attributed to US Dollar weakness. The Bank of England may consider interest rate cuts due to slowing inflation, potentially weakening the Pound Sterling. GBP/USD technical analysis shows potential for a bullish bounce, but a break below the trendline could lead to a larger correction. Most Read: Gold (XAU/USD), Silver (XAG/USD) Print Fresh Highs as the DXY Eyes 105.00 Cable has enjoyed a decent bounce this morning off a key confluence level. Despite weak PMI data, some US Dollar weakness has helped GBP arrest its slide. Preliminary October Composite PMI in the UK edged lower to 51.7 from 52.6 in October. This begs the question, can Pound Sterling extend its recovery? For all market-moving economic releases and events, see the MarketPulse Economic Calendar. October data pointed to a moderate increase in UK private sector output, but the rate of expansion slowed for the second month running to its lowest since November 2023. Survey respondents widely commented on the impact of delayed decision-making among clients and heightened economic uncertainty in October.  Employment was a particularly weak spot, with overall staffing numbers decreasing for the first time in 2024 to date.  Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Business activity growth has slumped to its lowest for nearly a year in October as gloomy government rhetoric and uncertainty ahead of the Budget has dampened business confidence and spending. Companies await clarity on government policy, with conflicts in the Middle East and Ukraine, as well as the US elections, adding to the nervousness about the economic outlook. Encouraging for the Bank of England (BoE) is the fact that further cooling of input cost inflation to the lowest for four years opens the door for the Central Bank to take a more aggressive stance towards lowering interest rates, should the current slowdown become more entrenched. This obviously means that the Pound Sterling may face further weakness as rate cut bets intensify. However, given that the DXY is at extremely overbought levels and GBP/USD is at extremely oversold levels, there is still a chance that Cable may rise back above the 1.3000 and potentially higher as well. A lot of this would hing on how the US Dollar performs over the coming days and weeks. There are a host of big events over the coming days which could impact markets and relate directly to the GBP and US Dollar. Chief of those being the US election which draws closer with market participants likely to hedge their bets ahead of the big day. This could mean volatility and some whipsaw price action.  On the other end of the pond we have the UK budget on October 30, which is the first from the UK Labour Government. Big tax increases seem likely because of the rising demands on government funds. More investment is on the way, but will it mean even more borrowing? That’s the big question for markets, and Reeves will need to handle it carefully. There are a host of questions which could spark volatility heading into the event as well.  GBP/USD Technical Analysis GBP/USD had a brief bounce at the back end of last week that failed to break through the 1.3100 handle before pushing lower. This saw cable break below the 100-day MA and finally test the long-term ascending trendline that has been in play since the April 22 lows.  All of this was discussed in the GBP price action piece last week:  GBP Price Action Ideas: GBP/USD, GBP/JPY and EUR/GBP The test of the ascending trendline just below the 100–day MA and key support level do look promising for a bullish bounce. However, the first hurdle would be a daily candle close back above the 100-day MA and then of course the psychological 1.3000 handle. This would then set the stage for a retest of the resistance area resting just below the 1.3100 range (denoted by the red block on the chart). Acceptance above this level could open up a deeper retracement toward the 1.3250-60 range. Alternatively, a break of the trendline would be significant and could open up a longer term correction toward the 1.2750 handle for cable. Such a move would hinge on the idea of a continued rally for the US Dollar and DXY in particular. The 200-day MA currently rests around the 1.2800 and could prove key as well.  Later today we have speeches from both Catherine Mann and Andrew Bailey of the Bank of England (BoE) which could stoke some short-term volatility. Any comments around rate cuts etc, may also have a more material impact. This would obviously hinge on what the comments are and where policymakers see rates heading in the months to come. GBP/USD Daily Chart, October 24, 2024 Source:TradingView.com Support 1.2940 1.2800 1.2750 Resistance 1.3000 1.3100 1.3250 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The Canadian dollar is in negative territory on Wednesday. In the North American session, USD/CAD is trading at 1.3844 at the time of writing, up 0.20%. The Canadian dollar has posted only three winning days in October and is close to a 10-week low. BoC flexes muscles, cuts rates by 50 bps The Bank of Canada has been among the global leaders in the new era of rate cutting and lowered rates for the fourth consecutive meeting earlier today. This brings interest the benchmark rate to 3.75%, 125 basis points lower than when the BoC started cutting rates in June. The markets were not surprised by the oversized 50bp cut, as Canada’s economy remains weak and inflation has been contained. Inflation dropped to 1.6% y/y in September after hitting the BoC’s 2% target in August. With inflation running at a three-year low, the BoC is expected to keep a close eye on the labor market, which has remained in decent shape. The BoC would like to gradually cut rates by 25 bp increments but could be forced to deliver another jumbo cut if inflation falls more than expected or the job market shows a sharp deterioration. The BoC meets next on Dec. 11 and policymakers will have to again decide on whether to cut rates by 25 or 50 basis points. The Federal Reserve has also been aggressive and started its rate-cutting cycle with an 50-bp cut in September. Inflation has been on a downtrend and eased to 2.4% in September, down from 2.5% a month earlier. Employment has become the number one priority and softer-than-expected job reports were a key reason why the Fed opted for an oversized cut in September. Fed members have signaled that more cuts are coming before year’s end but expect these to be the standard 25-bp size, barring a serious downswing in the US economy. USD/CAD Technical USD/CAD is testing resistance at 1.3845. Above, there is resistance at 1.3888 1.3796 and 1.3753 are the next support levels

The euro is down for a third straight day on Wednesday. In the European session, EUR/USD is trading at 1.0767, down 0.29% on the day. The euro remains under pressure and has declined 3.3% in October. Euro PMIs expected to show more of the same The Eurozone releases the September PMI reports on Thursday, with little change expected. The manufacturing sector is in a prolonged depression and has contracted for 27 straight months. Domestic and international orders have been decreasing while input costs are rising. Business conditions have been worsening and there doesn’t seem to be a light at the end of the tunnel. The market estimate for the Manufacturing PMI is 45.3, compared to 45.0 in August. The 50 level separates contraction from expansion. The services sector is in better shape, having expanded for seven consecutive months. The growth during this time has been modest and the September market estimate is 51.5, up from 50.5 in August. The PMIs point to a weak eurozone economy and lower interest rates would provide a badly-needed boost. The European Central Bank cut rates last week, its second quarter-point cut in just five weeks. The deposit rate has been brought down to 3.25% and with inflation largely under control, the ECB is shifting from fighting inflation to boosting economic growth. This likely means further rate cuts before the end of the year. The Federal Reserve jumped out of the rate-cutting gates in September, delivering a jumbo 50-basis point cut. Inflation dropped from 2.5% to 2.4% in September, closer to the Fed’s 2% target. Employment has become the number one priority and weak job numbers was a key reason why the Fed opted for an oversized cut in September. Fed members have signaled that more cuts are coming before year’s end but these will likely be in 25-bp increments, which is the traditional size of Fed rate hikes and cuts. EUR/USD Technical EUR/USD is testing support at 1.0765. Below, there is support at 1.0737 1.0782 and 1.0810 are the next resistance lines

The Canadian dollar has weakened against most major currencies (except against the JPY) in the past four weeks. Short-term FX positioning suggests that the expected BoC’s 50 bps cut may have been fully priced in. Watch out for a potential short-term mean reversion decline in the AUD/CAD cross pair. In a few hours’ time today, the Bank of Canada (BoC) will announce its latest monetary policy decision where the consensus is expecting a fourth consecutive interest rate cut to its key policy interest rate with a higher magnitude of 50 basis points (bps) to bring it down to 3.75%. The rationale for having a high expectation of a jumbo cut of 50 bps assigned to today’s BoC interest rate decision is that the inflationary trend in Canada has decelerated below the 2% inflation target. Canada’s core inflation rate ticked slightly higher to 1.6% y/y in September from a three-and-a-half-year low of 1.5% recorded in August but remained below BoC’s 2% target since April this year. Slack in the labour market warrants a more dovish BoC Coupled with a weakening labour market where the unemployment rate increased to a 34-month high of 6.6% in August, albeit a slight downtick to 6.5% in September, it is no longer economically viable for BoC to maintain a higher degree of restrictive monetary policy as the current key policy interest rate of 4.25% is significantly higher by 265 bps from the core inflation rate in Canada. However, markets are forward-looking as the Canadian dollar has weakened against the major currencies except against the Japanese yen in the past four weeks which suggests that today’s 50 bps cut from BoC may have been fully priced in. A mean reversion move to offset recent Canadian dollar weakness may be in progress Fig 1: AUD/CAD medium-term & major trends as of 23 Oct 2024 (Source: TradingView, click to enlarge chart) The major uptrend phase of the AUD/CAD cross pair in place since the 28 September 2023 low of 0.8567 reached and reacted off the upper boundary of its year-long ascending channel on 30 September 2024. In addition, medium-term upside momentum has weakened significantly as the daily RSI momentum indicator has staged a bearish breakdown below its parallel ascending trendline support and slipped below the 50 level (see Fig 1). Watch the 0.9377 key medium-term pivotal resistance and a break below the 0.9170 intermediate support reinforces the short-term mean reversion decline of the AUD/CAD to expose the 0.9020 medium-term support (also the 200-day moving average). On the other hand, a clearance above 0.9377 may see further weakness in the Canadian dollar where the AUD/CAD cross pair may squeeze higher for the next medium-term resistances to come in at 0.9520 and 0.9630.

Gold and Silver prices reach new highs amidst a rising US Dollar, driven by global uncertainties and a potential Trump Presidency. Silver’s demand/supply dynamics bode well for further gains. The US Dollar Index (DXY) strengthens due to positive economic data and fading rate cut expectations, with a potential rise to 105.00. Most Read: S&P 500, Nasdaq 100 – US Indices Eye Recovery as Earnings and Yields Weigh on Markets Gold prices have smashed through the 2750 handle despite the US Dollar continuing its advance. The precious metal has attracted bids with some believing this could be down to markets preparing for a potential Trump Presidency in the US.  There does not appear to be a single factor driving Gold prices but rather a combination of rising uncertainties for global market participants to consider. Global conflicts, trade wars and a potential Trump Presidency are at the forefront and that is leaving out the uncertain economic situation in many countries.  Despite sky high stock prices in the US and what seems to be improving sentiment, Gold, a notorious safe haven bet reveals a different story. Gold prices have been on a tear this year and with many people still viewing the precious metal as a safe haven, are market participants telling us something? Silver (XAG/USD) Demand/Supply Dynamics Bodes Well for Bulls A commodity that has flown under the radar of late has been silver, as prices soared to new all time highs. Silver is trading in the mid 34’s at present with market analysts noting that more gains could be in store for silver prices.  Looking more closely at Silver, the appeal is quite evident. Silver is used in a host of electronic products manufactured today and the rise of tech is only going to increase the demand for silver.  Given the physical shortage already present in silver markets there is a huge possibility that the rally could continue. Looking at the chart below, you can see the huge discrepancy between demand (blue line) and supply (white line) which I expect will underpin prices moving forward.  Source: LSEG Workspace US Dollar Index (DXY) Eyes a Rise to 105.00 Key Level The US Dollar continues its rise on positive data and fading rate cut expectations. Markets have been digesting comments from Fed Policymakers over the last week or so which has largely leaned on the hawkish side.  As markets adapt to fewer anticipated rate cuts in the US compared to more aggressive cuts by other central banks, the US Dollar may be set to keep rising. There is growing talk of a ‘Trump trade’ as US Treasury yields have experienced some interesting swings off late. This may be another area to focus on when looking at the greenback moving toward the US election.  US Dollar Index (DXY) Daily Chart, October 23, 2024 Source: TradingView Technical Analysis Gold (XAU/USD) From a technical analysis standpoint, Gold continues to print fresh highs and languish in overbought territory. As we know markets are able to languish in overbought territories for extended periods of time and thus the Gold rally could continue. Gold is currently flirting with the key level at 2750 with a drop lower opening up a retest of the support area at 2739. Lower down we could look at areas of support around 2724 and 2714. The upside provides us with less insight with today’s highs at 2758 an area to keep an eye on before the psychological level at 2775. GOLD (XAU/USD) Four-Hour (H4) Chart, October 23, 2024 Source: TradingView (click to enlarge) Support 2739 2724 2714 Resistance 2758 2775 2800 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The Japanese yen has posted sharp losses on Wednesday. In the European session, USD/JPY is trading at 152.67, up 1.06% at the time of writing. The yen is down 2.1% this week and has plunged 6.3% in October. IMF slashes Japan’s growth forecast The International Monetary Fund slashed its 2024 growth forecast for Japan to just 0.3%, down sharply from the 0.7% forecast in June. This is the lowest estimate since 2020, during the Covid-19 pandemic which severely impacted the economy. The IMF highlighted the “fading of a one-off boost” in tourism and disruptions in auto supply chains. Japan’s economy grew 1.7% in 2023, aided by a strong increase in tourism. The IMF said it expects the economy to rebound in 2025 and expand 1.1% as private consumption and wage growth improve, assuming that the Bank of Japan continues to raise rates “toward a neutral setting of about 1.5%.” The BoJ raised interest rates out of negative territory in July to the current rate of 0.25%. The markets are expecting further hikes but the central bank has been very cautious and wants to see evidence of sustainable inflation at 2% before making additional hikes. This has made the BoJ an outlier among major central banks, most of which are in a rate-cutting cycle in response to falling inflation. Japan releases Tokyo Core CPI, a key inflation indicator, on Thursday. The indicator is expected to ease to 1.7% in September, down from 2% in August. The BoJ meets on Oct. 30-31, right after a general election on Oct. 27. The Bank will likely maintain policy settings but the markets will be keeping a close eye on the quarterly projections for inflation and growth. USD/JPY Technical USD/JPY has pushed above several resistance lines today and the next resistance line is 153.19 150.93 and 150.66 are providing support

The euro is showing limited movement on Tuesday. In the North American session, EUR/USD is trading at 1.0806, down 0.07% on the day. Earlier, the euro fell as low as 1.0800, its lowest level since Aug. 2. The European Central Bank has been aggressive in its rate-cutting cycle and has trimmed 75 basis points this year. The key interest rate has been brought down to 3.25%, its lowest level since February 2023. There is room for further cuts, as the eurozone economy is struggling and inflation has dropped to 1.6%, comfortably below the ECB’s target of 2%. ECB’s Lagarde reassured by inflation data but battle not over ECB members are sounding optimistic about deflation, which is necessary for the central bank to continue cutting rates. ECB Governing Council member Peter Kazimir said on Monday that he expects inflation to drop to the 2% target in 2025. Kazimir said he was “increasingly confident that the disinflation path is on a solid footing”. This optimistic view was echoed by ECB President Lagarde on Tuesday. Lagarde reiterated that she expected the inflation target to be reached in 2025 and that the inflation numbers were “relatively reassuring”. Still, Lagarde added a note of caution, saying that services inflation was at 3.9% and the inflation battle was not yet won. The Federal Reserve is expected to continue cutting rates in the final two meetings of the year, but by how much? The Fed showed its aggressive side last month when it started its rate-cutting cycle with a jumbo cut of 50 basis points. San Francisco Fed President Mary Daly said on Monday that the September rate decision was a “close call” and she expected further rate cuts in order to prevent the labor market from continuing to weaken. EUR/USD Technical EUR/USD tested resistance at 1.0833 earlier. Above, there is resistance at 1.0854 1.0793 and 1.0772 are providing support

Major US stock indexes are struggling due to a combination of factors, including US earnings reports and hawkish comments from Federal Reserve policymakers. Earnings season has seen mixed results, with some companies exceeding expectations (like General Motors) and others falling short (like Verizon and GE Aerospace). The Dow Jones Industrial Average is showing potential for further upside, while the Nasdaq 100 remains rangebound. Most Read: Brent Crude – Oil Rises on China Rate Cuts but Middle East Uncertainty Lingers The major Wall Street indexes have struggled since the market opened this week. A combination of factors are in play as US earnings filter through, while Fed policymakers continue to lean on the more hawkish side.  US Treasuries increased as markets reacted to more aggressive comments from Federal Reserve policymakers. The US Presidential debate is also impacting Treasury markets, with investors watching for any possible changes to fiscal policy as betting odds favor a Donald Trump victory. US earnings picked up this week with a host of companies reporting. The surprisingly positive start to earnings season last week left market participants hopeful. Verizon VZ.N was the biggest decliner on the blue-chip Dow after the telecom giant missed estimates for third-quarter revenue with a 4.9% loss.  3M, a major company in the Dow, fell by 0.6%, wiping out its earlier pre-market gains, even though it increased the lower end of its full-year adjusted profit forecast. S&P 500 Heatmap Source: TradingView Among other notable names reporting today, GE Aerospace dropped 6.3% even after boosting its 2024 profit forecast, due to ongoing supply issues affecting its revenue, showing the challenges companies might face in impressing investors this year. Meanwhile, General Motors rose 7.3% after its third-quarter results exceeded Wall Street expectations, while Lockheed Martin fell 4% following its results. Magnificent 7 Hold the Key for S&P, Nasdaq 100 Markets are no doubt waiting for the magnificent 7 to report with Tesla kicking things off this week. Given that the magnificent 7 stocks alone currently account for around 35% of the S&P 500, near the most on record, its impact will be big.  The 7 companies are still trading around $800 billion below their all-time high posted July 10th despite the recent recovery which saw Nvidia post fresh all-time highs. Nvidia is also closing in on Apple for the title of the world’s most valuable company. The Chip Maker is only $100 billion away from surpassing Apple, $AAPL. US Equity Market Concentration Source: The Kobeissi Letter Technical Analysis  Dow Jones Industrial Index (US30) From a technical standpoint, the US30 (Dow Jones) is flashing interesting price action at present. Having experienced a 300-odd point selloff yesterday, the index dropped lower in European trade before rebounding aggressively around halfway through the US session.  Looking at the four-hour chart (H4) today, we can see that the Dow has bounced off a key support area around the 42764 handle. This level served as support on October 14 and 16 respectively.  A H4 candle close with little to no upside wick would hint at further upside for the Dow with a retest toward the resistance handle at 43198 a possibility. A H4 candle close below the 42764 handle would invalidate the bullish continuation setup.  Dow Jones DJ30 (US30) Four-Hour Chart, October 22, 2024 Source: TradingView (click to enlarge)  Support 42764 42599 42446 Resistance 43000 43198 43370 Nasdaq 100 The Nasdaq 100 remains rangebound between two key levels at 20000 and 20484. Having discussed the magnificent 7 and its potential impact on the S&P500 and Nasdaq. The Nasdaq may find itself struggling for a breakout with a deeper pullback ahead of the releases next week also a possibility.   Immediate resistance rests at 20484 before the all-time highs around 20790 come into focus.  Conversely, there is immediate support at the psychological 20000 handle, before the 19589 support level comes into focus. Lower than that we have 19123 as a key area to focus on.  Nasdaq 100 Daily Chart, October 22, 2024 Source: TradingView (click to enlarge)  Support 20000 19750 19536 Resistance 20484 20790 (all-time highs) 21000 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

Oil prices rose due to Chinese rate cuts and Middle East uncertainty. The IMF downgraded its global growth forecast to 3.2%. Technically, Further upside is possible if conditions remain consistent. Geopolitics remains key. Most Read: USD/CHF Technical Outlook: Pullback Before Continuation? Oil prices are enjoying a mini renaissance to start the week thanks to Chinese rate cuts and the ongoing and ever changing situation in the Middle East. This has been the rhetoric and driving force over the past few weeks and not much has changed.  Every data release from China or potential ceasefire discussions in the Middle East are resulting in swings in oil prices. The China situation may have more long lasting impact though as an economic slowdown in China means one for the rest of the world.  This was made more evident following the IMF revising down its global growth forecast to 3.2%. A slight downgrade but a downgrade nonetheless, pointing to the scope of downside risks in global markets. The IMF warned that the risks could come from further wars or trade protectionism, something which has become a hot topic on the US election campaign trail. The projections by the IMF showed growth to remain mediocre in the medium term with a lot of uncertainty. There was also a downgrade to China’s 2025 forecasted growth by the IMF to 4.8% from a previous 5%. This brings the IMF in line with many institutions who have done the same in recent weeks. Source: IMF Another sign that points to a potential slowdown in China comes from demand and supply dynamics. According to Commersbank’s commodity analyst, China was oversupplied by 930k barrels p/d in September.  The oil market in China is a concern. This is evident from China’s implied oil demand, which is calculated by subtracting net exports of oil products from the amount of crude oil processed. Exports have been on the decline and many hope the recent stimulus will help local demand as well. Only time will tell if the stimulus is enough. The Week Ahead There is a lack of high impact US data this week with eyes firmly focused on the geopolitical situation in the Middle East. Wednesday we get inventory data filtering through from the API and Thursday from the EIA, both of which could stoke some short-term volatility and moves for oil prices.  For all market-moving economic releases and events, see the MarketPulse Economic Calendar.  Download the Full IMF Report HERE: https://www.imf.org/en/Publications/WEO/Issues/2024/10/22/world-economic-outlook-october-2024 Technical Analysis From a technical perspective, Oil has retested and hugged the descending trendline for the last 5 days before moving higher this morning.  Having come within a whisker of the key support area at 72.38, Oil prices are now approaching resistance at 76.35, up around 1.9%. Yesterday’s daily candle closed as an inside bar hinting at further upside. If today’s candle can close around 75.50 or higher this would form an imperfect morningstar candlestick pattern, which would hint at further upside.  Brent Crude Oil Daily Chart, October 22, 2024 Source: TradingView (click to enlarge) Dropping down to a four-hour chart (H4) and looking at price action we have seen a change in character. Markets are now printing higher highs and higher lows meaning bulls are now in control.  Immediate resistance rests at 76.00 where we also see the 100-day MA resting making this a key confluence area. Oil has already rejected off this level today, will the bulls have enough to break through? If oil can get above the 76.35 handle there is an open run toward the 78.90 handle. Brent Crude Oil Four-Hour (H4) Chart, October 22, 2024 Source: TradingView (click to enlarge) Support 74.63 72.38 70.00 (key area of confluence) Resistance 76.00 78.90 80.00 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The euro has edged lower on Monday. In the North American session, EUR/USD is trading at 1.0838, down 0.24% on the day. ECB’s Kazimir says disinflation continuing The European Central Bank lowered its key interest rate last week by a 25 basis points to 3.25%, the first back-to-back rate cuts since December 2011. The rate cut was the third time the ECB has lowered rates this year, as it has been aggressive in its rate-cutting cycling, totaling 75 basis points. The rate statement from last week’s meeting noted that the “disinflationary process is well on track” and that the inflation outlook had improved due to “recent downside surprises” in economic activity. The September inflation report, released just before the rate announcement on Thursday, indicated that inflation dropped to 1.7% y/y, down from 1.8% in August. This was a milestone as it was the first time inflation has dropped below the ECB’s target of 2% since July 2021. The optimistic stance was reiterated by ECB Governing Council member Peter Kazimir, who said on Monday that he expects inflation to drop to the 2% target in 2025. Kazimir said he was “increasingly confident that the disinflation path is on a solid footing” which would allow the ECB to continue cutting interest rates. The ECB remains somewhat cautious, particularly over wage growth and services inflation which have been stubbornly high and are upside risks to the inflation outlook. Still, after three rate cuts this year it’s clear that the direction of the rate path is down and the markets expect the ECB to continue trimming rates right through to March 2025. EUR/USD Technical EUR/USD has pushed below support at 1.0854 and is testing support at 1.0837. Below, there is support at 1.0808 1.0884 and 1.0900 are the next resistance lines

USD/JPY has rallied by 7.7% from the 16 September 2024 low with three key risk events/data for this week (Japan’s flash PMI, Tokyo CPI & general election). The recent 4-week rally in the USD/JPY has displayed exhaustion conditions. Watch the 148.95 key intermediate support. This is a follow-up analysis of our prior report “USD/JPY Technical: Recent mean reversion rebound in US dollar strength may have hit a ceiling” published on 4 October 2024. Click here for a recap. Since our last publication, the price movements of USD/JPY have extended its rally by another 3% from its 4 October low to print an intraday high of 150.32 last Thursday, 17 October, and cleared above 149.30 medium-term resistance as highlighted. All in all, the Japanese yen has weakened by 7.7% against the US dollar in the past four weeks from 16 September to 17 October (low to high) with three key related risk events looming this week; Japan’s flash services and manufacturing PMIs for October out on Thursday, 24 October,  Tokyo’s CPI on Friday, 25 October, and the outcome of Japan’s snap general election held on Sunday, 27 October. Right now, several technical analysis-related elements are suggesting potential signs of bullish exhaustion in the 4-week rally. Bullish positioning has been reduced in the JPY currency futures market Fig 1: Commitments of Trader large speculators’ net positioning in JPY futures for the week of 14 Oct 2024 (Source: Macro Micro, click to enlarge chart) Based on the latest Commitments of Traders data for the week of 14 October 2024 (compiled by Macro Micro), the aggregate net bullish open positions of large speculators in the JPY futures market (after offsetting the aggregate positions of large commercial hedgers) are at +70,749 contracts (net long), a decline of 50% in the past three weeks after it hit a 5-year high of +143,519 contracts for the week of 23 September (see Fig 1). Net open large speculative positioning flows (primarily from hedge funds) are contrarian in nature which suggests that a relatively high level of net positioning may see an opposite reaction in price actions if related data or news flows disappoint. Given that large speculative market participants have trimmed their net bullish open positions in the JPY currency futures market, the risk of further profit-taking activities (sell JPY, buy US dollar) has been reduced if the materialized related data or news flow does not support a bullish JPY narrative. In contrast, if such data and news flow support a positive JPY narrative, large speculators may rebuild their net long position in the JPY futures market (buy JPY, sell US dollar) which in turn may lead to a bearish reversal in the USD/JPY. Hovering below the 200-day moving average with exhaustion elements Fig 2: USD/JPY medium-term trend as of 21 Oct 2024 (Source: TradingView, click to enlarge chart) The 4-week up move seen in the USD/JPY from its 16 September low of 139.58 has almost reached the key 200-day moving average that coincides closely with the 151.95 long-term pivotal resistance. Since 8 October, the price actions of USD/JPY have taken on the form of an impending bearish “Ascending Wedge” configuration coupled with a weekly bearish “Shooting Star” candlestick pattern for the week of 14 October (see Fig 2). Watch the 148.95 key intermediate support (close to the lower boundary of the “Ascending Wedge), and a break below it may trigger a potential bearish reversal scenario on the USD/JPY to expose the medium-term supports of 146.90 and 144.80. On the flip side, a clearance with a daily close above 151.95 invalidates the bearish scenario for the next resistance to come in at 154.70 in the first step.

Gold prices surged past $2700/oz fueled by expectations of global rate cuts and escalating geopolitical tensions in the Middle East. The London Bullion Market Association’s bullish prediction of $2941/oz gold price in 12 months. Technically, gold is overbought, but the threat of an Israeli strike on Iran could limit downside risks. Most Read: S&P 500, Nasdaq 100 – Wall Street Indexes Rise as TSMC Leads Chip Stock Rally, Where to Next? Gold prices advanced further overnight gaining acceptance above the $2700/oz as global rate cut bets intensified. The killing of Hamas Political Bureau leader and of the masterminds behind the October 7 attacks Yahya Sinwar had raised expectations of an escalation in the Middle East conflict, but the precious metal was already well on its way to fresh highs. Currently, a mix of factors is fueling the gold rally. Despite the strengthening US dollar, gold prices continue to climb. Economic data from the UK and the ECB’s interest rate meeting have boosted expectations for rate cuts worldwide, enhancing gold’s attractiveness. Lower global interest rates reduce the opportunity cost of holding this non-yielding precious metal and could keep the rally moving forward.  A bullish take from the London Bullion Market Association who conducted a poll recently further adds credence to the idea that Gold prices may not be done just yet. The poll was to predict the price of Gold in 12 months time with the association seeing prices at $2941/oz.  The US election is nearing as well and uncertainty continues around the next US President. This could be another reason the appeal of safe haven continues to grow.   Technical Analysis Gold (XAU/USD) From a technical analysis standpoint, Gold has been difficult to analyze with the lack of price action.  Gold bears may have been hoping for some headwinds from US data but that has not materialized as housing data disappointed. This has led to some USD weakness, which in theory should aid Gold prices. .  The concern for bulls lies in the fact that the RSI is now in overbought territory on the four-hour, daily and weekly charts. That coupled with the potential for profit taking before the end of the day leaves me slightly concerned. However, the threat of a retaliatory strike by Israel on Iran has strengthened as Israeli officials commented today a strike is imminent. This is something that could limit downside ahead of the weekend and into next week as well.  Immediate support rests at 2700 before the 2685 and 2673 handles come into focus.  Conversely, looking at the upside and immediate resistance rests at today’s high print around 2717 before 2725 and 2750 come into focus.  GOLD (XAU/USD) Four-Hour (H4) Chart, October 18, 2024 Source: TradingView (click to enlarge) Support 2700 2685 2673 Resistance 2717 2725 2750 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The Australian dollar is up for a second straight day on Friday. In the European session, AUD/USD is trading at 0.6712, up 0.24%. The Aussie is having a miserable October, having lost 2.9%. Australian employment change soars Australian job growth sparkled in September with a gain of 64.1 thousand. This was higher than the revised 42.6 thousand in August and crushed the market estimate of 25,000. The report was especially impressive as full-time employment jumped by 51.6 thousand, rebounding from -5.9 thousand in August. The labor market remains resilient, despite the sputtering economy which has been choked by high interest rates. The Reserve Bank of Australia is yet to join the rate-cutting cycle embraced by most major central banks, with the key rate at 4.35%. The central bank has maintained rates for almost a year and isn’t expected to start trimming until early 2025. With the labor market still tight, the RBA can afford to prolong its “higher for longer” rate stance. The RBA makes its next rate decision on November 5 and is widely expected to stay on the sidelines. US retail sales jump US retail sales rose 0.4% in September, above the 0.1% gain in August and beating the market estimate of 0.3%. A key driver of the strong gain was the sharp drop in gasoline prices. Annually, retail sales eased to 1.7%, below the revised 2.2% gain in August but above the forecast of 1.6%. The positive retail sales data is a sign that the US economy posted solid growth in the third quarter. This supports the case for the Fed to deliver quarter-point rate cuts in both November and December. The Federal Reserve chopped rates by an oversized half-point in September but that hefty cut is expected to be a one-time move, barring a sudden deterioration in economic data. AUD/USD Technical

The euro can’t find its footing and has tumbled 2.7% in October. EUR/USD has stabilized on Friday and is trading at 1.0835 in the European session, up 0.05%. On Thursday, the euro dropped as low as 1.0810, its lowest level since August 2. ECB cuts key rate to 3.25% The European Central Bank didn’t surprise anybody with a quarter-point rate cut on Thursday, the first back-to-back rate cuts since December 2011. The markets had fully priced in the move and the euro responded with slight losses. ECB President Lagarde has discarded forward guidance and stressed that rate decisions will be on a meeting-by-meeting basis, but the markets smelled a rate cut, with low inflation and weak economic growth. The rate statement was optimistic, noting that the “disinflationary process is well on track” and that the inflation outlook had improved due to “recent downside surprises” in economic activity. The ECB has cut rates three times this year and is expected to remain aggressive. The markets expect are forecasting rate cuts of 25 basis points at each of the next three meetings. The eurozone inflation release, made just before rate announcement on Thursday, showed inflation falling to 1.7% y/y, down from the initial estimate of 1.8% and below the 2.2% gain in August. The decline in inflation was helped by a sharp drop in energy prices. Services inflation remains high but eased to 3.1% y/y, down from 2.9% in August. The inflation report reached a milestone, dropping below the ECB’s target of 2% for the first time since July 2021. EUR/USD Technical EUR/USD is testing resistance at 1.0835. Above, there is resistance at 1.0866 1.0803 and 1.0776 are the next support levels

The British pound has extended its gains on Friday. In the European session, GBP/USD is trading at 1.3046, up 0.27% on the day. UK retail sales stronger than expected UK retail sales are moving in the right direction. Retail sales increased for a third straight month in September, rising 0.3% m/m. That was lower than the 1% increase in August but beat the market estimate of -0.3%. Annually, retail sales climbed 3.9%, up from a revised 2.3% in August and higher than the market estimate of 3.2%. This was the largest annual rise since February 2022. The positive retail sales report will be welcome news for the government, with Finance Minister Reeves presenting the Annual budget on Oct. 30. Reeves has warned that the budget will contain “tough measures” and is expected to include spending cuts and tax hikes. Consumers have cut back on discretionary items and a tough budget would likely dampen consumer spending. In the US, retail sales showed a solid gain in September, helped by lower gasoline prices. Retail sales jumped 0.4%, above the 0.1% gain in August and the market estimate of 0.3%. Annually, retail sales eased to 1.7%, below the revised 2.2% gain in August but above the forecast of 1.6%. The strong September data is a positive sign that third-quarterly growth was solid, which will support the case for the Fed to deliver quarter-point cuts in November and December. The Federal Reserve chopped rates by 50-bps in September but the jumbo rate cut is expected to be a one-time move, barring a sudden deterioration in economic data. GBP/USD Technical GBP/USD is testing resistance at 1.3016. The next resistance line in 1.3076 1.2963 and 1.2903 are the next support levels      

A 25bps cut by the ECB is likely to have been fully priced in. The current high expectation of another ECB rate cut in December faces an increased repricing risk. Watch the 1.0780/0750 key medium-term support on the EUR/USD. In the past four weeks, the EUR/USD has plummeted by 3.3% from its 25 September high of 1.1214 to today’s current intraday low of 1.0849 at this time of the writing ahead of the European Central Bank (ECB) monetary policy decision. Based on a one-month rolling performance basis, the Euro is the second weakest major currency against the US dollar with a loss of 2.5%, above the Japanese yen which was the weakest major currency as it shed -6.4% against the US dollar. 25 bps cut is likely to have been fully priced in The current price movement of the EUR/USD is likely to have fully priced in today’s 25 basis points (bps) cut by the ECB, its third cut in 2024 to bring the key deposit rate to 3.25% as headline inflation in the Eurozone decelerated to 1.7% y/y in September, below ECB’s target of 2% for the first time in more than three years. In addition, lacklustre readings seen in September’s manufacturing and services PMIs data suggest increasing signs of a weakening economic condition in the Eurozone. Hence, market participants are looking at one more rate cut of 25 bps by the ECB in December before 2024 ends. Oversold and overstretched Fig 1: Major & medium-term trends of EUR/USD as of 17 Oct 2024 (Source: TradingView) After taking into consideration the heightened dovish expectations being played out now in terms of the swift downward movement of the EUR/USD seen in the current week, there is an increasing risk of a repricing of the next ECB rate cut expectations (lowering the odds of cuts) if ECB President Lagarde offered less dovish guidance during her press conference later. Through the lens of technical analysis, the 4-week decline seen in the EUR/USD has led the daily RSI momentum indicator to reach its oversold region for the first time since 15 April 2024. Current price action is also coming close to the major “Symmetrical Triangle” range support at 1.0780/0750 (see Fig 1). In addition, the daily Bollinger Bandwidth indicator has risen sharply since 1 October 2024 which suggests an overstretched decline condition at this juncture that increases the odds of at least a short-term mean reversion rebound scenario. If the 1.0780/0750 key medium-term pivotal support holds on the EUR/USD, it may shape a mean reversion rebound towards the 1.0950 intermediate resistance in the first step. However, a breakdown and a daily close below 1.0750 see the continuation of the impulsive down move sequence to expose the next medium-term support at 1.0620.

The GBP has been declining against the USD due to softer-than-expected UK economic data, leading to expectations of more aggressive rate cuts by the Bank of England. GBP/USD is at a crucial level of 1.3000, a break below which could lead to further downside. GBP/JPY is showing signs of a potential breakout, with price coiling between the 100 and 200-day moving averages. EUR/GBP is near the YTD low, with immediate resistance at 0.8400. The pair’s future direction will depend on the GBP’s strength and the ECB’s decision. Most Read: US Dollar Index (DXY) Outlook: DXY Breaches the 100-day MA, Will the Rally Continue? The GBP has steadily declined against the greenback in recent weeks, while remaining stable against the Euro. This weakness in the British pound is attributed to market participants pricing in more aggressive rate cuts due to softer-than-expected data. The Euro meanwhile continues to engage in a tug of war with the GBP but appears to be winning at present, much to my surprise. The JPY yen has been the major loser of late, unable to capitalize on GBP weakness. GBP/JPY continues to inch higher as there remains weakness in the Japanese Yen ahead of the election at the end of the month. UK Inflation Data Surprise This morning the UK’s Office for National Statistics released a mild Consumer Price Index (CPI) report for September. It showed that annual inflation dropped to 1.7%. While prices were expected to slow down, they were predicted to decrease to 1.9% from 2.2% in August. Monthly inflation stayed the same. The most important print however came from services inflation which has been a sticky point for the Bank of England. According to the ONS, services inflation dropped more than expected, from 5.6% to 4.9%. This was not only below what experts predicted but also much lower than the Bank of England’s forecast of 5.5%. This softer result could lead to more interest rate cuts in the upcoming Bank of England meetings this year. All is not lost for the UK and the Pound as the Bank of England are still priced in to cut rates at around the same pace as the Federal Reserve. Initially the pound had been benefitting from the potential of rate divergence with the US Dollar in particular, however any such hopes appear to have been dashed following the latest UK inflation report. Technical Analysis GBP/USD From a technical standpoint, GBP/USD is at a very important level with the 1.3000 psychological level in play. A daily candle close below this level could open up further downside for the pair.  A daily candle close below the 1.3000 will face support around the 1.2950 handle which an area of confluence which houses the 100-day MA. Below this we do have the long term ascending trendline as well which could come into play for the first time since the previous touch on August 8.  There are two scenarios that could develop in the day/days ahead. The first one being a bounce of the 100-day MA and a retest of the 1.3000 or potentially the 1.3100 handle (pink box on the chart) before the downtrend continues. The second scenario, is a continued selloff until a touch of the trendline before a bounce occurs. At this stage both of these events are plausible as I do not see enough bearish pressure for a clean break of the ascending trendline at this stage. Now I could be wrong and we of course may break through the trendline as well, but I believe such a move may require a catalyst of sorts before it materializes.  Support 1.2950 (100-day MA) 1.2900 1.2793 (200-day MA) Resistance 1.3040 1.3100 1.3143 GBP/USD Daily Chart, October 16, 2024 Source: TradingView.com (click to enlarge) GBP/JPY GBP/JPY has been inching its way higher since bottoming out on August 5. There was another push down to the mid 180s on September 16 before the move higher began once more. GBP/JPY appears poised for a breakout after looking at recent price action. Price has been coiling between the 100 and 200-day MA since October 4. Usually when price is constricted in such a way, the longer the breakout takes the more aggressive it is.  On a daily timeframe a break and daily candle close below the 190.00 lower swing high would invalidate the bullish trend.  For now though a break to the upside seems more plausible based on price action and the overall trend. GBP/JPY Daily Chart, October 16, 2024 Source: TradingView.com (click to enlarge) Support 193.40 (200-day MA) 190.00 187.60 Resistance 195.40 (100-day MA) 198.00 200.00 EUR/GBP EUR/GBP remains near the YTD low around the 0.8300 handle. The pair is enjoying a bullish bounce today but there does appear to be significant technical hurdles if the GBP is to lose more ground to the Euro. Immediate resistance rests at 0.8400 with a key area of confluence resting just above. The region between 0.8425-0.8450 plays host to the 50 and 100-day MAs as well as the most recent swing high. Conversely, should the GBP strengthen in light of the ECB decision on Thursday then the 2022 lows around 0.8200 may become a real possibility. EUR/GBP Daily Chart, October 16, 2024 Source: TradingView.com (click to enlarge) Support 0.8311 0.8250 0.8200 Resistance 0.8400 0.8425 0.8447 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The US Dollar Index (DXY) continues to advance due to a lack of impactful US data and expectations of robust retail sales. Donald Trump’s comments on tariffs and the Federal Reserve’s independence. The DXY faces technical challenges, with the RSI in overbought territory, but the overall outlook remains bullish. Most Read:  The US Dollar Index (DXY) continues its advance with the lack of high impact US data keeping the greenback on the front foot. A move lower in the DXY may need a batch of softer US data which thus far has not been forthcoming. US retail sales this week is expected to remain robust which will keep the Dollar supported.  Yesterday, Donald Trump addressed an event where he highlighted two key market issues: tariffs and the Federal Reserve’s independence. He took a notably hawkish stance on protectionism, specifically focusing on U.S. car imports from Europe and Mexico. Regarding the Fed, he stated he wouldn’t interfere with its independence, yet asserted that the president should have a voice in rate decisions. As elections draw closer in the US we may see demand for the US Dollar increase. The uncertainty around the election could help the US Dollars safe haven appeal and thus keep the greenback advancing until after the election. Markets are now expecting less aggressive Fed rate cuts in November and December which does bode well for the USD. Policymakers from the Federal Reserve continue to caution around the rate cut cycle, Governor Waller elaborated on this in a speech delivered at Stanford University.  Governor Waller elaborated further stating that the baseline expectation remains to gradually lower the policy rate over the coming year, regardless of short-term developments. When questioned about the job market’s current state, Waller noted, “The labor market is still robust, even though labor demand is easing.”  US Federal Reserve Rate Cut Probabilities, November Meeting Source: CME FedWatch Tool The outlook for the Dollar remains bullish despite some technical concerns. How much further can the rally go? Economic Data Ahead The week ahead is a relatively quiet one when it comes to high impact US data. The only notable event on the calendar this week is retail sales which market participants believe will come in better than expected.  For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge) Technical Analysis – US Dollar Index  The US dollar’s rally has been an impressive one, but there are a host of challenges that lie in wait from a technical perspective. Firstly the RSI on the daily has finally crossed into overbought territory. Now, the issue with this is markets can oftentimes be in overbought on the RSI but continue to rise. Having broken above the 100-day MA for the first time since July with a daily candle close above this MA setting the tone for further gains.  Immediate resistance is at the confluence area which houses the 200-day MA around the 103.70 handle with further resistance areas resting at 104.00 and the psychological 105.00 handle. Conversely a retracement here may find support at 103.00, 102.16 and 101.00 US Dollar Index Chart, October 16, 2024 Source: TradingView (click to enlarge) Support 103.00 102.16 101.00 Resistance 103.70 104.00 105.00 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The British pound has finally showed some movement on Wednesday after a week of limited movement. In the European session, GBP/USD is trading at 1.2992, down 0.62% on the day. The pound fell below the symbolic 1.30 level for the first time since August 20. UK inflation drops more than expected The UK inflation report for September was projected to hit a milestone and fall below the BoE’s 2% target, but the reading exceeded expectations. CPI fell to 1.7% y/y, down from 2.2% in August and below the market estimate of 1.9%. This was the lowest level since April 2021 and was driven by lower prices for petrol and airfares. Services inflation, which has been stubbornly high, dropped from 5.6% y/y to 4.9%, its lowest level since May 2022. Monthly, CPI was flat, below 0.3% in August and below the market estimate of 0.1%. Core CPI also decelerated in September and was lower than expected (3.2% y/y and 0.1% m/m). As well, wage growth slowed to 4.9% in the three months to August, down from 5.1% previously. The Bank of England will be encouraged by the drop in inflation and in wages. The UK economy is groaning under the weight of a cash rate of 5% and the markets are looking at a rate cut in November as a done deal, while a December cut is a strong possibility. Many major central banks have shifted their primary focus from inflation risks to the labor market, and we could see the same with the BoE, now that inflation is back below the BoE’s target. GBP/USD Technical GBP/USD has pushed below support at 1.3071, 1.3039 and 1.3004. The next support level is 1.2972 1.3106 and 1.3138 are the next resistance lines