Forex Trading Library

The Week Ahead – Breathing room

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GBPUSD recovers as inflation in focus

Cable clawed back some losses as traders await a new set of readings on the UK’s inflation and job market. Market participants see little chance of another BoE rate hike at the November meeting, but the possibility of another increase next year cannot be excluded, especially after officials commented that more aggressive measures may be needed if inflation is stuck above the target for a prolonged period of time. A still hot CPI combined with resilient employment data would lead the market to price in further tightening, putting the rate differential in favour of the pound. 1.2500 is a major supply area and 1.1800 the next key support.

AUDUSD struggles amid China woes

Weak sentiment about China’s economy takes a toll on the Australian dollar. With the IMF cutting its growth forecasts for China, Australia’s largest trading partner, amid its property crisis and Sino-US tensions, the aussie as a proxy may struggle to stay attractive. Domestically, a comment from RBA officials acknowledged that the impact of rate hikes has become visible, reining in consumer spending to lower inflation. As most major central banks have hit the pause button in their quantitative tightening, traders widely expect that the RBA has reached its peak rate. 0.6180 is an important floor and 0.6570 a key resistance to clear.

XAUUSD recovers as yields retreat

Gold bounces back as the 10-year US Treasury yield fell off its 16-year peak. Like other assets, the precious metal has benefited from the retreat of the US dollar across the board in the wake of dovish comments from Fed officials. Suggestions that there is no need to raise interest rates any further have sent bond yields lower, helping non-yielding bullion regain some attractiveness. Meanwhile, global growth uncertainty as acknowledged by US policymakers and a renewed conflict in the Middle East have probably boosted some safe haven buying. 1810 is a sturdy support and the price must lift 1945 before it could continue to climb.

NAS 100 rebounds on renewed risk appetite

The Nasdaq 100 rallies as dovish Fed comments stir up risk appetite. The latest decline in bond yields has channelled some capital back into risk assets. The prospect of interest rates to remain unchanged until the end of the year may offer investors a stable backdrop and attract some buying interest as the third-quarter earnings season is about to kick off. Still, market participants are keeping a wary eye on the conflict between Israel and Palestine as a contagion across the region would threaten fragile global stability and dent the optimism about Israel’s tech industry. 15900 is a key ceiling to clear and 14450 a fresh support.

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