Go Short at the Highs with Range-bound Fluctuation in the Middle Term

Central Bank

Forex

Summary:

The U.S. non-farm payrolls have shown strong performance, providing a short-term boost to the U.S. dollar; however, the underlying depreciation trend of the U.S. dollar remains unchanged. Meanwhile, the Chinese yuan continues to strengthen due to favorable policies from the People's Bank of China (PBOC)), leading to a bearish outlook for the USDCNH.

SELL USDCNH

Close Time

CLOSED

7.05346

Entry Price

6.98200

7.10500

7.29121 -0.01636 -0.22%

515.4

Pips

Loss

6.98200

7.10501

Exit Price

7.05346

Entry Price

7.10500

Fundamentals

As of October 8, during the European trading session, the USDCNH traded around 7.060, marking a decline of 0.20% for the day.

On the news front, on October 4, the U.S. released non-farm payrolls indicating an increase of 254,000 jobs in September, significantly surpassing the expected 150,000. The unemployment rate in the U.S. also came in lower than anticipated, leading traders to generally abandon their bets on a 50 basis point rate cut by the Federal Reserve in November. The robust employment figures suggest a degree of resilience in the U.S. economy, enhancing the likelihood of a "soft landing." As a result, the dollar experienced support, with the U.S. Dollar Index (USDX) surpassing the 102 threshold and the USDCNH accelerating to 7.1037.

Despite the robust employment data from the U.S. in September, it has not altered the underlying scenario of significant debt and severe inflation in the U.S. The possibility of the Fed continuing to cut interest rates remains, which may only provide a temporary boost to the U.S. dollar. This is evident in recent market performance; following a sharp increase in the USDCNH last Friday, it began to decline on Monday and has continued to fall today. This indicates a market sentiment leaning towards the depreciation of the U.S. dollar, increasing the likelihood of a decline in the USDCNH.

Furthermore, the Chinese yuan has been bolstered by the PBOC's proactive growth-stabilizing policies on September 24, which have uplifted market sentiment and provided stronger support for the Chinese yuan's exchange rate. In the near future, as these growth-stabilizing measures persist, there is potential for improved economic growth momentum in the fourth quarter, allowing the Chinese yuan to maintain its recent strength.

In summary, the U.S. dollar has not escaped the cycle of depreciation; rather, the Chinese yuan has been consistently gaining strength under the favorable policies of the PBOC, heightening the likelihood of a decline in the USDCNH.

Technical Analysis

Go Short at the Highs with Range-bound Fluctuation in the Middle Term_1

In the 1W timeframe, the USDCNH formed a long bullish candle last week, indicating that bearish sentiment for the USDCNH remains weak as it approaches the critical support level of 6.9700, with insufficient downward momentum.

In the 1D timeframe, the USDCNH has been on a downward trend from July to September. After falling to the key support level of 6.9700 on September 26, it started a technical rebound, rising to the significant resistance level of 7.100, aided by favorable U.S. non-farm payrolls, before experiencing a subsequent decline.

Examining the candlestick structure, the USDCNH's highs and lows are progressively declining, suggesting increasing upward pressure on the price. The short-term trend appears bearish with a likelihood of testing the critical support at 6.9700 once again. If this support level is effectively breached, it would open up further downside potential for the USDCNH.

Overall, the price movement of USDCNH is likely to fluctuate within a range of 6.9700 to 7.100.

It is recommended to go short at the highs in the short term.

Trading Recommendations

Trading Direction: Sell

Entry Price: 7.0600

Target Price: 6.9820

Stop Loss: 7.1050

Deadline: October 22, 2024 15:00:00

Support: 7.0455, 7.0310, 7.0000

Resistance: 7.0838, 7.1032, 7.1129

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Alan

Central Bank

Forex

Summary:

Strong U.S. September non-farm payrolls data boosted the U.S. dollar and increased downward pressure on the AUDUSD.

SELL AUDUSD

EXP

EXPIRED

0.67820

Entry Price

0.66600

0.68550

0.62483 +0.00129 +0.21%

Pips

EXPIRED

0.66600

0.66837

Exit Price

0.67820

Entry Price

0.68550

Fundamentals

As of today during the European trading session, the AUDUSD has experienced a consecutive decline for four trading days, currently facing significant downward pressure.

On the U.S. side: Last Friday, the non-farm payrolls for September exceeded expectations, highlighting the resilience of the U.S. labor market. The robust non-farm payrolls diminished market expectations for a substantial interest rate cut by the Federal Reserve in November, prompting adjustments to the Fed's future monetary policy outlook. This has enhanced the appeal of the U.S. dollar.

In comparison, the strength of the U.S. dollar has weakened the attractiveness of the Australian dollar, as investors are more inclined to hold currencies with a relatively favorable interest rate outlook; under these circumstances, the AUDUSD is under notable downward pressure.

On the Australia side: The borrowing costs in Australia remain elevated in the context of combating inflation. Currently, the Reserve Bank of Australia (RBA) is in a wait-and-see stance regarding interest rate decisions, requiring further confirmation that inflation will return to the target range before taking any subsequent action. This results in a relatively small divergence in interest rate policy between Australia and the U.S., which has, to some extent, influenced the exchange rate of the AUDUSD.

Overall, due to the strengthening of the U.S. dollar prompted by robust non-farm payrolls, the Fed may slow its pace of interest rate cuts. Consequently, the support the Australian dollar had from interest rate differentials is gradually being undermined, leading to a less optimistic short-term outlook. However, if the global risk sentiment improves or if there are shifts in Fed policy, the Australian dollar may experience a rebound.

Technical Analysis

Robust Non-farm Payrolls Push Up the U.S. Dollar with Short-term Bearish Outlook_1

In the 1M timeframe, the AUDUSD is currently in a consolidation phase at the lows. Although there was strong upward momentum in August and September, it remains hindered by the critical resistance level of 0.6950, leading to a subsequent downturn. Additionally, the recent release of robust U.S. non-farm payrolls has intensified upward pressure on the AUDUSD, suggesting it may continue to consolidate at lower levels.

In the 1D timeframe, the AUDUSD has breached the short-term upward trend line, indicating signs of a potential downward shift and showcasing strong bearish momentum in the near term.

In terms of technical indicators, the AUDUSD is beginning to fall below the middle band of the Bollinger Bands. The MACD line has crossed below the signal line, giving birth to a death cross, while the Relative Strength Index (RSI) has turned downward from the overbought zone, indicating a tendency for the AUDUSD to decline in the short term.

Currently, if the AUDUSD effectively breaks below the key support level of 0.6650, and makes new lows, bears will likely open further downward channels, continuing to test the lower end of the consolidation range at the 0.6280 level. If the downward momentum halts above 0.6650, it may stabilize.

It is recommended to go short at the highs.

Trading Recommendations

Trading Direction: Sell

Entry Price: 0.6782

Target Price: 0.6660

Stop Loss: 0.6855

Deadline: October 22, 2024 15:00:00

Support: 0.6720, 0.6675, 0.6621

Resistance: 0.6760, 0.6782, 0.6817

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Traders' Opinions

Summary:

The EUR/USD pair declines as a strong US Dollar contrasts with the Euro's weakness amid Eurozone uncertainty, with key support at $1.0940

SELL EURUSD

EXP

EXPIRED

1.10000

Entry Price

1.08500

1.10500

1.04249 +0.00643 +0.62%

Pips

EXPIRED

1.08500

1.08156

Exit Price

1.10000

Entry Price

1.10500

In today’s foreign exchange market, the EUR/USD currency pair continues its downward trajectory, trading beneath critical psychological levels as the US Dollar gains strength. The prevailing bearish sentiment is largely driven by robust economic data from the United States, which has rekindled investor expectations for a prolonged period of elevated interest rates from the Federal Reserve. This scenario underscores the contrasting economic narratives shaping the two regions and hints at further challenges for the Euro.

Recent data from the US has exceeded market expectations, showcasing resilience in key economic indicators. Notably, employment figures and consumer spending have illustrated the US economy's ongoing recovery post-pandemic, prompting analysts to forecast that the Federal Reserve may sustain its current interest rate policy for an extended period. This hawkish sentiment from the Fed has rendered the US Dollar increasingly attractive to investors, leading to a stronger dollar and consequently exerting downward pressure on the EUR/USD pair.

Conversely, the Eurozone's economic outlook remains clouded with uncertainty, influenced by a confluence of factors including geopolitical tensions, sluggish growth in major economies, and concerns about inflationary pressures. These issues have collectively undermined confidence in the Euro, creating an environment where the currency struggles to find traction against its US counterpart. As the economic landscape evolves, traders are now closely monitoring key support levels to gauge the next potential move for the EUR/USD pair.

Technical Analysis

From a technical perspective, the EUR/USD currency pair has not exhibited any substantial movement in recent trading sessions, oscillating within a tight range. The price remains stable below the critical resistance level of $1.0990, indicating that the bearish trend is firmly in place. Stochastic indicators have started to lose their upward momentum, signaling potential overbought conditions that may trigger a resumption of the correctional bearish trend. Traders are keenly watching for potential downside targets, with immediate support levels identified at $1.0940, followed by $1.0850.

Given the current market dynamics, the outlook for EUR/USD remains bearish unless the pair can breach the $1.0990 resistance level and hold above it. A sustained move past this threshold, particularly above $1.1040, would likely shift the narrative towards a more bullish sentiment. However, in the absence of such a breakout, the prevailing trend suggests further downside potential.

For today, the anticipated trading range for the EUR/USD pair is projected between $1.0890 as a support level and $1.1040 as resistance.

TRADE RECOMMENDATION

SELL EURUSD

ENTRY PRICE: 1.1000

STOP LOSS: 1.1050

TAKE PROFIT: 1.0850

Risk Warnings and Disclaimers

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Warren Takunda

Traders' Opinions

Economic

Summary:

The Japanese Yen (JPY) remained stable against the US Dollar (USD) on Tuesday, as geopolitical tensions and intervention concerns offset fading expectations for further rate hikes by the Bank of Japan (BoJ).

BUY USDJPY

Close Time

CLOSED

148.000

Entry Price

152.000

146.000

156.302 -1.112 -0.71%

109.7

Pips

Profit

146.000

149.097

Exit Price

148.000

Entry Price

152.000

The Japanese Yen (JPY) demonstrated remarkable stability against the US Dollar (USD) on Tuesday, holding steady for the second consecutive day. This resilience comes amid growing concerns about a sustained bullish trend for the JPY, with overnight remarks from Japanese officials intensifying speculation about potential currency intervention. As geopolitical tensions escalate in the Middle East, the Yen’s safe-haven appeal has gained traction, further supporting its position against the Dollar.

As the trading day unfolded, the USD showed slight declines, creating additional downward pressure on the USD/JPY pair. The interplay between these currencies reflects broader market sentiments, particularly as traders digest recent developments in global geopolitics and monetary policy shifts. With the upcoming Federal Open Market Committee (FOMC) meeting minutes on Wednesday and key US inflation data scheduled for Thursday and Friday, market participants are keenly awaiting insights that could influence future policy directions.

Despite this relatively favorable backdrop for the Yen, the prevailing sentiment among JPY bulls remains cautious. The fading odds of another interest rate hike by the Bank of Japan (BoJ) in 2024 have tempered enthusiasm, prompting investors to reassess their positions. Concurrently, expectations for aggressive policy easing by the Federal Reserve (Fed) have also diminished, which has contributed to a more stable outlook for the USD. The balancing act between these central banks will be crucial in shaping currency trajectories in the near term.

Technical Analysis

From a technical perspective, the USD/JPY pair has encountered significant resistance at the 148.53 level, resulting in a slight bearish bias. This resistance point is critical, as a breach could signal a continuation of the bullish trend that has dominated in recent months.We are closely monitoring for any positive momentum that might assist in surpassing this barrier. Should the USD/JPY successfully break above this threshold, subsequent targets are projected at 150.00 and 152.00, reflecting a continuation of bullish sentiments.

Conversely, should the pair experience a decline and break below the 147.25 level, the market could see increased selling pressure, propelling the USD/JPY towards the 145.36 region in the near term. For today, the expected trading range for USD/JPY is between 146.80 (support) and 148.50 (resistance).

TRADE RECOMMENDATION

BUY USDJPY

ENTRY PRICE: 148.00

STOP LOSS: 146.00

TAKE PROFIT: 152.00

Risk Warnings and Disclaimers

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Winkelmann

Commodity

Summary:

Short-term markets have reduced bets on further drastic interest rate cuts, resulting in a slight retreat in gold prices, with rising risks of further correction.

SELL XAUUSD

Close Time

CLOSED

2644.41

Entry Price

2600.00

2672.00

2623.41 +28.97 +1.12%

300.8

Pips

Profit

2600.00

2614.33

Exit Price

2644.41

Entry Price

2672.00

Fundamentals

Over recent times, buoyed by geopolitical tensions and optimistic expectations of central bank rate cuts, gold has seen impressive gains, reaching historical peaks repeatedly. However, the September US non-farm payrolls report revealed an unexpected addition of 254,000 jobs, indicating resilience in the job market, and dampening the market's hopes for continued aggressive rate cuts by the Fed. Consequently, the US Dollar Index experienced its strongest rally in months.

Moreover, Fed officials generally supported a cautious approach to cutting rates, prompting markets to pare back bets on another major rate cut. In the short term, gold faces the threat of further correction amidst the rebound in the dollar and US Treasury yields. Nonetheless, given persistent safe-haven demand driven by geopolitical uncertainties and the upcoming US election, coupled with prospects for further central bank easing, gold retains significant upside potential in the medium to long term, with downside likely to be limited.

Technical Analysis

Cooling Expectations for Aggressive Rate Cuts Signal Imminent Correction in Gold Prices_1

Regarding the 4-hour chart, XAUUSD has been oscillating near record highs recently, with momentum visibly weakening. Despite escalated Middle Eastern conflicts, gold failed to set new highs, instead experiencing a pullback, signaling potential profit-taking that could lead to price weakness. A breakdown below $2635 could precipitate a rapid decline towards the $2600 mark, potentially lower. Technically, signs of overbought conditions suggest an imminent correction, with buying opportunities upon dips recommended.

Chasing the uptrend is not recommended. Try to sell when XAUUSD reaches $2640 or drops below $2630. The target should be at $2600, and the stop-loss should stay above $2660.

Trading Recommendations

Trading direction: Sell

Entry price: 2640

Target price: 2600

Stop loss: 2672

Support: 2600/2635

Resistance: 2660/2670

Risk Warnings and Disclaimers

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Manuel

Economic

Central Bank

Summary:

This pattern often suggests that selling momentum is weakening, indicating a possible bullish reversal from this support zone.

BUY GBPUSD

Close Time

CLOSED

1.30930

Entry Price

1.32700

1.30000

1.25573 +0.00575 +0.46%

93.0

Pips

Loss

1.30000

1.29996

Exit Price

1.30930

Entry Price

1.32700

Fundamentals

The UK's Gross Domestic Product (GDP) report for the second quarter delivered weaker-than-expected results. The economy expanded by just 0.5% quarter-over-quarter, slightly below both the anticipated rate and the previous quarter’s growth of 0.6%. On a year-over-year basis, GDP rose by 0.7%, again missing the forecast of 0.9% growth.

Bank of England (BoE) Governor Andrew Bailey has hinted at a potential shift toward a more aggressive stance on interest rate cuts, citing manageable inflation levels. His remarks have fueled speculation that the central bank could lower rates by a quarter-point in November, with the possibility of another cut in December.

Market participants are increasingly expecting the BoE to announce a rate reduction in its upcoming meetings, particularly as inflation in the UK’s services sector remains persistent. Annual services inflation, a key indicator closely tracked by the BoE, climbed to 5.6% in August, up from 5.2% in July. This has heightened the cautious sentiment surrounding the BoE's interest rate policy.

Bailey’s recent comments during the European trading session on Tuesday suggested that while the BoE will continue its easing cycle, it is likely to proceed at a cautious pace to avoid any drastic economic shocks.

From an economic standpoint, the S&P Global/CIPS UK Purchasing Managers’ Index (PMI) for September showed a slight decline, although it remained above the critical 50.0 level, indicating continued expansion. The PMI report indicated that private sector business activity fell to 52.9 from 53.8 in August, as both the manufacturing and services sectors experienced a sharper-than-expected slowdown.

Meanwhile, the U.S. Bureau of Labor Statistics revealed that nonfarm payrolls increased by 254,000 jobs in September, following an upward revision of 72,000 jobs over the previous two months. The unemployment rate edged down to 4.1%, reflecting sustained strength in the labor market.

Further evidence of robust demand for workers and low layoff rates supports the view that the job market remains solid, easing concerns about a potential cooling of the economy.

October's employment report is expected to reflect the effects of last month’s Boeing strike, which involved around 33,000 factory workers. Another labor event, the short-lived U.S. dockworkers' strike, lasted just three days and is unlikely to significantly impact payroll data.

Additionally, the September ADP employment change report surprised to the upside, adding 143,000 jobs against a forecast of 120,000. This data precedes the highly anticipated Nonfarm Payrolls (NFP) report, which investors are closely watching for confirmation of labor market trends.

The market’s sentiment aligns with the Federal Reserve's projections, with the CME FedWatch Tool indicating a 93.5% probability of a 25 basis point rate cut in November, while only 6.6% of investors expect a larger cut of 50 basis points. Emerging Divergence Points to Bullish Potential_1

Emerging Divergence Points to Bullish Potential_1

Technical Analysis

The GBP/USD pair has reached a local low of 1.3060 in the most recent session, a level not seen for a month. At the same time, the Relative Strength Index (RSI) has dropped to new lows, signaling a potential bullish divergence. This occurs when the RSI falls more sharply than the price itself, despite the current price being higher than the previous low. This pattern often suggests that selling momentum is weakening, indicating a possible bullish reversal from this support zone.

Both the 100- and 200-period moving averages remain above the current price, without showing signs of a bearish crossover. This suggests that bulls still hold some control, as no new lower lows have been established. For a potential take-profit target, we can utilize the Fibonacci expansion tool, which aligns the target zone with the 100-period moving average, providing a potential upward objective. However, if the price breaks below the key support level of 1.3000, further downside pressure could emerge.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3090

Target price: 1.3270

Stop loss: 1.3000

Validity: Oct 17, 2024 15:00:00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

The recent low, near 1.077, aligns with the 0.618 and 0.50 Fibonacci retracement levels, suggesting this area could serve as a retracement zone with bullish targets in play.

BUY EURUSD

Close Time

CLOSED

1.09498

Entry Price

1.10800

1.09100

1.04249 +0.00643 +0.62%

39.8

Pips

Loss

1.09100

1.09083

Exit Price

1.09498

Entry Price

1.10800

Fundamentals

The U.S. Bureau of Labor Statistics reported that nonfarm payrolls grew by 254,000 jobs in September, following a 72,000-job upward revision for the previous two months. The unemployment rate dropped to 4.1%, suggesting ongoing strength in the labor market.

Early indications showing strong demand for workers and low layoff levels, further suggest that the job market remains resilient, easing concerns about a potential slowdown.

October’s employment report will capture the impact of last month's Boeing strike, which involved approximately 33,000 factory workers. Another key labor event, the brief U.S. dockworkers’ strike, ended after three days and is unlikely to directly affect payroll figures.

In September, the ADP employment change report exceeded expectations, adding 143,000 new jobs versus a forecast of 120,000. This comes ahead of the official Nonfarm Payrolls (NFP) data, which investors are closely monitoring for confirmation of this labor market strength.

Market sentiment aligns with the Federal Reserve’s projections, with the CME FedWatch Tool showing a 93.5% probability of a 25 basis point rate cut in November. Only 6.6% of market participants expect a more significant reduction of 50 basis points.

The Eurozone's economic outlook has been dampened by weaker-than-expected inflation data. The Harmonized Index of Consumer Prices (HICP) rose by 1.8% year-on-year in September, missing forecasts of 1.9% and down from the 2.2% increase in August. Core inflation also declined slightly, registering at 2.7% compared to 2.8% in the previous month.

These numbers indicate that overall inflation has now dipped below the European Central Bank’s (ECB) 2.0% target, increasing the likelihood of additional rate cuts by the ECB. Such a move could result in capital outflows and weaken the Euro.

ECB policymakers favoring further monetary easing are preparing to advocate for another rate cut in the coming months, following a series of disappointing economic reports. However, this push may face resistance from more conservative members of the governing council.

Initially, officials were not expecting another rate cut during the October 17 meeting, as borrowing costs had already been lowered. This view was supported by sluggish growth projections and the belief that inflation would continue to decline gradually.

However, ongoing weak business activity across the Eurozone, declining confidence in Germany, and a notable slowdown in wage growth have bolstered the argument for further easing. Policymakers with a "dovish" stance are increasingly advocating for more stimulus, and recent economic challenges have intensified this momentum. Bullish Rebound From Key Support EURUSD Eyes Higher Levels_1

Bullish Rebound From Key Support EURUSD Eyes Higher Levels_1

Technical Analysis

The EUR/USD temporarily dipped below the 1.100 level and appears to be forming a significant support zone. The recent low, near 1.077, aligns with the 0.618 and 0.50 Fibonacci retracement levels, suggesting this area could serve as a retracement zone with bullish targets in play. The key resistance remains at 1.1200, a level that has been tested three times recently.

The 100- and 200-period moving averages are positioned above 1.1090, and their proximity could indicate a potential crossover after a pullback. If the price respects the downtrend line, there could be an upward move toward the 0.50 Fibonacci retracement level, offering a bullish target. Conversely, a break below 1.088 could pave the way for more significant declines.

Trading Recommendations

Trading direction: Buy

Entry price: 1.0950

Target price: 1.1080

Stop loss: 1.0910

Validity: Oct 17, 2024 15:00:00

Risk Warnings and Disclaimers

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Go Short at the Highs with Range-bound Fluctuation in the Middle Term

Fundamentals

Technical Analysis

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Robust Non-farm Payrolls Push Up the U.S. Dollar with Short-term Bearish Outlook

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Emerging Divergence Points to Bullish Potential

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Risk Disclosure