USD/JPY Reverses Sharply Down After US CPI Data Release: What's Next?

Forex

Summary:

On October 16, 2024, USD/JPY recorded a downward momentum, signaling that the downward pressure may continue in the coming period. Investors are currently reacting to the Fed's interest rate outlook and the global macroeconomic situation....

SELL USDJPY

Close Time

CLOSED

149.324

Entry Price

148.900

149.600

152.335 +0.348 +0.23%

27.6

Pips

Loss

148.900

149.600

Exit Price

149.324

Entry Price

149.600

On October 16, 2024, the USD/JPY exchange rate was trading around 149.32 . The US dollar has been gaining against the Japanese yen, but this trend may be under pressure from recent economic and political factors. The US Federal Reserve (Fed) has reduced expectations for aggressive interest rate cuts following the latest jobs report and FOMC minutes. Meanwhile, Japanese producer prices rose more than expected, creating domestic inflationary pressures. USD/JPY recorded a decline following the release of US CPI data, signaling that downward pressure may continue in the near term. Investors are now reacting to the Fed's interest rate outlook and the global macroeconomic situation.

Market psychology

Following the US CPI release, investors turned cautious on expectations that the Fed may cut interest rates gradually, leading to a weakening of the US dollar. The market sentiment index showed increased concerns that the Fed may keep interest rates unchanged or cut them slightly, reducing demand for the US dollar. The Japanese yen, often considered a safe haven, is attracting more interest.

JPY implied volatility has increased, indicating uncertainty about the next direction of USD/JPY. Investors are closely watching economic and policy data to adjust their positions.

Technical analysis

USD/JPY đảo chiều giảm mạnh sau công bố dữ liệu CPI từ Mỹ: Tiếp theo là gì?_1

On the 15-minute USD/JPY chart, the price is hovering near the resistance of 149.463 and the support of 149.306. The Stochastic indicator shows that the price is likely to correct further lower as it is in the overbought zone (82.28), predicting an upcoming bearish reversal. The Bollinger Bands are currently showing wide volatility, suggesting a possible correction if the price fails to break above the resistance.

Trading Recommendations

Based on the analysis, SELL USD/JPY strategy can be considered.

Entries : 149,324

Take Profit : 148,900

Stop Loss: 149,600

Risk Warnings and Disclaimers

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Adam

Commodity

Summary:

On October 16, 2024, the gold market continued to record upward fluctuations, breaking the resistance level at $2,680/oz. Factors such as the US CPI index and concerns about global inflation continued to be the main drivers for the upward trend...

BUY XAUUSD

Close Time

CLOSED

2679.95

Entry Price

2700.00

2670.00

2899.50 -8.53 -0.29%

99.5

Pips

Loss

2670.00

2669.97

Exit Price

2679.95

Entry Price

2700.00

Gold is currently trading at $2,682/oz, recording significant growth thanks to lower-than-expected US CPI data. This has reduced concerns about the possibility of the Fed continuing to raise interest rates. Demand for gold has increased sharply as the market seeks safe assets amid inflation and complicated geopolitical situations. The weakening of the US dollar is also an important factor helping gold prices maintain their upward momentum. Experts predict that if there are no sudden changes in monetary policy, gold prices may continue their positive trend.

In addition, the interest rate cut has boosted demand for gold as a safe haven asset, causing the price of gold to surge nearly $30 immediately after the Fed's announcement. In addition, tensions between countries in the Middle East, especially the conflict in Gaza and the escalation of tensions between Israel and Hamas, are also causing strong fluctuations in commodity prices. These uncertainties have increased demand for gold, which is often considered a safe asset in times of crisis.

Market psychology

Investor sentiment is currently bullish on gold as many people choose gold as a safe haven. Market concerns about the Fed's tightening monetary policy may ease after the positive CPI report. This is reflected in investors shifting from risky assets to gold and other stable assets. The USD Index is weakening, increasing the possibility of continued gold buying. However, this sentiment could still change if there are more unexpected information about inflation or interest rate hikes from the Fed.

Investors are seeking safety in defensive assets like gold as fears of an economic recession grow. This is reflected in the Fear and Greed Index, which is currently in the high “fear” zone due to uncertain volatility in the stock market. In addition, trading data shows that large investors are adjusting positions and moving away from risk assets like cryptocurrencies and stocks. This trend could continue if geopolitical uncertainty persists and economic indicators fall short of expectations.

Technical analysis

Giá Vàng Đang Tăng Vượt Mốc $2,680: Liệu Xu Hướng Mua Có Tiếp Tục?

On the H1 chart, gold broke through a strong resistance at $2,680 and is hovering around $2,682/oz. The widening Bollinger Bands indicate high volatility, with the 20-period moving average at $2,670 acting as short-term support. The CCI is at 106, indicating strong buying momentum, while the RSI is in overbought territory, signaling a possible slight correction before the rally resumes. If the price stays above $2,680, the next target will be the resistance at $2,695. On the other hand, if the price falls below $2,670, a deeper correction towards the support at $2,655 is possible.

Trading Recommendations

Based on technical analysis and current market sentiment, investors can consider buying gold at:

Entry: 2682-2683 USD/oz

TP: 2695 USD/oz.

SL: 2670 USD/oz to limit risk.

Risk Warnings and Disclaimers

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Alan

Forex

Central Bank

Summary:

The UK's Consumer Price Index (CPI) in September decreased more than anticipated, leading to a significant drop in the British Pound. This development has heightened market expectations for additional interest rate cuts by the Bank of England (BOE). From a technical perspective, critical support levels have been breached, indicating further potential for downward movement.

SELL GBPUSD

Close Time

CLOSED

1.30320

Entry Price

1.26500

1.31200

1.24018 +0.00365 +0.30%

49.4

Pips

Profit

1.26500

1.29826

Exit Price

1.30320

Entry Price

1.31200

Fundamentals

On October 16, during the Asian market session, the latest UK CPI data was released; the figures revealed that the annual inflation rate in the UK fell from 2.2% in August to 1.7% in September, a decrease that exceeded expectations. This marks the first time since April 2021 that the overall annual inflation rate has dropped below 2%. The monthly rate was recorded at 0%. Following the data release, the British pound experienced a significant decline, with a drop of over 0.5% during the day.

Grant Fitzner, Chief Economist at the Office for National Statistics, stated, "The decrease in flight and gasoline prices was the primary driver behind the decline in inflation this month. However, the rise in prices for food and non-alcoholic beverages mitigated this impact, marking the first strengthening of food price inflation since early last year."

We believe that the UK inflation data falling below expectations and the slowing growth rate may alleviate some inflationary pressures on the BOE. Lower inflation figures could enhance market expectations for further interest rate cuts by the Bank of England. Previously, the UK's economic growth had also slowed, with stagnation in real GDP growth recorded in July. The deceleration of economic growth alongside cooling inflation may lead to a decline in investor confidence regarding the UK economy, which could subsequently affect the trend of the British pound.

Technical Analysis

Potential for Downtrend Expands as the Key Support Has Been Breached_1

In the 1D timeframe, the GBPUSD has been in a consistent upward trend since August. It reached a critical resistance level of 1.3433 at the end of September, after which it began to retrace. Last week, a double bottom structure was formed, indicating potential for further upward movement. However, due to today's UK CPI data indicating a larger-than-expected decline, the British pound experienced a significant drop, which undermined the double bottom structure and broke the previous upward trend, widening the decline potential for the GBPUSD.

Currently, the GBPUSD has fallen below the crucial support level of 1.3000, which has now turned into resistance. It is recommended to wait for a price rebound to around the 1.3000 level where we could see weakness and potentially go short. If the price rebounds above 1.3000, we can wait until it approaches around 1.3060 to go short. The first target level would be 1.2870.

It is recommended to go short at the highs.

Trading Recommendations

Trading Direction: Sell

Entry Price: 1.3020

Target Price: 1.2650

Stop Loss: 1.3120

Deadline: October 30, 2024 15:00:00

Support: 1.2981, 1.2892, 1.2800

Resistance: 1.3020, 1.3074, 1.3101

Risk Warnings and Disclaimers

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Alan

Commodity

Political

Summary:

Market sentiment toward crude oil supply disruptions eased, and crude oil began to fall back; with the resumption of crude oil production in Libya and the U.S. Gulf region, the market supply of crude oil will still face a surplus.

SELL WTI

EXP

EXPIRED

70.900

Entry Price

66.500

72.100

72.924 +0.741 +1.03%

Pips

EXPIRED

66.500

69.815

Exit Price

70.900

Entry Price

72.100

Fundamentals

As at October 8, the geopolitical tensions in the Middle East have escalated following Iran's missile strike on Israel on October 1, leading to concerns over potential disruptions in Iranian crude oil supply and causing oil prices to soar by over US$10.

However, Israeli Prime Minister Netanyahu informed the Biden administration this past Monday that he is inclined to target Iran's military installations rather than its oil or nuclear facilities. This statement has alleviated fears surrounding the regional tensions, resulting in a drop in oil prices of more than US$3 on that day. As at today, WTI prices continue to reflect this downward trend.

On the demand front, the latest monthly reports from the International Energy Agency (IEA) and OPEC have both revised down their projections for global oil demand this year. The IEA emphasizes oil security in its report, highlighting the impact of Middle Eastern tensions on oil prices while asserting that oil supply continues to flow. It suggests that unless there are significant disruptions, the market could face an oversupply next year.

In the short term, oil prices are likely to remain volatile due to geopolitical uncertainties. With Libya restoring its production capabilities and the Gulf Coast output returning to normal post-hurricane, coupled with OPEC member nations expected to increase production in December, pressures on crude oil may intensify. Nevertheless, if Middle Eastern tensions escalate once again, we could see a resurgence in oil prices.

Technical Analysis

Crude Oil Oversupply Returns as Middle East Eases Slightly_1

As at October 16 during the European trading session, WTI crude oil is trading around US$69.80, marking a decline for four consecutive trading days.

In the 1W timeframe, oil prices benefited from the escalating situation in the Middle East over the previous two weeks, resulting in a two-week upward trend that peaked at US$77.91. However, last week, a long upper shadow formed, with the closing price settling below the critical resistance level of US$75.35. The current week's downward movement suggests that this rally may be coming to an end.

At present, oil prices are likely to continue testing the significant support level at US$65.00. If this support is breached, there will be additional downward potential; otherwise, prices may fluctuate within a range of US$65.00 to US$75.00 in the short term. It is recommended to go short at the highs.

Trading Recommendations

Trading Direction: Sell

Entry Price: 70.9

Target Price: 66.50

Stop Loss: 72.10

Deadline: October 30, 2024 15:00:00

Support: 69.11, 66.81, 66.16

Resistance: 70.65, 71.12, 71.60

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Pound Sterling faced a significant decline following the release of disappointing UK inflation data for September, prompting traders to anticipate interest rate cuts by the Bank of England.

SELL GBPUSD

Close Time

CLOSED

1.30200

Entry Price

1.28500

1.31200

1.24018 +0.00365 +0.30%

40.2

Pips

Profit

1.28500

1.29798

Exit Price

1.30200

Entry Price

1.31200

The Pound Sterling (GBP) experienced a dramatic decline as the latest Consumer Price Index (CPI) data released by the UK Office for National Statistics (ONS) revealed a slowdown in inflation, falling well below the Bank of England's (BoE) target. The annual headline CPI for September decelerated to 1.7%, significantly lower than the 2.0% target set by the central bank, and also lagging behind market expectations of a more modest decline to 1.9% from August's 2.2%. In addition, the month-on-month inflation remained stagnant, signaling a worrying trend for the UK economy.

The core CPI, which strips out volatile components such as food and energy, also undershot projections, falling to 3.2% from the previous reading of 3.6%. Analysts had anticipated a drop to only 3.4%, indicating that inflationary pressures are easing more sharply than previously thought. This softer inflation backdrop, particularly in services, which rose by a mere 4.9% compared to 5.6% in August, is likely to force traders to reassess their outlook for interest rates, increasing speculation around potential rate cuts in the remaining BoE meetings of the year.

Market participants are currently factoring in a 25 basis point cut from the BoE in either of its next two policy meetings scheduled for November and December. This sentiment is bolstered by a recent slowdown in wage growth, as evidenced by the Average Earnings Excluding Bonuses metric rising by only 4.9% for the three months ending in August—the slowest increase in two years, down from 5.1% in the previous reading. With consumer spending under pressure from rising living costs and stagnant wage growth, the economic landscape appears increasingly fragile.

In today’s London session, the Pound has fallen below the psychological support level of 1.3000 against the US Dollar (USD), reflecting growing pessimism among traders. Meanwhile, the USD continues to strengthen, buoyed by expectations of moderate interest rate cuts from the Federal Reserve (Fed). The US Dollar Index (DXY) is holding steady near 103.30, as traders anticipate cuts of 25 basis points in the Fed's upcoming policy meetings, following the central bank's aggressive 50 basis point cut last month.

Data from the United States has shown signs of resilience, with key indicators such as Nonfarm Payrolls (NFP) and the ISM Services PMI beating expectations, which diminishes concerns over a potential economic slowdown. Despite this positive trend, inflationary pressures in the US remain a pressing concern, complicating the Fed's path forward. As we approach the release of the US Retail Sales data for September—expected to show a growth of 0.3%—investors will closely scrutinize these numbers as a barometer of consumer sentiment and spending patterns in an uncertain economic climate.

Technical Analysis

The GBP/USD pair is exhibiting strong bearish momentum, having broken through the critical support level of 1.3000. Current price action indicates that the GBP is under pressure and attempting to extend its corrective bearish trend, with 1.2850 emerging as a potential target. Should the price rally, resistance is seen at 1.3110, which could invalidate the bearish outlook. For the day, traders can expect the GBP/USD to oscillate within a trading range of 1.2940 for support and 1.3070 for resistance. The prevailing trend remains bearish as the market digests the implications of the latest economic data and adjusts to the shifting expectations surrounding interest rates.

TRADE RECOMMENDATION

SELL GBPUSD

ENTRY PRICE: 1.30200

STOP LOSS: 1.31200

TAKE PROFIT: 1.2850

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Australian Dollar (AUD) continues its decline, pressured by economic instability in China, Australia’s largest trading partner.

SELL AUDUSD

Close Time

CLOSED

0.66900

Entry Price

0.66200

0.67300

0.62842 +0.00071 +0.11%

26.9

Pips

Profit

0.66200

0.66631

Exit Price

0.66900

Entry Price

0.67300

The Australian Dollar has extended its losing streak for a third consecutive day against the US Dollar, as market sentiment remains grim regarding Australia's closest economic partner—China. Despite the Reserve Bank of Australia (RBA) maintaining a hawkish stance, particularly through recent comments by Deputy Governor Sarah Hunter, the Aussie is under intense downward pressure. Hunter emphasized that while inflation expectations remain anchored, persistent price growth continues to challenge the central bank’s efforts, keeping markets on edge regarding future monetary policy decisions.

Economic uncertainty in China, which has shown weaker-than-expected growth figures and ineffective fiscal stimulus measures, has compounded the woes for the Australian Dollar. China’s economic slowdown is a critical factor influencing global commodity prices, directly impacting the Australian economy, which relies heavily on exports to its northern neighbor. Although China has announced stimulus packages aimed at reinvigorating its sluggish economy, skepticism among investors remains high as concerns over the depth and effectiveness of these measures continue to linger.

The sentiment from China has been exacerbated by geopolitical tensions, including heightened military drills around Taiwan by China’s People’s Liberation Army. Markets have reacted cautiously, viewing these maneuvers as adding uncertainty to an already fragile economic outlook.

Meanwhile, the US Dollar has been steadily gaining strength, bolstered by robust employment figures and stronger-than-expected inflation data. This has diminished market expectations of aggressive easing by the US Federal Reserve. Instead of drastic rate cuts, the Fed appears to be preparing for a more measured approach. The CME FedWatch Tool reflects this sentiment, showing a 94.1% probability of a modest 25 basis point rate cut in November, with no significant chance of a larger 50-basis-point reduction.

The current economic data has led analysts to revise their forecasts, now predicting 125 basis points in total rate cuts over the next 12 months, a more conservative outlook than earlier in the year when aggressive rate reductions seemed likely.

Adding to this, Federal Reserve Bank of Atlanta President Raphael Bostic indicated on Tuesday that he expects one more 25 basis point rate cut this year. This sentiment, mirrored by other Fed officials, suggests that the central bank is content with a slow and steady approach, avoiding the kind of aggressive monetary policy shifts seen earlier in the year.

Domestically, the Australian economy isn’t offering much support to the embattled Aussie either. The Westpac Leading Index remained unchanged in September, marking six straight months of stagnation. This stagnation, combined with low consumer confidence, paints a picture of a sluggish economy that could struggle to regain momentum in the coming months.

Consumer sentiment, as measured by the ANZ-Roy Morgan Consumer Confidence Index, has been persistently weak, remaining below the 85-point mark for a record 89 consecutive weeks. This prolonged low confidence reflects broader concerns over economic uncertainty, rising living costs, and sluggish wage growth—factors that weigh heavily on household spending and overall economic activity.

Market participants are also taking note of recent analysis from the Commonwealth Bank of Australia, which suggests that the RBA could cut interest rates by 25 basis points by the end of 2024. This projection is contingent on a stronger disinflationary trend, which, according to analysts, may develop faster than the RBA anticipates.

In China, the latest economic data offers little reason for optimism. The National Bureau of Statistics reported that the monthly Consumer Price Index (CPI) remained stagnant at 0% in September, down from a modest 0.4% rise in August. The annual inflation rate ticked up by 0.4%, falling short of the 0.6% expectation, while the Producer Price Index (PPI) plunged by 2.8% year-on-year. The deeper-than-expected drop in producer prices highlights the ongoing deflationary pressures within China's industrial sector, a worrying sign for global commodity markets.

These deflationary trends in China could further exacerbate the downward momentum for the Australian Dollar, as they directly impact demand for key Australian exports such as iron ore, coal, and liquefied natural gas (LNG). With China’s economic engine sputtering, the risk of a prolonged slowdown grows, leaving the AUD vulnerable to further declines.

Technical Analysis

Australian Dollar Faces Continued Pressure Amid China's Economic Woes and Hawkish US Data_1

From a technical perspective, the AUD/USD pair has broken below the crucial 0.6697 support level, signaling a potential shift towards a more bearish outlook. If the pair holds below this level, it is likely to target the next downside level at 0.6622, a key area of interest for bearish traders. However, a recovery above 0.6697 could trigger a short-term rally, with gains potentially extending towards the 0.6744 resistance area.

Traders should closely monitor price action around these key levels, as a rejection of support could accelerate the pair’s downward trajectory. The expected trading range for today is between 0.6640 (support) and 0.6750 (resistance).

TRADE RECOMMENDATION

SELL AUDUSD

ENTRY PRICE: 0.6990

STOP LOSS: 0.67300

TAKE PROFIT: 0.6620

Risk Warnings and Disclaimers

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Winkelmann

Commodity

Summary:

Amid ongoing geopolitical uncertainties, gold has staged a strong rally, rapidly approaching historical highs. Once there is a breakthrough, it may hit new highs again.

BUY XAUUSD

Close Time

CLOSED

2674.94

Entry Price

2700.00

2647.00

2899.50 -8.53 -0.29%

41.1

Pips

Profit

2647.00

2679.05

Exit Price

2674.94

Entry Price

2700.00

Fundamentals

Recently, concerns over second waves of inflation have decreased expectations for Fed rate cuts, leading to persistent U.S. dollar strength and subsequent downward pressure on gold prices. Nevertheless, a weakening job market continues to underpin prospects of Fed rate cuts. Additionally, the safe-haven demand fueled by geopolitical tensions and political uncertainties ahead of U.S. elections, coupled with expectations for easing, bolster gold's potential for significant gains in the medium to long term, limiting downside risks.

In the short term, Israel's plans for retaliation against Iran could escalate Middle Eastern conflicts at any moment, heightening fears of broader regional confrontations. Simultaneously, tensions on the Korean Peninsula have sharply escalated due to 'drone infiltration,' attracting safe-haven buying and dip-buying support for gold, potentially paving the way for further upside moves.

Technical Analysis

Gold Rebounds Again in Bullish Trend for New Highs?_1

In the 4H chart, XAUUSD entered an oscillating phase at highs. After falling to the psychological support level at $2600, significant buy-on-dip activity emerged, swiftly pushing prices back toward recent peaks. A potential head-and-shoulders bottom pattern looms, signaling that if the neckline at $2670 is breached, gold may test higher levels, possibly even challenging all-time highs.

As gold bulls dominate, investors should buy at lows. Try to buy when XAUUSD returns to $2650, or when XAUUSD surges above $2670. Meanwhile, the stop-loss should be set below $2650.

Trading Recommendations

Trading direction: Buy

Entry price: 2671

Target price: 2700

Stop loss: 2647

Support: 2600/2650

Resistance: 2670/2700

Risk Warnings and Disclaimers

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Data

USD/JPY Reverses Sharply Down After US CPI Data Release: What's Next?

Market psychology

Technical analysis

Trading Recommendations

Gold Prices Are Rising Above $2,680: Will The Buying Trend Continue?

Market psychology

Technical analysis

Potential for Downtrend Expands as the Key Support Has Been Breached

Fundamentals

Technical Analysis

Trading Recommendations

Crude Oil Oversupply Returns as Middle East Eases Slightly

Fundamentals

Technical Analysis

Trading Recommendations

Pound Sterling Plummets as UK Inflation Data Disappoints, Fed Cuts on the Horizon

Technical Analysis

Australian Dollar Faces Continued Pressure Amid China's Economic Woes and Hawkish US Data

Gold Rebounds Again in Bullish Trend for New Highs?

Fundamentals

Technical Analysis

Trading Recommendations

Risk Disclosure