Dollar Is Temporarily Supported by Rate Hike Expectations, New Expectations to Form Soon

Summary:

The Fed officials' successive speeches may trigger the market to form some kind of consensus. And this could lead to a unified speculative theme, such as speculation about the end date of interest rate hikes, the terminal rate, and the economic recession, and so on. Also, we should be wary of market concerns about the strong dollar.

BUY USDX

Close Time

CLOSED

113.942

Entry Price

115.189

113.240

108.710 -0.010 -0.01%

70.2

Pips

Loss

113.240

113.220

Exit Price

113.942

Entry Price

115.189

Fundamentals

After two consecutive trading days of sharp gains, the Dollar on Wednesday, although still recorded gains. But the rise has slowed down, and the overall oscillation is on the upside, with a slight increase of 0.07% at the close.

Yesterday, three important Fed officials delivered speeches. Chicago Fed President Charles Evans said that if inflation turns optimistic, there may be fewer rate hikes; Minneapolis Fed President Neel Kashkari said that the Fed will not repeat its past mistake of cutting rates once the economy weakens; St. Louis Fed President James Bullard believed that the U.S. faces serious inflation problems, the credibility of the Fed's inflation target is at risk, and there will be more rate hikes at future meetings, with policy interest rates may peak at around 4.5%.

The current US interest rate is 3-3.25% and will reach 4.5% by the end of the year. This means that there are at least 125-150 bps of rate hikes for the remaining two meetings this year, that is, either "75 bps in November and 50 bps in December" or "75 bps in November and 75 bps in December". The common point in both possibilities is - a 75 basis point hike in November.

Thus, although the disruption of the UK fiscal plan on financial markets is temporarily nearing its end and its influence is gradually decaying, it cannot be ruled out that a new round of expectations of interest rate hikes are formed by the market.

This week, in particular, many Fed officials delivered intensive and frequent speeches. This is the first week that Fed officials have been out of the blackout period since the September rate hike. And such frequent speeches may trigger the market to form some kind of a consensus, and then a unified speculative theme, such as speculation on the end date of interest rate hikes, the end rate, or the economic recession, and so on.

Another thing to be wary of is that the dollar is now approaching 115, which is a hurdle. Because when the dollar reaches 115 or higher, market concerns about the impact of a strong dollar on emerging market countries will intensify. Meanwhile, the dollar flows from overseas to the U.S. showing a "domino effect", and the possibility of a financial crisis cannot be ruled out. At that time, the dollar may experience a round of retracement.

Technical Analysis

In the 4H chart, the dollar breaks the 38.2% Fibonacci Retracement (113.942) again. In the past two trading days. The focus should be on whether the dollar can stabilize on this line, and once it has, a new round of gains will begin. Strong support is 112.372 in the short term, and the dollar will have the conditions for a strong retracement if it falls below this line. As for indicators, Stoch and DMI show that the dollar will fall in the short term; Ichimoku shows that the dollar is not finished in the short term. Overall, the dollar may rise after falling.

USDX: Dollar Is Temporarily Supported by Rate Hike Expectations, New Expectations to Form Soon_1

Trading Recommendations

Trading direction: Long

Entry price: 113.942

Target price: 115.189

Stop loss: 113.240

Support: 113.942/113.500/112.906

Resistance: 114.514/115.189/115.925

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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Winkelmann

Central Bank

Summary:

Despite the higher risk of recession in Europe, the European Central Bank (ECB) is more hawkish compared to the Bank of England (BOE). The technical side of the pound is severely damaged after suffering a severe blow, and the market sentiment is extremely pessimistic, so the euro still has an advantage over the pound in the short term.

BUY EURGBP

Close Time

CLOSED

0.89450

Entry Price

0.92000

0.88000

0.82882 -0.00090 -0.11%

145.0

Pips

Loss

0.88000

0.87991

Exit Price

0.89450

Entry Price

0.92000

Fundamentals

Last week, the BOE raised interest rates by 50 basis points as expected, which appears to be much stingier compared with the 75bp rate hikes by the ECB and the Federal Reserve. It was mainly because the United Kingdom is in the midst of a rare energy crisis and high inflation, and its economic outlook continues to deteriorate. The BOE is facing a much worse environment, which keeps the pound at a disadvantage against other currencies for a long time.

In addition, the British government announced a tax cut plan which has been the largest one in 50 years. The plan requires the issuance of a large number of new bonds to provide funds. The market fears that this move may undermine the BOE's efforts to curb inflation, so the pound and the British government bonds have seen a "historic plunge."

Many institutions called on the BOE to urgently raise interest rates, but the response was that interest rates would not be raised until the meeting in November. As central banks tighten monetary policy faster, the risk of a global recession intensifies. The dollar thus keeps rising with the support from the Fed's hawkish stance and risk aversion, while the battered pound has come under further pressure.

The pound is facing the pressure of the strong dollar, while the euro is benefiting from the ECB's aggressive interest rate hikes following the Fed, so the battered pound is expected to suffer further pressure.

Technical Analysis

EURGBP: UK Tax Cuts Undermine Central Bank's Rate Hikes, Sell-Off in Pound May Continue_1

In the 4H time frame, EURGBP once soared to a high near 0.9278. Although it fell back shortly, the current market almost lost confidence in the pound. The market sentiment is extremely pessimistic. Investors rushed to buy dollars in a panic, which makes the pound's situation even less optimistic. The EURGBP is still in an uptrend and is expected to rise above 0.9200 again in the short term.

It is recommended to go long with small positions when the price falls back to near 0.8950. The target can be set near 0.9200, with the stop loss set below 0.8850.

Trading Recommendations

Trading direction: Long

Entry price: 0.8945

Target price: 0.9200

Stop loss: 0.8800

Support: 0.8850/0.8725

Resistance: 0.9000/0.9200

Risk Warnings and Disclaimers

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Winkelmann

Russia-Ukraine Conflict

Central Bank

Summary:

Oil prices have fallen to a key support area. The short-term escalation of the Russia-Ukraine conflict may cause oil prices to rebound.

BUY BRENT

Close Time

CLOSED

83.803

Entry Price

87.500

81.500

76.039 -0.388 -0.51%

369.7

Pips

Profit

81.500

87.500

Exit Price

83.803

Entry Price

87.500

Fundamentals

Most central banks around the world have been raising interest rates in earnest recently. Market expectations of a global recession continue to rise, with lingering concerns about falling oil demand. Crude oil markets remain under pressure. In addition, the pace of global monetary policy tightening accelerated. In the context of tightening momentum and increased market volatility, high-risk markets such as crude oil continue to face an unfavorable situation.

However, tensions in the Russia-Ukraine conflict continue to escalate. With the end of the referendum in the Russian-occupied areas of Ukraine, the West may again increase sanctions against Russia. And the West's move could be met with a larger energy shutdown in retaliation from Russia, who has also issued a new nuclear warning. Meanwhile, leaks in two Nord Stream gas pipelines, which could be repaired for months, will strike a serious blow to the European continent's energy security.

With the winter heating season approaching, the energy crisis in Europe is becoming more severe, and crude oil supply problems remain prominent. Moreover, the Iran nuclear deal is once again at an impasse, making it impossible for Iranian crude oil to rejoin the market in the short term, and the possibility of oil prices rising again cannot be ruled out.

Technical Analysis

BRENT: Russia-Ukraine Conflict Escalates, Oil Price Rally within Reach_1

In the daily chart, BRENT continues to oscillate downward. The price is close to the previous pressure-turned-support area in the short term and is expected to rebound after it stabilizes.

BRENT: Russia-Ukraine Conflict Escalates, Oil Price Rally within Reach_2

In the 4H chart, BRENT's path of least resistance remains to the downside for now. However, the indicator RSI has recovered from the oversold area and the downtrend has weakened. The rally is expected to start again. It is recommended to keep an eye on the support below around 82.5.

It is recommended to go long after the price falls to near 82.5 and stabilizes, with the rebound target set near the resistance level of 87.5 and the stop loss set below 82.0.

Trading Recommendations

Trading direction: Long

Entry price: 83.5

Target price: 87.5

Stop loss: 81.5

Support: 82.5/82.0

Resistance: 85.7/87.5

Risk Warnings and Disclaimers

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Eva Chen

Summary:

Last week, the Ministry of Finance of Japan intervened in foreign exchange markets for the first time in 20 years. Nevertheless, this will only stabilize the exchange rate of the JPY in the short term, but it will not prevent the JPY from further weakening. The Ministry of Finance's intervention appears to have been triggered by the speed at which the JPY has weakened, rather than by policymakers' desire to set a specific level for the JPY. Therefore, as long as the JPY weakens gradually and orderly, the possibility of further intervention by the Ministry of Finance is very low.

BUY USDJPY

Close Time

CLOSED

144.780

Entry Price

147.680

139.800

157.686 +0.427 +0.27%

9.3

Pips

Loss

139.800

144.687

Exit Price

144.780

Entry Price

147.680

Fundamentals

The Bank of Japan (BOJ) is buying government bonds to keep yields down. Last week, the Ministry of Finance of Japan intervened in foreign exchange markets for the first time in 20 years. Nevertheless, this will only stabilize the exchange rate of the JPY in the short term, but it will not prevent the JPY from further weakening.

The BOJ's yield curve control instrument only limits the yield on 10-year Japanese government bonds, so in the BOJ's use of the instrument, the rise in yields can penetrate other government bonds. Even if the yield spread between U.S. and Japan government bonds continues to widen and the Federal Reserve continues to aggressively raise interest rates, the BOJ will continue to stay put.

As a result, the BOJ has been buying ultra-long-term government bonds for two consecutive days in an attempt to contain rising yields. And although the Japanese authorities have been talking about the trend of the JPY and even spending huge amounts of money to support the JPY, it is generally believed that the JPY will remain weak while the BoJ's policies remain ultra-loose. The unplanned bond purchase is a sign of the continuation of the ultra-loose policy, so the pressure of weakening the JPY will continue.

USDJPY: Ministry of Finance of Japan's Intervention also Failed to Prevent the JPY from Further Weakening_1

Technical Analysis

The USDJPY continued to move higher during the New York session on Tuesday after a two-day rally briefly lost momentum after approaching 145.00 as risk appetite began to reassert itself.

Nevertheless, the overall trend remains bullish. The intraday pullback was due to the large volatility of the Ministry of Finance of Japan intervention's failure to significantly break through recent congestion, suggesting that the intervention failed to provide substantial support for the JPY, while the USD remained well supported by safe-haven flows and the Fed, a strong hawkish expectation.

In the 4H timeframe, bulls break through and stand firm above the upward trend line in a consolidation state, indicating that bulls regain full control. The USDJPY's outlook remains unchanged as the range trading continues. Intraday bias remains neutral at this point. As long as 143.83 resistance is converted into support, it is expected to rebound further and break through 145.89 to move up towards 147.68 long-term resistance. On the downside, however, a decisive breakthrough to 145.89 also means confirming a short-term peak. It is recommended to go long at the lows.

Trading Recommendations

Trading direction: Long

Entry price: 144.70

Target price: 147.68

Stop loss: 139.80

Deadline: 2022-10-11 20:00:00

Support: 144.06, 143.54, 143.12

Resistance: 144.78, 145.00, 145.90, 146.76

Risk Warnings and Disclaimers

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Eva Chen

Summary:

WTI crude oil showed a downward trend within the downtrend channel and seemed to find support at the bottom. As crude oil prices fall back to their lowest level since January, OPEC+ must announce a cut of at least 500K barrels a day in the next few days to contain the decline and set a bottom for oil prices.

SELL WTI

Close Time

CLOSED

80.400

Entry Price

73.000

86.800

73.193 -0.396 -0.54%

89.3

Pips

Profit

73.000

79.507

Exit Price

80.400

Entry Price

86.800

Fundamentals

WTI crude oil fell for the fourth straight week amid expectations that a stronger USD would hit the global economy. On Friday, WTI crude oil fell below US$80, returning to the level at the beginning of 2022.

At the September meeting, OPEC+ temporarily boosted oil prices by cutting production by 100K barrels a day, which was the main reason why crude oil had been able to stabilize above US$80 before. However, (on the demand side) the global economy is in a recession crisis as the Federal Reserve continues its tough interest rate hike. Together with the COVID-19 pandemic in China, the decrease in global demand is far greater than the increase in demand for fuel oil in Europe due to the replacement of natural gas, resulting in a decline in oil prices.

OPEC will have to cut 500K – 1M barrels per day to maintain oil prices at around US$90.

As many OPEC+ members' production is lower than the quota, any effective reduction in production will be less than the amount yet to be agreed upon. The near-term oil price stability can only be achieved by OPEC+. If OPEC+ does not cut production as soon as possible, it will stimulate oil prices to further decline.

With the risk of a recession in Q4 and relatively weak fundamentals, supply and demand will rebalance, which will lead to an increase in inventories. If OPEC does not reduce its supply, the crude oil market will turn to futures premiums, and some crude oil products will find it difficult to find a destination.

There are 3 key points to focus on in Q4. The impact of the Fed's policy of raising interest rates on the economy; A significant decrease in production due to geopolitical conflicts or sudden weather events; Demand for natural gas substitution in winter in Europe. Considering the current macro situation, the oil price is likely to continue to fall in Q4, with the overall fluctuation ranging from US$65 to US$85.

WTI: Focus Should Be Paid to Pullback in Short Term and Rebound in Middle Term_1

Technical Analysis

In the short term, we continue yesterday's view that bulls will return to the 38.2% Fibonacci retracement level after a short-term bottoming. That is, close to the major psychological threshold of US$80. A higher retracement could reach the 50% Fibonacci retracement level, which is closer to the channel resistance level of US$81.15 or US$82.30, a 61.8% Fibonacci retracement.

Before reflecting the overbought condition or bulls' exhaustion, the stochastics have a certain rise space. Therefore, crude oil will continue to move higher from the bottom. Before reaching the overbought zone, the RSI also has some areas to cover. Therefore, bulls will follow up until they reach the overbought zone.

However, 100 SMA is lower than 200 SMA, indicating that the path of least resistance is downward, or the downward trend is more likely to recover rather than reverse. 100 SMA is aligned with 50% Fibonacci and channel top to increase its strength as a (resistance) ceiling. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 80.40

Target price: 73.00

Stop loss: 86.80

Deadline: 2022-10-11 20:00:00

Support: 76.33

Resistance: 80.00, 81.15, 82.30

Risk Warnings and Disclaimers

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Eva Chen

Summary:

The market now expects the GBP to remain under pressure as it falls to near 40-year lows against the backdrop of the recent strengthening of the USD. In the short term, with the end of a two-year cap on energy prices, coupled with a pullback in the USD, the GBP will rebound.

SELL GBPUSD

Close Time

CLOSED

1.12000

Entry Price

1.00000

1.13800

1.24389 +0.00241 +0.19%

116.4

Pips

Profit

1.00000

1.10836

Exit Price

1.12000

Entry Price

1.13800

Fundamentals

The Bank of England (BOE) Governor Bailey said last night that "the BOE will not hesitate to raise interest rates if necessary, and the date of the monetary policy meeting will remain unchanged at November 3".

The BOE Governor Bailey's statement helps short-term GBP recovery. This indicates that the BOE will not change its direction, which will help the recovery of the GBP and send a message that the BOE is not panicking. However, in any case, the UK market is now very sensitive to any communication from UK policymakers, and the GBP has not emerged from its predicament. The BOE must raise interest rates, but this will exacerbate the slowdown. Based on the experience of 1992, the interest rate hikes also failed to support the GBP.

As there is no clear valuation threshold for the GBP, our forecast for the GBPUSD to fall to parity looks "quite reasonable", but still does not consider it inevitable. Although traditional valuations suggest that the GBP does necessarily fall much further, the GBP's "collapse" is actually a risk premium linked to policy measures, which has led markets to expect the GBP to fall to parity or below. At the same time, the exchange rate issue is unlikely to develop into a crisis because the UK does not have much debt denominated in foreign currencies.

Options markets indicate traders expect s the GBP to continue to fall. The GBP's three-month risk reversal contract is close to its most bearish level since 2016, while others show a 43% chance of falling to parity with the USD by the end of the year.

GBPUSD：GBP Has Yet to Emerge from Its Predicament Although Bailey's Speech Appeased the Market_1

Technical Analysis

The GBPUSD has recovered from Monday's historic low of 1.0356 to above 1.0800 as the RSI and stochastics appear to have bottomed in the oversold zone, suggesting a potential adjustment is inevitable. However, downside risks are likely to persist in the near term as the indicators remain in the bearish zone and the exchange rate itself is well below the bearish channel.

For bulls, the short covering will test the starting point of this sell-off at 1.1200 after adjusting for levels 1.0800–1.0930. Bulls need to break through and stay above this level to clear the way for the 20-day SMA level of 1.1377 and the pandemic low of 1.1408.

On the bright side, resistance at 1.1545 has been limiting the upward movement of the GBPUSD since the beginning of the month. If this round of short covering can test 1.1545, the bulls could take effect again before reaching 1.1737.

On the downside, in the short term, 1.0670 became the support for the second consecutive day. If breaking this support again, the bears are bound to test again the psychological level of 1.0500, paving the way for another fall to 1.0356 to reactivate the long-term downward trend.

Overall, although the GBPUSD is trying to make a long recovery from its historic low, the GBPUSD has yet to emerge from its predicament. More selling and panic will continue after the downward trend returns. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 1.1200

Target price: 1.0000

Stop loss: 1.1380

Deadline: 2022-10-11 20:00:00

Support: 1.0800, 1.0600, 1.0356

Resistance: 1.1200, 1.1377, 1.1408

Risk Warnings and Disclaimers

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Warren Takunda

Summary:

Strong break resitance yesterday. Now in correction phase . Should this level hold we could see price print higher highs .

BUY EURNZD

EXP

EXPIRED

1.69200

Entry Price

1.73000

1.67800

1.83329 -0.00152 -0.08%

Pips

EXPIRED

1.67800

1.73324

Exit Price

1.69200

Entry Price

1.73000

Technical Analysis

EURNZD is trading in a ascending channel and just just broke a strong supply ( resistance level)

Which suggests price is going to look to go up towards 1.7500 , which means we are bullish biased

Price is currently sitting in the confluence pocket of :

broken resistance (which might turn into support

key Fibonacci retracement level

ascending trendline acting as diagonal support

Trading Recommendations

BUY EURNZD

ENTRY PRICE : 1.69200

STOPLOSS :1.67800

TAKE PROFIT : 1.7300

EXP : 11 OCTOBER

Risk Warnings and Disclaimers

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Data

Dollar Is Temporarily Supported by Rate Hike Expectations, New Expectations to Form Soon

Fundamentals

Technical Analysis

Trading Recommendations

UK Tax Cuts Undermine Central Bank's Rate Hikes, Sell-Off in Pound May Continue

Fundamentals

Technical Analysis

Trading Recommendations

Russia-Ukraine Conflict Escalates, Oil Price Rally within Reach

Fundamentals

Technical Analysis

Ministry of Finance of Japan's Intervention also Failed to Prevent the JPY from Further Weakening

Fundamentals

Technical Analysis

Trading Recommendations

Focus Should Be Paid to Pullback in Short Term and Rebound in Middle Term

Fundamentals

Technical Analysis

Trading Recommendations

GBP Has Yet to Emerge from Its Predicament Although Bailey's Speech Appeased the Market

Fundamentals

Technical Analysis

Trading Recommendations

EURNZD :Major Resistance Break & Retest

Technical Analysis

Trading Recommendations

Risk Disclosure