EUR/USD Looking at EURUSD’s chart, we can see that EUR lost ground against the USD and it feels at the lowest level for the week, at the current rate of 0.971. If today it will not manage to hold the rate above the level of 0.97, then we could see it dropping towards the level of 0.9640 otherwise it should upwardly react toward the level of 0.9760.

The big revelation - From delusions to reality Twenty years ago, the single European currency was born to bridge nations and open new paths for European integration. The spread between the government bonds of the member states that adopted the single currency and those of Germany decreased almost to zero, even for countries like Greece, Italy, Spain, and Portugal, which will be tested by the financial crisis a few years later. In fact, since 2001, the member countries of the euro agreed to a Stability and Growth Pact (SGP) where all were obliged to ensure that member countries pursue sound public finances and coordinate their fiscal policies. In return, all members enjoyed the cost of borrowing as Europe's powerful economies since they would borrow at roughly the same interest rates as Germany. And this was done until 2008, as seen in the diagram below. But a few years later, with the financial crisis of 2008, everything changed. It was revealed that member states had effectively built foreign currency debt. This was true because they could not print money in Euros to avoid bankruptcy due to the high debt they had incurred. If they could do so, such a move would obviously create high inflation and currency depreciation conditions, but the member state would avoid bankruptcy. But that didn't happen. The eurozone had changed its face and became strikingly different. As Greece, Portugal, Spain, and Italy could go bankrupt, spreads on their government bonds shot up to extremely high levels. To avoid bankruptcy and exit from the eurozone, and since they couldn't print money, they were forced to be supported by the ECB, the EU and, in some cases, the IMF in exchange for significant cuts in public financial spending. The austerity demonstrated by Europe led to the escalation of social reactions and the rise of populism and nationalism, not only in the economically weak member states. The uncertainty lasted for quite a long time. However, things in Europe finally calmed down when ECB President Mario Draghi said the historic phrase: "he would do everything in his power to preserve the euro". The European Central Bank has introduced Outright Monetary Transactions (OMT), a program under which the bank makes purchases on secondary markets of government bonds issued by eurozone member states. The program was accompanied by conditions of the discipline of euro member governments. Its existence was enough to reassure investors. Everything flows - The European debt is mutualised And while the countries since 2015 were trying to find a stabilization model, a few years later came COVID-19, which brought even more significant changes to the Eurosystem. The lockdown once again created the risk of bankruptcy in some member states, as according to the stability programs they followed, they were obliged to have small deficits or surpluses to be financed by the European Stability Mechanism. Policymakers to avoid a new round of social and financial uncertainty in the eurozone took a remarkable decision; all member states could run a public deficit of more than 3 per cent of GDP, thus offering financing to all member states for as long as needed due to the effects of the pandemic. With the end of the pandemic on 21 July 2022, the Governing Council of the ECB, in order to fulfil its primary mandate, which is Price Stability, approved the establishment of a Transmission Protection Instrument (TPI) in order to ensure that the direction of monetary policy is transmitted smoothly to all euro area countries. The TPI can be activated to address unwarranted, disorderly market developments if these pose a serious threat to the smooth transmission of monetary policy across the euro area. In such a case, the Eurosystem can buy securities from individual countries in order to combat a deterioration in funding conditions that is not justified by the country's fundamentals. This means that the central bank, unlike in the past, when the Eurosystem bought bonds of member states according to the specific weight each member has in the common currency, today in order to achieve price stability, can and does selectively buy bonds from each member state, regardless of its specific weight in the euro. In simple words, that means it mutualises the debt of the member states. This undoubtedly constitutes a considerable change in policy for Europe. Eurobonds are here impacting euro and investment opportunities In conjunction with NextGenerationEU (NGEU), the EU's long-term budget confirms the significant changes that will take place in Europe. It is the most extensive stimulus package ever financed in Europe. The funding program was designed to stimulate recovery after COVID-19. A total of €2.018 trillion in current prices is helping to rebuild Europe by making it greener, more digital, and more resilient. The program initiators say that "this is more than a recovery plan. It is...

USD/JPY rallies as BoJ might stay dovish The Japanese yen weakens as quantitative tightening remains a remote prospect. As its currency sank to a 32-year low, the Bank of Japan’s ultra-loose monetary policy has become increasingly at odds with the finance ministry’s view. The central bank may still deem it premature to shift away from the status quo given heightened global uncertainties. The latter, however, concerned by the yen’s unidirectional slide and its negative impacts on corporations, may choose to intervene in the market again, popping up short-term market moves. The greenback is heading towards 155.00 with 144.00 as the closest support. EUR/USD slips as energy crisis hinders inflation fight The euro remains under pressure as the ECB is expected to raise rates by 75bp. The energy price pressure in the euro zone has been a significant headache for policymakers. With inflation reaching five times the ECB’s target last month, the central bank may have little choice but to go down the path of rapid rate increases. However, unlike other major peers, the ECB will need to keep bond spreads in check or risk another debt crisis in peripheral countries. Needless to say, such a rock and hard place situation makes the euro hardly an attractive asset to hold onto. 0.9540 is a fresh support and parity (1.0000) is a psychological hurdle. USD/CAD steadies ahead of BoC hike The Canadian dollar struggles as the risk appetite ebbs and flows. Consumer price pressures in Canada remain high and above forecasts despite a slight deceleration in September, which would call for another large-sized rate hike by the BoC this week. A 50-basis point hike would be the bare minimum while markets are leaning towards a 75bp move. Still the central bank’s hawkish stance might not be enough to shift overall sentiment. A recovery in oil prices temporarily offers the commodity-linked currency a little edge against the greenback. 1.3500 is the first support and 1.4300 could be the next target. S&P 500 falls as Fed remains hawkish The S&P 500 slides as investors refrain from adding risk. Upbeat quarterly earnings offer stocks limited support as bearish sentiment continues to drive the price action. Hawkish comments from Fed officials mirror strong US job data and high inflation, reinforcing expectations the central bank will not divert from its aggressive path. With cash offering historic risk-free returns these days, most investors would like to see signs inflation is slowing down before jumping in with both feet. Until then, sporadic rallies would only feed the bears. The index may tank to a two-year low at 3280 with 3800 as the immediate resistance.

All eyes will be on the European Central Bank meeting next week. We think a 75bp hike looks like a done deal. The PMI survey on Monday will also be closely watched, providing clues on whether the eurozone economy has contracted even further. For the Bank of Canada, we expect a similar 75bp rate hike, given the upside surprise in inflation. US: The Fed cannot slow the pace of hikes yet There are lots of important numbers out for the US next week, but none are likely to change the market's forecast for a 75bp interest rate hike on 2 November. 3Q GDP is likely to show positive growth after the “technical” recession experienced in the first half of the year. Those two consecutive quarters of negative growth were primarily caused by volatility in trade and inventories, which should both contribute positively to the 3Q data. Consumer spending is under pressure though while residential investment will be a major drag on growth. We are forecasting a sub-consensus 1.7% annualised rate of GDP growth. We will also get the Fed’s favoured measure of inflation, the core personal consumer expenditure deflator. This is expected to broadly match what happened to core CPI so we look for the annual rate to rise to 5.2% from 4.9%. With the economy growing and inflation heading in the wrong direction, the Fed cannot slow the pace of hikes just yet. Also, look out for durable goods orders – Boeing had a decent month so there should be a rise in the headline rate although ex-transportation, orders will likely be softer. We should also pay close attention to consumer confidence and house prices. The surge in mortgage rates and collapse in mortgage applications for home purchases has resulted in falling home sales. With housing supply also on the rise, we expect to see prices fall for a second month in a row. Over the longer term, this should help to get broader inflation measures lower given the relationship with the rental components that go into the CPI. Canada: A 75bp hike is the most likely outcome In Canada, the central bank is under pressure to hike rates a further 75bp given the upside surprise in inflation. Job creation has also returned and consumer activity is holding up so we agree that 75bp is the most likely outcome having previously forecast a 50bp hike. UK: Markets looking for clarity on fiscal plans and government stability The ruling Conservative Party has said it will fast-track plans to get a new leader in place by next Friday - and potentially even by Monday if only one candidate makes it through the MP selection round. Candidates have until Monday at 2pm to clear the hurdle of 100 MP nominations to make it onto the ballot paper, before Conservative MPs vote on the outcome. With only a week to go until the Medium Term Fiscal Plan on 31 October, there's inevitably a question of whether this is enough time for a new prime minister to rubber stamp Chancellor Jeremy Hunt's plans for debt sustainability. Investors are - probably rightly - assuming that Hunt will remain in position under a new leader. But the bigger question is whether the Conservative Party can unite behind a new leader and whether a more stable political backdrop can emerge - because if it can't, then not only is there uncertainty surrounding future budget plans, but also whether we're moving closer to an early election. Eurozone: ECB to hike by 75bp again amid ongoing inflation concern The hawks have clearly convinced the few doves left of the necessity to go big on rate hikes again. Contrary to the run-up to the July and September meetings, there hasn’t been any publicly debated controversy on the size of the rate hike. In fact, European Central Bank President Christine Lagarde seems to have succeeded in disciplining a sometimes very heterogeneously vocal club. To this end, it is hard to see how the ECB cannot move again by 75bp at next week’s meeting. As the 75bp rate hike looks like a done deal, all eyes will also be on other, more open, issues: excess liquidity, quantitative tightening and the terminal interest rate. Besides the ECB, which will be the key focal point for eurozone investors, we’re looking at the survey gauges of the economy next week. The PMIs on Monday will be critical to determine whether the eurozone economy has slid further into contraction or whether an uptick has occurred. There is not much evidence on the latter in our view, but Monday will provide more clarity on how the eurozone economy is performing in October. Key events in developed markets next week Source: Refinitiv, ING Read the original analysis: Key events in developed markets next week

UK Prime Minister Liz Truss stepped down this week after only 44 days in the office. The resignation follows heavy pushback on the 'mini-budget' presented in late September, which sparked fears of even more persistent inflation and much stronger rate hikes by the Bank of England. The new chancellor Jeremy Hunt has already overturned many of the spending measures introduced in the mini-budget, which has supported GBP and eased the pricing on BoE hikes. Going forward, the conservative party aims to find a new PM already next week, and the process begins by conservative MPs voting to select two final candidates on Monday. Then, the party members will cast the final deciding vote by Friday October 28 at the latest, or alternatively the less popular of two withdraws without a vote by the party members. At the time of writing, former chancellor Rishi Sunak is the most likely candidate followed by the former Prime Minister Boris Johnson. The European Council agreed on joint measures to limit energy prices largely in line with the earlier proposal by the Commission. While details still remain uncertain, the measures include 'a dynamic price corridor' to limit further rises in gas prices despite the earlier pushback by Germany. In addition, EU will work to set up a mechanism to cap the price of gas used for electricity generation, to create a new benchmark for gas prices and to create a voluntary joint purchasing platform (see details here). Spot gas prices have eased to the lowest levels since the start of the war as inventory levels are now close to full in most EU countries, but long-term solutions to replacing Russian gas still remain uncertain. Market sentiment has remained cautious not least on the back of the UK political uncertainty. US 10y bond yields have reached new cycle highs above 4.20%, but in contrast to the rise seen earlier this year, the most recent uptick has been driven largely by higher inflation expectations - a worrying development for the Fed in light of the persistent upside surprises in realized inflation. FOMC silent period begins on Saturday, this week's communication has supported our call for 2x75bp hikes in the last two meetings of the year. Next week, we expect the ECB to hike its policy rates by 75bp. The move is fully priced in by the markets, so focus will be on communication. We expect Lagarde to acknowledge that the risk of the September's downside scenario materializing has increased (-0.9% growth in 2023). In addition, markets will focus on comments about ECB potentially ending APP reinvestments next year to complement the liquidity tightening from maturing TLTROs. See our full preview: ECB Preview - Focus on the technicalities, 19 October. In contrast, Bank of Japan embarked on emergency bond buying this week, and we see no tightening indications ahead of next week's policy meeting. We will look out for further FX intervention to stem the yen slide, but as global yields continue to rise, so does the pressure on BoJ, which seems determined to defend its yield curve control. On the data front, markets will focus on the October Flash PMIs on Monday. We expect further signs that euro area is sliding towards a recession already this year, while US growth remains modestly positive. On Thursday, we see upside risks to our forecast for the US Q3 Flash GDP at +1.1% q/q AR, as the recent sharp decline in imports could have boosted net exports more than anticipated. Download The Full Weekly Focus

A central bank extravaganza lies ahead. The show will kick off with the Bank of Canada meeting, where markets expect another rate increase but are split on the size. Meanwhile in Europe, a triple-barreled hike by the ECB is already locked in, putting the emphasis on the press conference. Finally, the Bank of Japan is unlikely to throw a life jacket to the sinking yen. 

Summary United States: Momentum Continues to Slow This week's data show that while the U.S. economy has remained resilient thus far, tighter monetary policy is certainly starting to impact some key sectors. Industrial production regained its footing in September, but there are signs of slower growth ahead, while regional manufacturing surveys support this loss of momentum. Meanwhile, the real estate sector has been significantly affected by rising interest rates, with total housing starts falling 8.1% in September. Peering ahead, the forward-looking Leading Economic Index points to a recession in the coming year. Next week: New Home Sales (Wed), Q3 Real GDP (Thu), Personal Income & Spending (Fri) International: Robust Consumer Inflation, Subdued Consumer Spending This week saw more evidence on the international front of divergent economic trends—with consumer inflation remaining rapid and consumer spending staying subdued. Inflation surprised to the upside in the United Kingdom, Canada and New Zealand. Meanwhile, retail spending data were subdued in the United Kingdom and Canada. For now, rapid inflation remains a greater concern than slower growth for foreign central banks, and we anticipate further monetary tightening in the weeks and months ahead. Next week: U.K. PMIs (Mon), Bank of Canada (Wed), European Central Bank (Thu) Credit Market Insights: ARMs Make a Comeback as Mortgage Applications Plummet The Mortgage Bankers Association (MBA) reported on Wednesday that mortgage applications for purchase fell 4.5% during the week ended October 14. The long skid has helped push application counts to their lowest level since 1997. With markedly higher financing costs squeezing demand for mortgages, there is one type of home loan that has made a comeback this year, the adjustable rate mortgage (ARM). Topic of the Week: "Modest" Is the Word of the Day in a Mixed Beige Book From employment in New York to overall economic activity in Dallas, "modest" was the word of the day in the newest Beige Book released by the Federal Reserve. Modest growth was broad-based, manufacturing activity improved on net and demand for services remains strong. That said, the outlook continues to worsen. Read the full report here

ECB meeting – 27/10 – at its last meeting in September, it was widely expected that the ECB would raise rates, with the only uncertainty being around whether they would go by 75bps or 50bps. The decision to raise rates by 75bps was dictated by the upgrading of the banks inflation forecasts, which were adjusted higher to 8.1% in 2022 and 5.5% in 2023. These targets now look incredibly dated given that we now have German inflation well above 10% and the EU headline rate also into double figures with core prices at 4.8% and likely to move higher. A growing number of ECB policymakers have been increasingly vocal about the need for much higher rates, despite an acknowledgment that GDP is likely to fall quite sharply. The ECB cut its 2023 and 2024 forecasts, to 0.9% and 1.9% respectively, it raised its forecast for 2022 to 3.1%. These GDP forecasts seem extraordinarily optimistic given the energy backdrop, and perhaps speaks to a certain amount of cognitive dissonance on the part of ECB officials. The ECB said it expects to continue hiking in subsequent meetings, albeit probably at a slower pace than the Federal Reserve, although we’ve heard from a number of governing council members of the need to front load rises and move the headline rate back to 3%. This would be a huge move given where rates are now, at 1.25%. If the ECB does another 75bps this week the effect on countries like Italy could well be problematic and while the governing council of the TPI program there are still many unanswered questions as to how it might work. There is also the added problem that an aggressive tightening is precisely the wrong medicine at a time when demand is cratering and the blocs largest economy, Germany is likely to tip into recession by year end. Bank of Japan – 28/10 – with the Japanese yen set to fall to 32-year lows against the US dollar the focus remains firmly on the Bank of Japan and its apparent unwillingness to alter course on its own monetary policy settings. We’ve already seen the first round of intervention which saw the yen initially strengthen, however until such time as we see some sort of pivot from the Japanese central bank then further weakness towards 150 and 160 looks increasingly likely. The Bank of Japan’s CPI forecast is expected to be pushed up from its current 2.3%, especially given that we’re already at 3%, and an 8 year high, and there is little sign that price pressures are diminishing. US Q3 GDP and Core PCE – 27/10 and 28/10 – with the US economy currently coming off the back of two negative quarters, aka, a technical recession, it seems almost counterintuitive that we can expect to see the economy rebound when the latest Q3 numbers are released later this week. Q3 GDP is expected to show a rebound of 2.2%, with most of the rebound expected to come about on the back of inventory rebuilding. Personal consumption, which showed growth of 2% in Q2 despite the 0.6% contraction is expected to be much weaker at 0.8% given the weaker trend seen in recent retail sales numbers and higher food and energy prices. Core prices have shown in recent weeks to be much stickier than anticipated as services inflation start s to bleed into the economy along with higher wages. Core PCE is expected to show an additional uplift in data released the day after the US Q3 GDP numbers with a jump to 5.2% expected in September, from 4.9% and reinforcing the probability that the Fed will move by another 75bps when they meet next week, as well as increasing the risk that another 75bps could come in December. Bank of Canada meeting – 26/10 – are we near to peak rate hikes for the Bank of Canada. It seems unlikely given the direction of travel from the Federal Reserve. We saw the Bank of Canada raise rates by another 75bps, following on from the 100bps seen in July. There is already increasing evidence that wages are starting to rise in response to this recent inflation surge, however headline CPI does appear to be showing signs of slowing with headline CPI falling to 7% in August, from the June peaks of 8.1%. This suggests we could well see 50bps at this week’s meeting rather than the customary bumper hikes we’ve become used to. The increased focus on core prices appears to be driving the dynamics here and while lower they are much stickier at around 5.7%. UK banks Q3 results - HSBC 25/10 – HSBC shares hit their lowest levels this year earlier this month on the back of the sharp rise in yields cause by the UK mini-budget, as...

The British pound is likely to see another few months of turmoil now that Prime Minister Liz Truss has resigned. During Truss’ reign, which latest a mere 45 days, the shortest tenure in UK prime ministerial history, the pound was rocked by her government’s plan to borrow billions of dollars to fund tax cuts. On the day of the release of the ‘mini-budget’ that contained the tax cut plan, the pound fell from ~$1.12000 to its weakest level ever, with speculation that it could hit and cross parity with the US dollar, a forex reality that had only been explored once in the past, in 1985, when the super-strength of the US dollar decimated the pound (along with every other currency). The pound did recover from this crisis as Truss and her government began to backtrack on the planned tax cuts, with further support added to the GBP from an emergency intervention from the Bank of England that is a story for another day. As it stands, the GBP now has a few major events ahead of it that could kick up some volatility.  GBP/USD 4GH, with RSI The first is whether Boris Johnson, the Prime Minister that was succeeded by Truss, will contest for the leadership of the country's ruling party, and by extension the Prime Ministership. It is anyone's bet how the market will react to this possibility.  The second is whether Rishi Sunak, the UK’s ex finance Minister who was beaten by Truss for the top position in September, will contest for the Prime Ministership. As a known face with a known agenda, Sunak contesting for the job could help provide some stability to currency markets. Sunak had earlier dismissed Truss’ tax cut plans as fantasy economics in favour of a very gradual application of tax over a decade. The GBP/USD is currently priced at $1.1230, -2.3% down from its October peak, and any bias in any direction may emerge in the next few days as the leadership race heats up.

Outlook: To an overload of economic data we need to add worries about so-called stealth intervention from at least two sources, the Bank of Japan and the Swiss National Bank. Experts doubt the BoJ is intervening, despite a warning from FinMin Suzuki: “We cannot tolerate excessive currency moves driven by speculators. We are closely watching currency moves with a sense of urgency.” PM Kishida also said “speculative-driven rapid currency moves [are] problematic.” But the dollar/yen moved to a 32-year high soon afterwards at 149.29 before retreating, and not sedately. Suzuki reminded the press the BoJ had intervened before (about $18 billion) and the government doesn’t always announce intervention. He also denies the primary cause is the BoJ cap on yields, saying lots of other factors are at work. The reports end up making Suzuki looking somewhat weak. Any loss of face is to be corrected and we expect the market to back down periodically ahead of any punishment. As for the SNB conducting stealth intervention, nobody knows and if they do, they are not telling. We are willing to believe it if only one the highly unusual choppy pattern in the dollar/Swiss, even if euro/Swiss is or should be the focus. We have been studying charts for a very long time and choppiness like this in definitely not normal. The most fundamental of the fundamentals is the cost of energy. It’s the central key determinative factor in a wide array of economic outcomes, and not just inflation. The FT has an article today citing the Qatari energy minister, who points out Europe may get through this winter okay but if the Ukraine war keeps going and Russia remains sanctioned, next year and beyond will be a different kettle of fish. Qatar warns that if Russia stops sending gas to Europe, it’s a vast problem because other sources are just not available. Russia supplied about 40% of Europe’s gas--and Qatar, the world’s largest producer, can divert only about 10-15% of its shipments from Asia to Europe. All Qatar’s plans to increase output don’t come online for several years. The FT emphasizes that Qatar has a long-term outlook driven by the need for investment planning and the long time it takes to build facilities and infrastructure. Asians understand this and have signed decades-long contracts, something the Europeans don’t want to do. The FX forecast has to include periodic pullbacks in the dollar, which is what we are seeing now. They are not caused by any particular data point, although they can occur suspiciously around big changes in the S&P, as is happening this time for reasons no one can explain. Still, a pullback is not a reversal and we see nothing on the horizon to cause wavering from the strong dollar outlook. Fun Tidbit: The FT reports a YouGov poll shows 10% of Britons approve of PM Truss. China Tidbit: Amid vast amounts of commentary on the Party congress in China and what it means, the WSJ delivered this chart. We think it’s a stunner. China beat the world in growth and in restructuring society to be a whole lot less poor, but it’s still an “emerging” market. A little less fear, please. Tidbit: If you like economic/financial history, here’s a splendid moving chart of the UK pound through time with triggering events noted. It was posted on Twitter last weekend and as of Monday morning, had been viewed a million times. It was apparently designed by Bloomberg on BoE data but Interactive Investors is named, too. US Political Tidbit: The US midterm elections are only three weeks away but early voting began yesterday in some states. Even top-notch pollsters like 538.com admit that the historical standard could get upended this time, meaning the party out of office that usually wins the midterms may not this time. One important issue is the absurd lack of qualification (and character) of some candidates like the ageing football star in Georgia and the scammy TV doctor in Pennsylvania, not to mention the election-deniers and their followers who declined to watch the Jan 6 Committee hearings. Even so, the Dems may not prevail. This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes. To get a two-week trial of the full reports plus traders advice for only $3.95. Click here!

Australia is expected to have created 25,000 new job positions in September. The Reserve Bank of Australia is nowhere near the US Federal Reserve's stance on monetary policy. AUD/USD’s bearish trend is likely to be unaffected by Australia’s employment data. Australia will publish its September employment report on Thursday, October 20. The country is expected to have added 25,000 new jobs, decreasing from the previous 33,500. The Unemployment Rate is expected to remain unchanged at 3.5%, as well as the Participation Rate, currently at 66.6%. Alongside the employment figures, the country will release Q3 NAB’s Business Confidence, foreseen to improve to 7 from 5 in the second quarter of the year. Encouraging data may give AUD/USD a well-needed boost, as the pair trades near the two-year low posted this month at 0.6169, but would it be enough to take it out of its misery? The RBA vs. the Fed The Reserve Bank of Australia decided to hike the cash rate by 25 bps in October, easing quantitative tightening after pulling the trigger by 50 bps for four consecutive months, which took the main rate to 2.6%. The Minutes of the meeting released this week showed that policymakers believe that the effects of the recent hikes have yet to take effect on the economy, somehow justifying the smaller move, despite being convinced inflation is still “too high.” But the real reason behind the latest RBA monetary policy decision is fear. Given that the “cash rate had been increased substantially in a short period of time,” the risk of a recession is greater. Governor Philip Lowe is going slower than its overseas counterparts, as he sees how other economies are rapidly deteriorating as rate hikes have little impact on inflation. The US Federal Reserve has no such concern. The United States central bank is on its way to pushing rates into restrictive levels and keeping them there “for some time,” according to the latest FOMC Meeting Minutes. The Australian central bank is nowhere near a restrictive monetary policy However, AUD/USD may continue to track the negative slope in the 50-Day SMA (0.6684) as the minutes from the RBA’s October meeting reveal that “a smaller increase than that agreed at preceding meetings was warranted given that the cash rate had been increased substantially in a short period of time,” and the comments suggest the central bank is nearing the end of the hiking-cycle as Governor Philip Lowe and Co. show little intentions of carrying out a restrictive policy. AUD/USD possible scenarios Central banks’ imbalance had a negative impact on AUD/USD, and given the current scenario, the pair’s bearish trend will likely prevail. For sure, upbeat figures should mean a temporary recovery, but the pair would need a stronger reason to run north. A relevant resistance level comes at around 0.6345, the 23.6% Fibonacci retracement of the 0.6915/0.6169 slump. Sellers have rejected recovery attempts around it ever since bottoming at fresh 2022 lows in the previous week. The 38.2% retracement is at 0.6452 a level the pair can hardly reach just with the job’s report. In the middle, the 0.6390 price zone stands at a static resistance area. The pair has a near-term support area at 0.6230/40, with a break below the latter favoring a downward extension towards 0.6160. If the year’s low gives up easily, AUD/USD has room to extend its decline toward the 0.6000 psychological threshold in the next few sessions.

COT data is very important for gold as it’s tracked closely by a lot investors and speculators, especially for a longer-term approach. Looking at the Non-Commercials or Large Speculators, we can see that those are still heavily short, but they are approaching similar readings compared to 2013, 2015 and 2018. Notice that all of those extreme levels lead to a reversal, a rise in price, which can be very interesting now as well, especially when adding an Elliott wave count that shows a five wave drop from the high, now in late stages. In fact, there can be an ending diagonal with nice support at 1600/1610. GOLD COT Data At the same time, we have to respect the US yields of course, which are still on the rise and that’s why we see gold coming down as USD trades higher in risk-off environment. So for gold to recover we also have to ask ourselves, what can trigger a turning point? Well, it can be the FED, if they will be forced to slow down the hawkish approach next year, possibly if jobs data gets worse, or if they will be successful fighting the inflation. From an Elliott wave perspective, we see 10 year US yields in late stages of an impulse, so a slow down of a bull run would not be a surprise, since we know that after every five waves market makes a minimum three wave retracement. US10Y Weekly Chart GOLD Daily Chart So, will gold really slow down and turn higher next year? It’s too soon to tell, but so far we have some nice development here, which will be interesting to track from an intraday perspective as well. So if you like gold, silver or dollar, make sure to check our services where we offer Elliott wave updates on a daily basis. Get Full Access To Our Premium Analysis For 14 Days. Click here!