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Daily Pivots: (S1) 0.6646; (P) 0.6678; (R1) 0.6699; More...

Intraday bias in AUD/USD is turned neutral with current recovery, but further decline is expected as long as 0.6758 resistance holds. Below 0.6657 will resume the fall from 0.6941 short term top to 0.6621 structural support. Decisive break there will pave the way back to 0.6348 support next. Nevertheless, considering bullish convergence condition in 4H MACD, firm break of 0.6758 will turn bias back to the upside for retesting 0.6941 instead.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with rise from 0.6269 as the third leg. Firm break of 100% projection of 0.6269 to 0.6870 from 0.6340 at 0.6941 will target 138.2% projection at 0.7179. However, break of 0.6621 support will argue that rise from 0.6269 has completed and bring deeper fall back to 0.6269/6348 support zone.

Australian Dollar saw a modest rebound in the Asian session today, buoyed by much stronger-than-expected employment data. The Australian labor market continues to display resilience, with full-time jobs rising sharply, pushing the total over 10 million for the first time, while unemployment rate held steady at 4.1%. This robust labor market data has dashed any hopes for a near-term RBA rate cut. While some had hoped that rate reductions could come sooner, today's data suggests that the first policy shift will still likely be deferred until February next year, depending upon Q3 CPI figures due on October 30.

Despite this positive surprise, momentum for Aussie remains relatively weak. The underwhelming press conference from China’s Ministry of Housing, PBoC, and National Financial Regulatory Administration left markets disappointed. While China pledged to expand its “whitelist” of real estate projects and increase bank lending to unfinished developments by CNY 4T, analysts largely viewed these moves as "fine-tuning" of existing policies rather than the substantial stimulus package that markets had hoped for. This led to only a modest rebound in Chinese and Hong Kong stock markets.

In the broader currency markets, Canadian Dollar leads the way this week, though largely as a correction of recent losses. Dollar continues its upward march, while Yen remains resilient. Yen could avoid further sharp declines for now, unless traders push it through 150 psychological level against the greenback. At the other end of the spectrum, Swiss Franc is the weakest currency this week, followed by Aussie and New Zealand Dollar. Sterling is faring relatively better after yesterday’s selloff, while Euro is hovering in the middle as traders await today’s anticipated ECB rate cut.

Technically, as GBP/JPY dips further today, focus is now on 192.87 minor support. Break there will firstly open up deeply decline to 189.54 support first. Decisive break there will rise the chance that whole corrective rise from 180.00 has completed, and turn near term outlook bearish for 180.00/183.70 support zone.

In Asia, at the time of writing, Nikkei is down -0.47%. Hong Kong HSI is up 0.83%. China Shanghai SSE is up 0.26%. Singapore Strait Times is up 0.93%. 10-year JGB yield is up 0.0091 at 0.964 . Overnight, DOW rose 0.79%. S&P 500 rose 0.47%. NASDAQ rose 0.28%. 10-year yield fell -0.022 to 4.016.

ECB gears up for first back-to-back rate cut in 13 yrs

ECB is widely expected to cut the deposit rate by 25bps to 3.25% today, marking the first back-to-back rate reduction in 13 years. This step reflects ECB’s growing urgency to accelerate monetary easing as inflation cools faster than anticipated and persistent manufacturing struggles spill over into services and employment.

Although December had initially been considered the optimal time for the next cut, recent economic data has heightened concerns among ECB officials. Nevertheless, the December meeting remains significant, with updated economic projections that will shape the policy direction in 2025.

While the market is almost fully pricing in three further cuts through March 2025, ECB President Christine Lagarde is unlikely to offer explicit guidance today. However, the underlying message will likely suggest that another cut in December is likely unless the economic outlook improves.

Technically, EUR/USD's fall from 1.1213 short term top is in progress. Near term outlook will stay bearish as long as 55 D EMA (now at 1.0999) holds. This decline is seen as the third leg of the corrective pattern from 1.1274 (2023 high). Next target is 61.8% retracement of 1.0447 to 1.1213 at 1.0740. Any further dovish tone from the ECB today could accelerate this downward movement.

Australia's employment grows 64.1k in Sep, unemployment rate unchanged at 4.1%

Australia's employment figures for September showed stronger-than-expected growth, with 64.1k jobs added, significantly exceeding forecast of 25.2k. Full-time employment led the gains, rising by 51.6k, while part-time jobs increased by 12.5k.

Unemployment rate remained steady at 4.1%, slightly better than the expected 4.2%. Participation also increased by 0.1% to 67.2%, indicating higher workforce engagement. Monthly hours worked saw a modest rise of 0.3% mom.

Over the past year, employment has grown by 3.1%, outpacing the civilian population growth of 2.5%. This pushed the employment-to-population ratio to a historical high of 64.4%, reflecting robust labor market conditions.

Australia's NAB business confidence drops to -6 in Q3, inflation pressures ease slightly as margins squeezed

Australia’s NAB quarterly Business Confidence declined from -2 to -6 in Q3. Business conditions also dropped from 5 to 2, with trade conditions falling from 9 to 5, profitability slipping from 2 to 0, and employment conditions down from 5 to 3, signaling softer economic momentum.

Leading indicators weakened, with expected business conditions for the next 3 months falling from 11 to 10, and for the next 12 months from 15 to 12. Forward orders remained negative at -4, and capacity utilization eased from 83.6% to 83.0%. Capital expenditure plans also declined from 24 to 19, indicating reduced investment expectations.

Cost pressures remained persistent. Labor costs grew 1.2%, up from 1.1%, and purchase costs increased to 1.0%, up from 0.9%. Final product price growth, however, slowed from 0.6% to 0.4%, and retail price growth remained steady at 0.7%, suggesting inflationary pressures are easing but at the expense of business margins.

NAB Head of Australian Economics Gareth Spence noted, “Labor cost growth remains elevated, and wage costs are the top issue affecting business confidence. While purchase cost growth persists, the marked drop in final product price growth suggests progress on inflation, though margins are under pressure.”

Japan's exports fall -1.7% yoy in Sep, first decline in 10 months

Japan's exports in September dropped by -1.7% yoy to JPY 9.038T, marking the first annual decline in 10 months. This slump was driven by weaker demand from key trading partners. Exports to China, Japan's largest market, fell by -7.3% yoy, while those to the US dropped by -2.4% yoy.

On the other hand, imports rose modestly by 2.1% yoy to JPY 9.333T, leading to a trade deficit of JPY -294B, the third consecutive monthly shortfall.

In seasonally adjusted terms, there was a small improvement. Exports grew by 2.0% mom to JPY 8.956T, while imports fell by -1.2% mom to JPY 9.144T. This led to a seasonally adjusted trade deficit of JPY -187B.

Looking ahead

ECB rate decision is the main event in European session. At the same time, Swiss trade balance, Eurozone trade balance and CPI final will also be released.

Later in the day, a batch of US data will be released including jobless claims, retail sales, Philly Fed survey, industrial production, business inventories and NAHB housing index.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6646; (P) 0.6678; (R1) 0.6699; More...

Intraday bias in AUD/USD is turned neutral with current recovery, but further decline is expected as long as 0.6758 resistance holds. Below 0.6657 will resume the fall from 0.6941 short term top to 0.6621 structural support. Decisive break there will pave the way back to 0.6348 support next. Nevertheless, considering bullish convergence condition in 4H MACD, firm break of 0.6758 will turn bias back to the upside for retesting 0.6941 instead.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with rise from 0.6269 as the third leg. Firm break of 100% projection of 0.6269 to 0.6870 from 0.6340 at 0.6941 will target 138.2% projection at 0.7179. However, break of 0.6621 support will argue that rise from 0.6269 has completed and bring deeper fall back to 0.6269/6348 support zone.

ECB is widely expected to cut the deposit rate by 25bps to 3.25% today, marking the first back-to-back rate reduction in 13 years. This step reflects ECB’s growing urgency to accelerate monetary easing as inflation cools faster than anticipated and persistent manufacturing struggles spill over into services and employment.

Although December had initially been considered the optimal time for the next cut, recent economic data has heightened concerns among ECB officials. Nevertheless, the December meeting remains significant, with updated economic projections that will shape the policy direction in 2025.

While the market is almost fully pricing in three further cuts through March 2025, ECB President Christine Lagarde is unlikely to offer explicit guidance today. However, the underlying message will likely suggest that another cut in December is likely unless the economic outlook improves.

Technically, EUR/USD's fall from 1.1213 short term top is in progress. Near term outlook will stay bearish as long as 55 D EMA (now at 1.0999) holds. This decline is seen as the third leg of the corrective pattern from 1.1274 (2023 high). Next target is 61.8% retracement of 1.0447 to 1.1213 at 1.0740. Any further dovish tone from the ECB today could accelerate this downward movement.

Key Highlights

• Bitcoin price started a fresh surge after it cleared the $65,000 resistance zone.
• BTC surpassed a major bearish trend line with resistance at $63,200 on the 4-hour chart.
• Gold prices rallied further and traded above the $2,675 resistance.
• EUR/USD is consolidating losses above the 1.0850 zone.

Bitcoin Price Technical Analysis

Bitcoin price started a fresh increase above the $62,500 resistance zone. BTC/USD climbed the $64,000 and $65,000 levels to move into a positive zone.

Looking at the 4-hour chart, the price surpassed a major bearish trend line with resistance at $63,200. It settled above the $65,000 level, the 200 simple moving average (green, 4 hours), and the 100 simple moving average (red, 4 hours).

The increase was such that the price soared above the $67,500 level. It even spiked above $68,000 before the bears appeared. The price is now consolidating gains. Immediate support is near the $66,800 level.

The next key support sits at $66,400. A downside break below $66,400 might send Bitcoin toward the $64,500 support. Any more losses might send the price toward the $63,500 support zone.

On the upside, the price could face resistance near the $68,500 level. The next key resistance is at $69,200. A successful close above $69,200 might start another steady increase. In the stated case, the price may perhaps rise toward the $71,500 level or even a new all-time high.

Looking at EUR/USD, the pair saw a lot of bearish moves and recently started a consolidation phase above the 1.0850 support.

Today’s Economic Releases

• US Initial Jobless Claims - Forecast 258K, versus 258K previous.
• US Retail Sales for Sep 2024 (MoM) – Forecast +0.3%, versus +0.1% previous.
• US Industrial Production for Sep 2024 (MoM) – Forecast -0.2%, versus +0.8% previous.

Australia's employment figures for September showed stronger-than-expected growth, with 64.1k jobs added, significantly exceeding forecast of 25.2k. Full-time employment led the gains, rising by 51.6k, while part-time jobs increased by 12.5k.

Unemployment rate remained steady at 4.1%, slightly better than the expected 4.2%. Participation also increased by 0.1% to 67.2%, indicating higher workforce engagement. Monthly hours worked saw a modest rise of 0.3% mom.

Over the past year, employment has grown by 3.1%, outpacing the civilian population growth of 2.5%. This pushed the employment-to-population ratio to a historical high of 64.4%, reflecting robust labor market conditions.

Full Australia employment release here.

Australia’s NAB quarterly Business Confidence declined from -2 to -6 in Q3. Business conditions also dropped from 5 to 2, with trade conditions falling from 9 to 5, profitability slipping from 2 to 0, and employment conditions down from 5 to 3, signaling softer economic momentum.

Leading indicators weakened, with expected business conditions for the next 3 months falling from 11 to 10, and for the next 12 months from 15 to 12. Forward orders remained negative at -4, and capacity utilization eased from 83.6% to 83.0%. Capital expenditure plans also declined from 24 to 19, indicating reduced investment expectations.

Cost pressures remained persistent. Labor costs grew 1.2%, up from 1.1%, and purchase costs increased to 1.0%, up from 0.9%. Final product price growth, however, slowed from 0.6% to 0.4%, and retail price growth remained steady at 0.7%, suggesting inflationary pressures are easing but at the expense of business margins.

NAB Head of Australian Economics Gareth Spence noted, “Labor cost growth remains elevated, and wage costs are the top issue affecting business confidence. While purchase cost growth persists, the marked drop in final product price growth suggests progress on inflation, though margins are under pressure.”

Full Australia quarterly NAB business confidence release here.

Japan's exports in September dropped by -1.7% yoy to JPY 9.038T, marking the first annual decline in 10 months. This slump was driven by weaker demand from key trading partners. Exports to China, Japan's largest market, fell by -7.3% yoy, while those to the US dropped by -2.4% yoy.

On the other hand, imports rose modestly by 2.1% yoy to JPY 9.333T, leading to a trade deficit of JPY -294B, the third consecutive monthly shortfall.

In seasonally adjusted terms, there was a small improvement. Exports grew by 2.0% mom to JPY 8.956T, while imports fell by -1.2% mom to JPY 9.144T. This led to a seasonally adjusted trade deficit of JPY -187B.

• The GBP has been declining against the USD due to softer-than-expected UK economic data, leading to expectations of more aggressive rate cuts by the Bank of England.
• GBP/USD is at a crucial level of 1.3000, a break below which could lead to further downside.
• GBP/JPY is showing signs of a potential breakout, with price coiling between the 100 and 200-day moving averages.
• EUR/GBP is near the YTD low, with immediate resistance at 0.8400. The pair’s future direction will depend on the GBP’s strength and the ECB’s decision.

The GBP has steadily declined against the greenback in recent weeks, while remaining stable against the Euro. This weakness in the British pound is attributed to market participants pricing in more aggressive rate cuts due to softer-than-expected data.

The Euro meanwhile continues to engage in a tug of war with the GBP but appears to be winning at present, much to my surprise. The JPY yen has been the major loser of late, unable to capitalize on GBP weakness. GBP/JPY continues to inch higher as there remains weakness in the Japanese Yen ahead of the election at the end of the month.

UK Inflation Data Surprise

This morning the UK’s Office for National Statistics released a mild Consumer Price Index (CPI) report for September. It showed that annual inflation dropped to 1.7%. While prices were expected to slow down, they were predicted to decrease to 1.9% from 2.2% in August. Monthly inflation stayed the same.

The most important print however came from services inflation which has been a sticky point for the Bank of England. According to the ONS, services inflation dropped more than expected, from 5.6% to 4.9%. This was not only below what experts predicted but also much lower than the Bank of England’s forecast of 5.5%. This softer result could lead to more interest rate cuts in the upcoming Bank of England meetings this year.

All is not lost for the UK and the Pound as the Bank of England are still priced in to cut rates at around the same pace as the Federal Reserve. Initially the pound had been benefitting from the potential of rate divergence with the US Dollar in particular, however any such hopes appear to have been dashed following the latest UK inflation report.

Technical Analysis

GBP/USD

From a technical standpoint, GBP/USD is at a very important level with the 1.3000 psychological level in play. A daily candle close below this level could open up further downside for the pair.

A daily candle close below the 1.3000 will face support around the 1.2950 handle which an area of confluence which houses the 100-day MA. Below this we do have the long term ascending trendline as well which could come into play for the first time since the previous touch on August 8.

There are two scenarios that could develop in the day/days ahead. The first one being a bounce of the 100-day MA and a retest of the 1.3000 or potentially the 1.3100 handle (pink box on the chart) before the downtrend continues.

The second scenario, is a continued selloff until a touch of the trendline before a bounce occurs. At this stage both of these events are plausible as I do not see enough bearish pressure for a clean break of the ascending trendline at this stage. Now I could be wrong and we of course may break through the trendline as well, but I believe such a move may require a catalyst of sorts before it materializes.

Support

• 1.2950 (100-day MA)
• 1.2900
• 1.2793 (200-day MA)

Resistance

• 1.3040
• 1.3100
• 1.3143

GBP/USD Daily Chart, October 16, 2024

Source: TradingView.com (click to enlarge)

GBP/JPY

GBP/JPY has been inching its way higher since bottoming out on August 5. There was another push down to the mid 180s on September 16 before the move higher began once more.

GBP/JPY appears poised for a breakout after looking at recent price action. Price has been coiling between the 100 and 200-day MA since October 4. Usually when price is constricted in such a way, the longer the breakout takes the more aggressive it is.

On a daily timeframe a break and daily candle close below the 190.00 lower swing high would invalidate the bullish trend.

For now though a break to the upside seems more plausible based on price action and the overall trend.

GBP/JPY Daily Chart, October 16, 2024

Source: TradingView.com (click to enlarge)

Support

• 193.40 (200-day MA)
• 190.00
• 187.60

Resistance

• 195.40 (100-day MA)
• 198.00
• 200.00

EUR/GBP

EUR/GBP remains near the YTD low around the 0.8300 handle. The pair is enjoying a bullish bounce today but there does appear to be significant technical hurdles if the GBP is to lose more ground to the Euro.

Immediate resistance rests at 0.8400 with a key area of confluence resting just above. The region between 0.8425-0.8450 plays host to the 50 and 100-day MAs as well as the most recent swing high.

Conversely, should the GBP strengthen in light of the ECB decision on Thursday then the 2022 lows around 0.8200 may become a real possibility.

EUR/GBP Daily Chart, October 16, 2024

Source: TradingView.com (click to enlarge)

Support

• 0.8311
• 0.8250
• 0.8200

Resistance

• 0.8400
• 0.8425
• 0.8447

• The US Dollar Index (DXY) continues to advance due to a lack of impactful US data and expectations of robust retail sales.
• Donald Trump’s comments on tariffs and the Federal Reserve’s independence.
• The DXY faces technical challenges, with the RSI in overbought territory, but the overall outlook remains bullish.

Most Read: 

The US Dollar Index (DXY) continues its advance with the lack of high impact US data keeping the greenback on the front foot. A move lower in the DXY may need a batch of softer US data which thus far has not been forthcoming. US retail sales this week is expected to remain robust which will keep the Dollar supported.

Yesterday, Donald Trump addressed an event where he highlighted two key market issues: tariffs and the Federal Reserve’s independence. He took a notably hawkish stance on protectionism, specifically focusing on U.S. car imports from Europe and Mexico. Regarding the Fed, he stated he wouldn’t interfere with its independence, yet asserted that the president should have a voice in rate decisions.

As elections draw closer in the US we may see demand for the US Dollar increase. The uncertainty around the election could help the US Dollars safe haven appeal and thus keep the greenback advancing until after the election.

Markets are now expecting less aggressive Fed rate cuts in November and December which does bode well for the USD. Policymakers from the Federal Reserve continue to caution around the rate cut cycle, Governor Waller elaborated on this in a speech delivered at Stanford University.

Governor Waller elaborated further stating that the baseline expectation remains to gradually lower the policy rate over the coming year, regardless of short-term developments. When questioned about the job market’s current state, Waller noted, “The labor market is still robust, even though labor demand is easing.”

US Federal Reserve Rate Cut Probabilities, November Meeting

Source: CME FedWatch Tool

The outlook for the Dollar remains bullish despite some technical concerns. How much further can the rally go?

Economic Data Ahead

The week ahead is a relatively quiet one when it comes to high impact US data. The only notable event on the calendar this week is retail sales which market participants believe will come in better than expected.

Technical Analysis – US Dollar Index

The US dollar’s rally has been an impressive one, but there are a host of challenges that lie in wait from a technical perspective.

Firstly the RSI on the daily has finally crossed into overbought territory. Now, the issue with this is markets can oftentimes be in overbought on the RSI but continue to rise. Having broken above the 100-day MA for the first time since July with a daily candle close above this MA setting the tone for further gains.

Immediate resistance is at the confluence area which houses the 200-day MA around the 103.70 handle with further resistance areas resting at 104.00 and the psychological 105.00 handle.

Conversely a retracement here may find support at 103.00, 102.16 and 101.00

US Dollar Index Chart, October 16, 2024

Source: TradingView (click to enlarge)

Support

• 103.00
• 102.16
• 101.00

Resistance

• 103.70
• 104.00
• 105.00

• GBPCAD reversed from resistance zone
• Likely to fall to support level 1.7750

GBPCAD currency pair recently reversed down from the key resistance zone between the strong resistance level 1.8085 (which stopped the previous impulse wave i) and the upper daily Bollinger Band.

The downward reversal from this resistance zone created the well-formed daily Japanese candlesticks reversal pattern Shooting Star Doji.

Given the strength of the resistance level 1.8085 and the bearish divergence on the daily RSI, GBPCAD currency pair can be expected to fall further to the next support level 1.7750 (former low of wave ii from the start of this month).