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EURUSD bounced on Thursday after two-day drop was strongly rejected on signals that the US Federal Reserve kept policy unchanged and signaled that the job with rate hikes is likely done, which deflated the US dollar.

Additional pressure on greenback came from higher than expected weekly jobless claims and significant drop in unit labor cost in Q3 which indicated some weakness in labor market, though clearer picture will be seen after release of October’s NFP report on Friday.

Fresh strength probed again above pivotal Fibo barrier at 1.0638 (38.2% of 1.0945/1.0448) and cracked the base of falling daily cloud (1.0664), but faced increased headwinds, as cloud is thick and weighs heavily.

Clear break above 1.0638 and penetration of daily cloud is required to confirm initial bullish signal for attack at psychological 1.0700 barrier and avoid another bull-trap above 1.0638.

Positive momentum continues to strengthen on daily chart and MA’s (10/20/30) turned to bullish setup and underpin near-term action, which needs to hold above 1.06 zone (daily Tenkan-sen) to keep bias with bulls.

Res: 1.0664; 1.0700; 1.0736; 1.0755.
Sup: 1.0605; 1.0570; 1.0516; 1.0495.

The Bank of England left interest rates unchanged today at 5.25%, as expected, with the vote widening slightly but remaining very close.

The fact that the vote remains close highlights how uncertain the outlook remains in the view of the MPC and how, as Bailey reaffirmed in the press conference after, the risks to inflation are still to the upside.

That said, based on its forecasts, which show inflation falling below 2% over the forecast period, a rate cut is seemingly the more likely next move. Of course, these forecasts are always subject to change and often are, especially in such a challenging and uncertain environment.

Still, it looks clear at this point that the BoE is, like many of its peers, done with the tightening cycle and it's now a case of how long it remains at the peak. Of course, that's also extremely important at a time when rates are restrictive, and potentially significantly so.

The BoE is persisting with the language of "sufficiently restrictive for sufficiently long" which isn't as helpful as they may think. But it does come across softer than some of its peers which may again suggest it's not as confident that rates will stay at the peak as long as others. Or perhaps I'm just reading too much into these statements like everyone else.

A final point that was very evident in the press conference is how taken aback the MPC has been by wage growth and what that means for inflation and interest rates. Measures of wage growth may therefore become the key data release going forward as other areas of the economy cool but this remains stubbornly high. Lower wage growth may well be what tips the balance of the forecasts in favour of earlier rate cuts.

The pound has been quite choppy across the initial announcement and new projections, and then throughout the press conference but nothing has significantly changed which suggests today has largely unfolded as expected. There remains considerable uncertainty and the data over the coming months could clear things up. Until then, the BoE, like its peers is in wait-and-see mode.

Today it became known about the level of inflation in Switzerland. Compared to the US, UK, and other countries, Switzerland can boast of a CPI of only 0.1%. The minimal increase in prices is due to an increase in fuel costs due to the rise in oil prices in the second half of the year. Thus, the country’s economy provides more arguments in favor of the protected harbor status.

On October 5, we wrote that the Swiss franc was near an important resistance, forming an AB double top. After this, the rate fell by 2.5% to form the October low, and now the chart provides a new piece of information for analysis, in particular about the 0.909 level, which acts as an important resistance.

The USD/CHF price has interacted with it before (as shown by the arrows), but note:

→ the level was able to stop the sharp increase on October 31;

→ did not allow the price to reach the upper boundary of the ascending channel (shown in blue);

→ the price only briefly stayed higher. The bulls were unable to gain a foothold above 0.909, and the rate fell to the lower border of the channel.

On November 2-3, rebounds form from the lower border of the channel, which looks like a logical development of the situation, but the progress of the rebounds has not approached 50% of the decline from the November highs, so this can hardly be considered a successful resumption of the bullish trend. But the bears seem determined to firmly seize the initiative, given the strength and confidence of the Swiss economy and the CHF's ability to be protected from inflation.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

The cryptocurrency market showed a correlation with the stock market, gaining bullish momentum amid softening rhetoric from the Federal Reserve.

The price of the main cryptocurrency reached USD 35,900 for the first time in 18 months.

Wherein:

→ the positivity is also due to expectations that the US Securities and Exchange Commission will approve a Bitcoin ETF. According to analysts at Bernstein (an asset management firm), this could happen by the first quarter of 2024.

→ according to the same analysts, the price of Bitcoin could reach USD 150k by 2025;

→ Jurrien Timmer, director of global macroeconomics at Fidelity, called bitcoin a commodity currency or exponential gold that aims to be a store of value and a hedge against monetary depreciation.

Are the bullish sentiments that strong?

The chart provides information to help maintain an unbiased view of the market:

→ the price of BTC/USD is slightly above the upper border of the ascending channel. And this is a sign of overbought;

→ the price dynamics of BTC/USD forms a divergence with the RSI indicator, which is also in the overbought zone — which ultimately indicates the market’s vulnerability to a rollback;

→ the price is above the psychological level of 35,000 – and an analysis of the past behavior of the bitcoin price relative to round levels shows that false punctures are a common practice;

→ BTC/USD price has moved out of the consolidation zone (shown by the green triangle), but a breakout of the consolidation zone could be followed by a ton of buyers — and it is possible that they will find themselves locked in losses if a pullback does occur. A price return to the green triangle area will motivate them to close positions, thereby exerting even more selling pressure.

While ETF approval seems imminent and could attract significant capital to the bitcoin market over the long term, technically, the BTC/USD price could pull back from overbought territory.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

• British pound posts sharp gains
• BoE and Fed pause for second straight time

The British pound has posted strong gains on Thursday. In the European session, GBP/USD is trading at 1.2216, up 0.54%.

Bank of England pauses

The Bank of England voted to maintain interest rates at 5.25% at today’s meeting. The pauses follow 14 straight rate increases in the current tightening cycle which began in December 2021. The move indicates that the MPC is sticking to the “Table Mountain” approach, which is essentially a “higher for longer” stance that keeps rates at elevated levels until the BoE is confident that inflation will fall back to the 2% target.

The MPC vote was 6-3, with the majority favoring a pause and three members voting to hike rates by a quarter-point. At the September meeting, the vote to pause was 5-4. The division within the MPC indicates that members remain divided over policy, which will make it difficult for Governor Bailey to present a clear path moving forward.

The BoE revised inflation projections slightly higher and the statement noted that the BoE stood ready to raise rates if it sees “more persistent inflationary pressures”. The markets are hoping that the back-to-back pauses mark the end of the current rate-tightening cycle, but rate cuts aren’t expected until late in 2024. Governor Bailey said after the meeting that higher interest rates had pushed inflation lower but it was “much too early to be thinking about rate cuts.”

US dollar dips after Fed pause

The Federal Reserve held rates for a second straight time on Wednesday. The Fed reiterated that rate hikes remained on the table, but acknowledged that “tighter financial and credit conditions” were weighing on inflation. This was likely a reference to the recent rise in US Treasuries, which has increased borrowing costs and could push inflation lower without the Fed having to raise rates.

If Powell was trying to sound hawkish, the markets weren’t buying it. Future markets have priced in another pause in December and expectations are that the Fed is done with hiking, despite Powell’s assertion to the contrary. The US dollar is down against all of the majors and US stock markets were strongly higher on Wednesday.

GBP/USD Technical

• GBP/USD is testing resistance at 1.2175. Above, there is resistance at 1.2251
• There is support at 1.2068 and 1.2032

Daily Pivots: (S1) 1.0531; (P) 1.0556; (R1) 1.0595; More...

EUR/USD is still capped below 1.0693 resistance despite current rebound. Intraday bias stays neutral first. On the upside, break of 1.0693 will extend the rebound from 1.0447 to 1.0764 cluster resistance (38.2% retracement of 1.1274 to 1.0447 at 1.0763). However, break of 1.0515 will indicate that larger fall from 1.1274 is ready to resume through 1.0447 to 1.0199 fibonacci level.

In the bigger picture, fall from 1.1274 medium term top could be viewed part of a correction to rise from 0.9534 (2022 low). An interim bounce from current level, as the second leg of the pattern, cannot be ruled out. But upside should be limited well below 1.1274 resistance to start the third level. The pattern would likely at least have a take on 61.8% retracement of 0.9534 to 1.1274 at 1.0199 before completion.

Daily Pivots: (S1) 0.9062; (P) 0.9087; (R1) 0.9105; More....

Intraday bias in USD/CHF stays neutral first, and further rise remains mildly in favor as long as 0.9007 support holds. Above 0.9111 will resume the rebound from 0.8886 to retest 0.9243 resistance next. However, firm break of 0.9007 will turn bias to the downside for 0.8886 support instead.

In the bigger picture, outlook is mixed up by the deeper than expected pull back from 0.9243. Yet there was no follow through selling after hitting 0.8886. On the upside, break of 0.9243 resistance will revive the case of medium term bottoming at 0.8851, and turn outlook bullish. However, sustained break of 61.8% retracement of 0.8551 to 0.9243 at 0.8815 will argue that larger decline from 1.0146 is ready to resume through 0.8551 low.

Daily Pivots: (S1) 150.50; (P) 151.10; (R1) 151.54; More...

While USD/JPY's retreat from 151.69 is steep, it's still holding above 148.79 support. Intraday bias remains neutral and some more range trading could be seen. Further rally is mildly in favor as long as 148.79 support holds. Decisive break of 151.93 will target 100% projection of 129.62 to 145.06 from 137.22 at 152.66. However, firm break of 148.79 will indicate rejection by 151.93, and bring deeper fall through 147.28 support.

In the bigger picture, immediate focus is now on 151.93 resistance (2022 high). Rejection by 151.93, followed by sustained break of 145.06 resistance turned support will argue that rise from 127.20 has completed, and turn outlook bearish for 137.22 support and below. However, sustained break of 151.93 will confirm resumption of long term up trend. Next target will be 61.8% projection of 102.58 to 151.93 from 127.20 at 157.69.

Daily Pivots: (S1) 1.2110; (P) 1.2137; (R1) 1.2179; More

GBP/USD is still bounded in established range despite today's rebound, and intraday bias stays neutral. On the upside, firm break of 1.2287 resistance will argue that rise from 1.2036 is resuming. Intraday bias will be turned back to the upside for 38.2% retracement of 1.3141 to 1.2036 at 1.2458. On the downside, decisive break of 1.2036 will resume whole decline from 1.3141 for 1.1801 support next.

In the bigger picture, fall from 1.3141 medium term top could still be a correction to up trend from 1.0351 (2022 low) only. But risk of complete trend reversal is rising. Sustained break of 38.2% retracement of 1.0351 to 1.3141 at 1.2075 will pave the way to 61.8% retracement at 1.1417. For now, risk will stay on the downside as long as 55 D EMA (now at 1.2315) holds, in case of rebound.

In the wake of BoE's decision to maintain interest rates unchanged, Sterling exhibited a mixed performance, gaining against Dollar yet faltering when paired with the Euro and commodity-linked currencies. The voting pattern at the BoE leaned slightly more hawkish than anticipated, but the newly projected rate path suggests the peak in interest rates was reached already. The Dollar, on the other hand, is losing ground, exacerbated by a further dip in 10-year yield, now below 4.7% mark. This development is mirrored in US stock futures, which are signaling positive opening.

Currently, Dollar is the third weakest performer of the week, managing only marginal gains over Yen and the Swiss Franc. However, its position remains precarious. In contrast, Australian Dollar leads the pack as the week's strongest, followed by New Zealand Dollar and Euro. Canadian Dollar shows a mixed performance, while Sterling struggles to keep pace with its peers.

Technically, EUR/USD is back pressing 55 D EMA with today's strong bounce. Strong break of this EMA and 1.0693 resistance will carry bullish implication. Further rise should at least be seen to 1.0764 cluster resistance (38.2% retracement of 1.1274 to 1.0447 at 1.0763). However, rejection by 55 D EMA will keep near term outlook bearish for another fall through 1.0447, soon.

In Europe, at the time of writing, FTSE is up 1.24%. DAX is up 1.60%. CAC is up 1.94%. Germany 10-year yield is down -0.085 at 2.680. Earlier in Asia, Nikkei rose 1.10%. Hong Kong HSI rose 0.75%. China Shanghai SSE dropped -0.45%. Singapore Strait Times rose 0.19%. Japan 10-year JGB yield dropped -0.0433 to 0.916.

US initial jobless claims rose to 217k, above exp 210k

US initial jobless claims rose 5k to 217k in the week ending October 28, above expectation of 210k. Four-week moving average of initial claims rose 2k to 210k.

Continuing claims rose 35k to 1818k in the week ending October 21. Four-week moving average of continuing claims rose 37k to 1758k.

BoE stands pat, adopts lower rate path for economic forecasts

BoE held its Bank Rate steady at 5.25%, aligning with broad market anticipations. The decision came with a 6-3 split, with Megan Greene, Jonathan Haskel, and Catherine Mann opting for a 25 basis points increase. The bank emphasized the necessity of maintaining a restrictive monetary stance for an extended period to steer inflation back to its target. They also signaled that should more enduring inflation signs surface, the option for further rate hikes is still on the table.

Four-quarter GDP growth:

• Lowered from 0.9% to 0.6% in Q4 2023.
• Lowered from 0.1% to 0.0% in Q4 2024.
• Lowered from 0.5% to 0.4% in Q4 2025.
• At 1.1% in Q4 2026 (new).

Modal CPI inflation:

• Lowered from 4.9% to 4.6% in Q4 2023.
• Raised from 2.5% to 3.1% in Q4 2024.
• Raised from 1.6% to 1.9% in Q4 2025.
• Slow to 1.5% in Q4 2026. (new).

These projections are based on a market-implied path for the Bank Rate that hovers around 5.25% until Q3 2024, and then gradually decreases to 4.25% by the end of 2026.

This represents a lower trajectory compared to the projections in August, which anticipated a Bank Rate of 5.8% by the end of 2023, 5.9% by the end of 2024, and 5% by the end of 2025.

Eurozone PMI manufacturing finalized at 43.1, woes deepen

Eurozone's PMI Manufacturing reading for October was finalized at 43.1, a slight decline from September's 43.4.

A closer look at individual countries, notably, Germany, Europe's largest economy, posted a five-month high, though it still lurks in the downturn territory with a reading of 40.8. France hits a 41-month low at 42.8.

Amidst the broader decline, Greece displayed resilience with a two-month high of 50.8. In contrast, countries such as Ireland, Spain, and Italy presented figures pointing towards continued economic pressure with readings of 48.2, 45.1, and 44.9, respectively.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, likened the ongoing trend in Eurozone manufacturing to a "bumpy sleigh ride." While the slight stability in recent PMI figures might hint at approaching the low point of this downturn, the critical indicators like the new orders index remain in the red.

The stagnation of these vital indices, as history suggests, could potentially set the stage for a recovery. However, de la Rubia anticipates this turnaround to materialize in the first half of the upcoming year.

Furthermore, he pointed out the synchronized decline among the eurozone nations. With key players like France, Italy, Spain, and Germany showcasing dipping PMIs, it's evident that a sectoral contraction might be imminent for these nations in the current quarter.

Swiss CPI unchanged at 1.7% yoy in Oct, core CPI rises to 1.5% yoy

Swiss CPI rose 0.1% mom in October, matched expectations. Core CPI (excluding fresh and seasonal products, energy and fuel) rose 0.1% mom. Domestic products prices was flat at 0.0% mom. Imported products prices rose 0.3% mom.

Annually CPI was unchanged at 1.7% yoy, matched expectations. Core CPI accelerated from 1.3% yoy to 1.5% yoy. Domestic products price growth quickened from 2.1% yoy to 2.2% yoy. Imported products price growth slowed from 0.5% yoy to 0.4% yoy.

Australia's trade surplus narrows sharply to AUD 6.79B in Sep

Australia's economic outlook has taken a concerning turn as the trade surplus for September contracted significantly, recording its lowest monthly surplus since March 2021. The data released indicates a shrinkage from prior month's AUD 10.16B to AUD 6.79B, falling short of the anticipated AUD 9.58B surplus. This sharp decline in trade surplus is fueling concerns that the Australian economy may have slipped into recession in the third quarter.

The primary factor contributing to the reduced surplus is a noticeable -1.4% yoy drop in goods exports, which totaled AUD 45.62B. This decline was primarily driven by a substantial -39.2% reduction in the shipment of metals and non-monetary gold, a critical export commodity for the Australian economy.

On the import side, there was a 7.5% yoy increase to AUD 38.84B. This surge in imports is attributed to a 23.3% jump in import of capital goods. Additionally, there was a noticeable spike in the demand for recreational items.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2110; (P) 1.2137; (R1) 1.2179; More

GBP/USD is still bounded in established range despite today's rebound, and intraday bias stays neutral. On the upside, firm break of 1.2287 resistance will argue that rise from 1.2036 is resuming. Intraday bias will be turned back to the upside for 38.2% retracement of 1.3141 to 1.2036 at 1.2458. On the downside, decisive break of 1.2036 will resume whole decline from 1.3141 for 1.1801 support next.

In the bigger picture, fall from 1.3141 medium term top could still be a correction to up trend from 1.0351 (2022 low) only. But risk of complete trend reversal is rising. Sustained break of 38.2% retracement of 1.0351 to 1.3141 at 1.2075 will pave the way to 61.8% retracement at 1.1417. For now, risk will stay on the downside as long as 55 D EMA (now at 1.2315) holds, in case of rebound.

Economic Indicators Update