Sample Category Title

The NZD/USD pair has dropped to a seven-week low, touching 0.6091, as the sell-off that started on 1 October continues to intensify. The New Zealand dollar's weakness is largely attributed to the Reserve Bank of New Zealand's (RBNZ) recent decisions to lower interest rates in response to decreasing inflation pressures.

The RBNZ has implemented consecutive rate cuts, most recently reducing the key rate by 50 basis points to 4.75% per annum, following a similar reduction in August. These measures aim to anchor inflation within the target range of 1-3%, with upcoming consumer price data anticipated to potentially show inflation consolidating around 2%, aligning well with the RBNZ’s objectives.

Globally, the focus is on the upcoming publication of the latest US Federal Reserve meeting minutes. These minutes are highly scrutinised as they provide crucial insights into the Fed's future monetary policy direction. Market participants often use this information to gauge the likelihood of further Fed-rate adjustments, which, in turn, influences global currency dynamics.

Technical analysis of NZD/USD

The NZD/USD market has reached the forecasted target of the downward wave at 0.6080. Currently, a new consolidation phase is expected to form above this level. If there is an upward breakout, a corrective movement towards 0.6230 could occur. Following this correction, the potential for a further decline to 0.5944 may be considered. Alternatively, if the consolidation resolves downwards, the downward trend could continue towards 0.5944. The MACD indicator supports this bearish outlook, with the signal line positioned below zero and trending downwards.

On the hourly chart, after forming a consolidation range around 0.6126, the pair achieved the downward wave target at 0.6080 with a downward exit. An upward movement to 0.6126 is expected today, followed by a retest of 0.6100. The market may develop a new consolidation range at these levels. An upward breakout could initiate a corrective rally towards 0.6230, considered a corrective response to the recent downward trend. The Stochastic oscillator, with its signal line below 20 and pointing upwards, suggests a potential for upward correction.

• USDJPY creates bullish correction from 14-month low
• RSI and MACD stand above their mid-levels

USDJPY is holding above the 38.2% Fibonacci retracement level of the down leg from 161.94 to 136.56 at 148.10 but is failing to extend its rebound from the 14-month low of 139.56 above the previous peak of 149.35.

Having a look at the technical oscillators, the RSI is pointing marginally up above the 50 area, while the MACD is strengthening its bullish momentum above its trigger and zero lines since it bottomed on August 8.

If the buying interest continues and the market surpasses the 149.35 resistance, then a strong obstacle could come from the 50.0% Fibonacci of 150.75 and the 200-day simple moving average (SMA) at 151.20.

In the negative scenario, a slide below the 38.2% Fibo of 148.10 could drive traders towards the immediate support of 146.50-147.15. Below that, the 50-day SMA and the 20-day SMA, where they stand near the 23.6% Fibonacci of 144.80, may pause the descending move.

Summarizing, USDJPY is displaying bullish attitude in the near term; however, only a break above the 200-day SMA could endorse the upside movement.

The XAU/USD chart shows that yesterday, the price of gold fell below $2610, a level not seen since 20th September.

Bearish sentiment has been driven by the continued strengthening of the US dollar. According to Trading Economics:

→ This is due to market participants lowering expectations for an aggressive rate cut by the Federal Reserve.

→ Currently, there is an 89% probability that the Fed will decide on a 25 basis point rate cut in November.

The technical analysis of the XAU/USD chart indicates that gold is still within the upward channel (shown in blue), which began in August 2024. However:

→ The gold price has broken below the median line of the blue channel.

→ The price decline from the historic peak reached on 26th September is forming a descending channel (shown in red), which can be considered a correction within the broader upward trend.

→ The $2670 level is showing signs of resistance, while the psychological level of $2600 could act as support, as seen during the bullish breakout in mid-September.

It is possible that bulls will attempt to resume the upward trend, using the area (marked by an orange circle) created by the following support levels:

→ The lower boundary of the blue channel.

→ The red channel line.

→ The psychological level of $2600.

Be prepared for potential volatility spikes. The FOMC meeting minutes will be released today at 21:00 GMT+3, which could trigger sharp movements in the gold price.

Start trading commodity CFDs with tight spreads. Open your trading account now or learn more about trading commodity CFDs with FXOpen.

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.

Market picture

The cryptocurrency market has stabilised around the $2.17 trillion level where it was a week and a day ago. The sentiment index has remained in the 49-50 (neutral) range for the fifth day, which contrasts with the near ‘extreme greed’ sentiment in the stock market. This wariness among crypto investors has often heralded stock market sell-offs. Still, this time, it could be due to sell-offs in China and expectations of new signals on the Fed’s monetary policy.

Bitcoin’s price has changed little over the past 24 hours, remaining at $62.4K, sandwiched between the 200-day moving average above and the 50-day below. Potential triggers to break out of this range could be Fed minutes or US inflation data if they lead to a reassessment of expectations in traditional markets. A technical signal could be a move out of the range delineated by the mentioned moving averages at $63.6K and $60.8K, with the potential for further movement towards a breakout.

News background

According to Bitfinex, Bitcoin’s decline from $66,500 to $60,000 last week is a ‘healthy rebuild’ that reduces the risk of a ‘sudden drop’ in the coming days and weeks.

Matrixport expects that miners’ shares may rise as their revenue stabilises after falling and lagging Bitcoin’s momentum. The daily revenue of publicly traded mining companies fell from $70 million to $31 million after the April 2024 halving.

The US Supreme Court has granted permission to sell 69,370 Bitcoins previously seized from the darknet site Silk Road. US authorities declined to comment on whether they plan to sell the bitcoins on the marketplace.

A court in the US has approved a plan to distribute payments to creditors of the collapsed FTX exchange. About 98% of creditors will receive more than $6.8bn in fiat within 60 days of the plan taking effect.

The Crypto.com exchange filed suit against the SEC after receiving a Wells notice. The agency is using the notice to report violations of the law, which is the basis for the planned civil suit.

According to Politico, Robinhood’s general counsel, Dan Gallagher, is the leading candidate to head the SEC if Donald Trump wins the U.S. presidential election. Other contenders include former CFTC Chairman Chris Giancarlo, SEC Commissioner Hester Pearce and former agency general counsel Robert Stebbins.

ECB Governing Council member François Villeroy de Galhau indicated today that a rate cut is "very probable" at the upcoming meeting next week.

Speaking on Franceinfo radio, Villeroy emphasized that this move "won’t be the last" in the current easing cycle. However, he added that the pace of future cuts will depend on how inflation evolves over time.

Villeroy stressed ECB’s commitment to gradual policy adjustments, saying the central bank will avoid making any "volatile moves." He remarked, "We are used to acting with gradualism, which means resolutely but without making too significant steps."

On inflation, Villeroy expressed confidence that price levels will stabilize at ECB's 2% target by early next year in France, and later in 2025 across Europe. However, he noted that fluctuations could still occur in the coming months.

• NZDUSD continues the bearish correction
• Technical oscillators are mixed

NZDUSD plunged significantly after the RBNZ’s decision to cut interest rates by 50 bps. The pair remained closed to the 0.6100 round number and is holding near the 200-day simple moving average (SMA), which is acting as a strong support level.

The technical oscillators are showing some contradicting signals. The stochastic oscillator is pointing upwards in the oversold area after a bullish cross within its %K and %D lines; however, the RSI is pointing down below the neutral threshold of 50.

If the market retreats further, the next support to pause the bearish action is coming from the previous troughs on August 15 at 0.5975. Moving lower, the support area of 0.5850-0.5875 may halt the steep negative momentum.

On the other hand, a potential rebound off the 0.6105 barrier may send the pair up to the 50-day SMA at 0.6160 and the 20-day SMA at 0.6225. More increases may take the bulls back towards the 15-month peak of 0.6370 and slightly higher to 0.6415, registered in July 2023, adding some optimism for upside pressure.

To sum up, as long as the market remains above the 200-day SMA, the bias remains positive despite the aggressive selling interest in the last few days.

Short Term Elliott Wave View in GBPJPY suggests that cycle from 9.11.2024 low is currently in progress as a zigzag. Up from 9.11.2024 low, wave A ended at 195.97. Pullback in wave B also unfolded as a zigzag Elliott Wave structure. Down from wave A, wave ((a)) ended at 190.96 and wave ((b)) ended at 192.22. Wave ((c)) lower ended at 189.56 which completed wave B in higher degree.

The pair has turned higher in wave C. Up from wave B, wave (i) ended at 193.35 and pullback in wave (ii) ended at 189.84. Pair extended higher in wave (iii) towards 195.17 and pullback in wave (iv) ended at 191.72. Final leg wave (v) ended at 195.62 which completed wave ((i)) in higher degree. Pullback in wave ((ii)) is currently in progress to correct cycle from 9.30.2024 low in 3, 7, or 11 swing before it resumes higher. Down from wave ((i)), wave (a) ended at 192.88. Expect pair to rally in wave (b) then turns lower again in wave (c) to complete wave ((ii)). Near term, while pivot at 189.57 low remains intact, expect dips to find buyers in 3, 7, 11 swing for further upside.

GBPJPY 45 Minutes Elliott Wave Chart

GBPJPY Elliott Wave Video

https://www.youtube.com/watch?v=aC6R_B5SrHQ

Markets

The post payrolls rise in US yields and by extension in yields on other core markets yesterday shifted into a lower gear. Uncertainty whether China (fiscal and monetary) stimulus would be able to kickstart a genuine reacceleration of Chinese growth also left European markets with a risk-off start and modestly lower yields. Sentiment temporarily changed in the US, with yields trying to fight back early in US dealings. The $58 3-y Note action tailed slightly and other metrics also suggested guarded investors interest even after recent sharp rise in yields. Afterall, the impact on the market was limited. At the end of the day, US yields in technical trading eased between 3.7 bps (2-y) and 1.1 bp (30-y). Fed speakers including board member Jefferson repeated that risks to the Fed dual mandate of price stability and maximum employment have been roughly brought into balance. Decisions on further easing will be made on a data-dependent, meeting by meeting approach. Bost Fed president Collins took gave a similar assessment, but apparently is giving a bit more weight to the Fed supporting favourable economic conditions and not putting unnecessary restraint on demand. Aside from market policy expectations, an intraday decline of the oil price maybe also helped to cap the rise in US yields. Moves in German yields were modest (2-y -1.9 bps, 30-y +0.2 bps) as markets see the debate on to additional 25 bps cuts this year as ‘settled’. US equities ignored the China-driven uncertainty data weighted on European indices (S&P 500 +0.97, Nasdaq + 1.45%). The dollar maintained its post-payrolls gains, but nothing more than that (DXY 102.55, EUR/USD even marginally higher at 1.098). After some intraday volatility, sterling gained modestly against the euro (EUR/GBP 0.848) and the dollar (1.3104), but uncertainty on the UK fiscal situation/end October budget might hamper sustained further gains.

This morning, mainland China indices (CSI 300 -3.0%) suggest ongoing market doubts of the efficacy and the amount of stimulus from both monetary and fiscal authorities. Even so, spill-over effects to other regional markets stay limited. US yields are marginally higher. The dollar shows no clear trend (EUR/USD 1.097). Later today, there are no important eco data in Europe or the US. The US Treasury will sell $39 bln US 10-y Notes. Investors will also keep an eye at the Fed minutes of the September 17-18 meeting. Officially there was only one dissenting vote (Michelle Bowman) on the 50 bps rate cut, but especially given the strong payrolls report Friday, markets will look for other MPC members making reservations on the bold start of the easing cycle. For now we expect yields to hold near current levels in the run-up to tomorrow’s US CPI data. The technical picture on the dollar improved (e.g. EUR/USD below 1.1002 neckline), but for now there is no convincing trigger to extend further USD gains.

News & Views

The Reserve Bank of New Zealand cut its policy rate for a second consecutive time this morning, upping the pace from an inaugural 25 bps to 50 bps today. The Official Cash Rate now stands at 4.75% which the RBNZ still sees as being restrictive, leaving monetary policy well-placed to deal with any near-term surprises. The central bank sticks with a data-dependent approach going forward. At the next meeting, a new set of economic forecasts will be available. Money markets discount another 50 bps rate cut. Headline CPI is expected to be withing the 1%-3% target band in Q4 2024 and to remain around the midpoint in the medium-term. Weak demand is restricting the pass-through of increased input costs to prices faced by consumers. Apart from weak consumer growth, also weak business investments and low productivity growth slow the economy. Employment conditions continue to soften. The kiwi dollar extends this month’s losses against a reviving dollar with NZD/USD currently changing hands at 0.61 coming from levels around 0.6350 at the end of Q3.

The US federal budget deficit was $1.8tn in fiscal year 2024 (about 6.4% of GDP) according to estimates by the Congressional Budget Office. That’s $139bn more than the official shortfall recorded during fiscal year 2023. If not for the Supreme Court’s decision to overturn a plan to cancel many borrowers’ outstanding student loans, the 2023 deficit would have been $2tn. Revenues increased over the past year by an estimated $479bn (or 11% to $4.92tn). Outlays rose by an estimated $617bn (or 10% to $6.75tn). The US spent $950bn on interest, up 34% from the prior year, mostly because of higher interest rates. Interest costs surpassed military spending.

Graphs

GE 10y yield

The ECB cut policy rates by 25 bps in June and in September. Stubborn inflation (core, services) still is a source of concern, but very weak PMI’s and soft comments of Lagarde (and other MPC members) suggest the ECB is likely to step up the pace of easing with an October cut. Spill-overs from strong US data prevented a test of the 2.0% barrier. 2.00-2.35% might serve as a ST consolidation range.

US 10-y yield

The Fed kicked off its easing cycle with a 50 bps move. The Fed shifting focus from inflation to a potential slowdown in growth/employment made markets consider more 50 bps steps. Strong US September payrolls suggest the economy doesn’t need aggressive Fed support for now, but the debate might resurface as the economic cycle develops. For the US 10-y, 3.60% serves as strong support. The steepening trend is taking a breather.

EUR/USD

EUR/USD moved above the 1.09 resistance area and twice tested the 1.12 big figure as the dollar lost interest rate support at stealth pace. Bets on fast and large rate cuts trumped traditional safe haven flows into USD. An ailing euro(pean economy) partially offset some of the general USD weakness. After solid early October US data, the dollar regained traction, with EUR/USD breaking the 1.1002 neckline. Targets of this pattern are near 1.08.

EUR/GBP

The BoE delivered a hawkish cut in August. Policy restrictiveness was indicated to be further unwound gradually. The economic picture between the UK and Europe also was increasingly diverging to the benefit of sterling, pulling EUR/GBP below 0.84 support. Dovish comments by BoE Bailey ended by default GBP-strength.

Chinese authorities think that the country could achieve its 5% growth target with the stimulus measures that have already been announced, but investors not much so. On the contrary, the investor community was expecting that the government would announce a fiscal package of as much as 3 trillion yuan to complement the latest monetary measures to boost growth, but the Chinese authorities unveiled a laughable amount of 200 billion yuan in spending for next year. The worry is that the Chinese will throw money into the market without targeting troubled areas, and the lack of a fiscal leg to the Chinese stimulus package will hardly address the major issues and improve the EM giant’s suffering fundamentals. Voila. This is why we see the CSI index down by 5% today. The selloff in the HSI is more reasonable, however, after an almost 10% plunge yesterday. Mining stocks, including BHP and Rio Tinto remained under a decent selling pressure in Australia, but the bleeding in copper and iron ore slowed, the metals were flat to slightly positive in the Asian session.

If we leave our emotions aside, there is hope that the Chinese government rectifies this misstep. Xi understood that he’d better have investors to play along than against him. As such, the Chinese stimulus story can’t end on a disappointing note, there should be more: more stimulus measures, but also be more uncertainty regarding the measures’ ability to reverse fortunes.

Getting ugly

Last week, the EU imposed 45% tariff on Chinese EVs – in a decision that was strongly contested by some European countries – like Germany, and some European carmakers like VW, as they knew that bringing such a massive tariff of Chinese car imports would result in retaliation from the Chinese authorities and would fire back on the European companies. And that’s exactly what happened. The Chinese authorities didn’t take long to announce that they will also put tariffs on European cars, brandy and luxury goods. The news didn’t resonate well across the European markets, but the losses in the Stoxx 600 remained limited to only 0.55% yesterday.

The selloff mainly concerned energy companies like Total and Eni, and their British and American peers as crude oil took a dive on disappointing fiscal spending plans from China.US crude tumbled below the $73pb level and is consolidating near the $74pb this morning. Some suggested that the possibility of a ceasefire in the Middle East helped accelerating yesterday’s selloff. I am little convinced when the first thing I see in the morning is how Israel’s response to Iran would be ‘significant’ (Bloomberg). Therefore, oil’s short-term risks remain tilted to the upside, while the long-term outlook is comfortably bearish due to ample global supply, prospects of weakening global demand, and sluggish Chinese growth until (and if) proven otherwise by the data.

Little concerned

Despite a 10% plunge in Hang Seng, the major US indices did well, yesterday. The S&P500 gained 1%, Nasdaq advanced 1.55% as Nvidia jumped 4% as the US 2-year yield eased below the 4% mark on balanced comments from the Federal Reserve (Fed) members. Some said the Fed should continue to focus on the employment market, while others said that the Fed should remain careful with the inflation leg. Overall, the comments and the economic data would justify a 25bp cut from the Fed in November, and that’s what the activity on Fed funds futures suggests today: a 88% chance of a 25bp cut.

But boy, these probabilities chance so rapidly. Due today, we will have a look at the latest FOMC meeting minutes to understand how and why the Fed opted for a 50bp cut at the latest meeting whereas they had the opportunity to start easing by a safe 25bp and avoid all that volatility, uncertainty and confusion around that decision. Then, we have a CPI update from the US scheduled for Thursday. If we see any undesired strength there, we could see the probability of a no cut take off as rapidly as the probability of a 50bp cut did last week.
Matching fundamentals and technicals

The US dollar index consolidates near a major Fibonacci level, the 38.2% retracement on summer retreat, near the 102.50 level. Parallelly, the EURUSD consolidates near its own major Fibonacci retracement level, 1.0980. A move above or below these levels, respectively, will send the US dollar into a medium-term bullish consolidation zone, and the euro into the medium-term bearish consolidation zone. A sufficiently soft US CPI update could prevent that from happening, while a stronger-than-expected read would leave little doubt about the view that the euro deserves to weaken from the actual levels. There is not much to prevent the European Central Bank (ECB) from announcing a few more rate cuts in the coming meetings to support the slowing European economies when headline inflation has fallen below their 2% target. Core inflation, however, is another story. But the fact is, I like when technicals match the fundamental story, and the US CPI will provide a good basis to justify a fresh move in the USD to one way or the other.

And speaking of central banks, the Reserve Bank of New Zealand (RBNZ) announced a 50bp cut today, as expected. The kiwi-dollar is testing the 200-DMA to the downside this morning, with a stronger case for a slide below the 60 cents level.

In focus today

Tonight, FOMC will release the minutes from its September meeting. Markets will focus on any clues regarding the expected size of rate cuts aat the coming meetings.

Economic and market news

What happened overnight

The Reserve Bank of New Zealand (RBNZ) lowered interest rates by 50bp from 5.25% to 4.75%, which was nearly fully priced in the market. RBNZ still views monetary policy as being restrictive even though inflation has returned to the target rate. This message could signal potential further rate cuts going forward, which made NZD/USD drop around 0.7% from 0.613 at the announcement to around 0.609 this morning.

Chinese stocks fell on Wednesday in the onshore market ending a 10-day streak of positive returns. The Shanghai composite index is down over 5% this morning compared to Tuesday's closing price The onshore market was closed for longer during the week-long holiday, though, and has mainly played catch-up with offshore stocks after opening again. Hence the big decline today mostly reflects the sharp 10% sell-off in offshore stocks on Tuesday. Today offshore stocks declined further but by a more moderate 1.5%. The sharp correction in Chinese stocks follows a press briefing yesterday from the National Development and Reform Commission, which disappointed by not providing any details on fiscal stimulus as widely anticipated after the strong stimulus package announced ahead of the holiday. NDRC said the Chinese government is fully confident that it will reach its economic and social development goals for this year (5% growth) and said that some of the 2025-budget will be issued this year to support projects. The anticipation in the market is that more details on stimulus will be given later this month, which we also expect.

What happened yesterday

In Sweden, the new flash CPI for September came in marginally higher than expected. CPIF grew 1.2% y/y and CPIF ex energy at 2.0% y/y. We expected CPIF at 1.14% y/y and CPIF ex energy at 1.94% y/y in line with consensus and one tenth above the Riksbank's forecasts. Hence the print was higher than Riksbank forecast, so overall the print supports for our 25bp cut forecast at the next meeting.

In the Middle East, Israel's military said that it had deployed a fourth army division into Lebanon, which signals an expansion of the ground offensive against Hezbollah. Prime minister Netanyahu further claimed that the Israeli military has "eliminated" the successor leader of the Hezbollah movement after Nasrallah who was killed only two weeks ago in another attack by Israel.

In the US, NFIB Small Business Optimism index moved slightly higher in September to 91.5 from 91.2 in August. Firms reported less trouble finding new workers and a slight increase in hiring plans. Declining share of firms also report sufficient quality of available labour as their most important problem (which is still inflation for the largest share of businesses). Outlook for expansion, credit conditions and price plans remained steady. General uncertainty index reached its all-time-high, but the level is still comparable to the months leading up to 2016 and 2020 elections (= not alarmingly high). Overall, NFIB supports the notion that US economy remains on a steady footing for now.

Fed's Kugler (voting member), spoke about monetary policy, and said that she is ready to vote for further monetary policy easing if inflation continues to decrease.

In Germany, industrial production came in higher than expected at 2.9% m/m (consensus: 0.8% m/m, prior: -2.4% m/m) in August, on the back of especially higher production in the automotive industry.

ECB's Nagel spoke about monetary policy and said that he is open to considering another interest rate cut. This is interesting since Nagel has traditionally been considered too be an inflation hawk. Nagel said that ECB is clearly on the way to the 2% inflation target.

Oil prices slipped back. Weak demand, a stronger USD and lack of retaliation so far from Israel against Iran are likely the main reasons. We think oil prices will stay range bound close to USD 80/bbl as a rising geopolitical premium offsets weaker demand and stronger USD.

Equities: Global equities were higher yesterday, driven by a lift in US markets. Performance, both absolute and relative between regions, turned more or less upside down versus Monday, tempting one to declare a status quo. However, that is not entirely the case. Indeed, yields halted their upward trajectory, but utilities and REITs were significant underperformers again yesterday, while banks and tech ensured that both value and growth sectors performed adequately yesterday. Despite the multitude of factors at play these days, when we summarise the developments over a few weeks, we observe a generally positive reaction to the robust labour market data, including what we see in relative sector and style performance. It may also be pertinent to mention the performance of energy stocks yesterday; a glance at the oil price provides insight into the significant underperformance in that sector.

In the US yesterday, the Dow closed up by +0.3%, the S&P 500 by +1.0%, Nasdaq by +1.5%, and the Russell 2000 by +0.1%. Chinese markets are in focus again this morning. However, today they are experiencing negative performance, with both Hong Kong and especially mainland markets down sharply. The rest of Asia is higher, following the positive session on Wall Street yesterday. US futures are marginally lower, while European markets are mixed despite the uptick late in the US cash session yesterday. With fading optimism in China, there is also a negative impact on European exporters, particularly affecting high-end consumer brands.

FI: There were modest movements in global bond yields yesterday. 2Y and 10Y US Treasuries was trading in a tight range around 4%. We saw a similar picture in European government bond yields where there were also movement in yields. The Schatz-spread once again tightened, and we expect it will continue to tighten like the Bund ASW-spread. We still expect that the Bund ASW-spread will go towards 20bp before year-end.

FX: EUR/SEK ended the day fairly stable with a slight topside surprise to Swedish flash inflation data failing to provide support for the SEK. EUR/USD traded in a tight range with focus shifting to the release of inflation data tomorrow.