Sample Category Title

Key Highlights

• EUR/USD is correcting higher above the 0.9850 resistance.
• It broke a major bearish trend line with resistance at 0.9835 on the 4-hours chart.
• USD/JPY declined heavily after it tested the 152.00 resistance zone.
• GBP/USD could gain pace if it clears the 1.1400 resistance.

EUR/USD Technical Analysis

The Euro remained well bid above the 0.9700 zone against the US Dollar. EUR/USD started a recovery wave and was able to climb above the 0.9780 resistance.

Looking at the 4-hours chart, the pair settled above the 0.9800 level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

There was also a break above a major bearish trend line with resistance at 0.9835 on the same chart. The pair even cleared the 50% Fib retracement level of the downward move from the 0.9999 swing high to 0.9631 low.

It opened the doors for more upsides and the pair might continue to rise towards 0.9920. It is near the 76.4% Fib retracement level of the downward move from the 0.9999 swing high to 0.9631 low.

The next major resistance on the upside may perhaps be near 1.0000. Any more gains could set the pace for a move towards the 1.0080 level. If there is a downside correction, the pair might test the 0.9750 support.

The next major support is near the 0.9720 level. A downside break below the 0.9720 support may perhaps send EUR/USD towards the 0.9650 support. Any more gains could lead the pair towards 0.9600.

Looking at USD/JPY, the pair rallied further and tested the 152.00 resistance zone, where the bears emerged. The pair declined heavily and dropped over 250 pips.

Economic Releases

• Germany’s Manufacturing PMI for Oct 2022 (Preliminary) - Forecast 47.2, versus 47.8 previous.
• Germany’s Services PMI for Oct 2022 (Preliminary) - Forecast 44.8, versus 45.0 previous.
• Euro Zone Manufacturing PMI for Oct 2022 (Preliminary) – Forecast 48.0, versus 48.4 previous.
• Euro Zone Services PMI for Oct 2022 (Preliminary) – Forecast 48.2, versus 48.8 previous.
• UK Manufacturing PMI for Oct 2022 (Preliminary) – Forecast 48.0, versus 48.4 previous.
• UK Services PMI for Oct 2022 (Preliminary) – Forecast 49.0, versus 50.0 previous.
• US Manufacturing PMI for Oct 2022 (Preliminary) – Forecast 51.2, versus 52.0 previous.
• US Services PMI for Oct 2022 (Preliminary) – Forecast 49.2, versus 49.3 previous.

It's a week of drama. In the UK, Liz Truss became the shortest-serving Prime Minister as political chaos continued, and the race for the next PM started immediately. In the US, stocks surged on Friday on talks that Fed could start slowing its rate hikes in December. Meanwhile, in Japan, the government waited patiently until a golden opportunity came to all-in intervene.

The net results are, Dollar ended as the worst performer, but Yen was somewhat a close second. The fact that Swiss Franc was the third weakest indicates clearly an improvement in sentiment. New Zealand Dollar was the strongest one, followed by Aussie and Loonie. Meanwhile, Euro and Sterling were just mixed, with Euro a touch better.

Markets speculating that Fed might slow tightening from December

US stocks staged a strong rally on Friday as sentiment was boosted by prospect of Fed slowing its tightening cycle. The move was triggered by a WSJ report, which said that while a 75bps hike was expected at the November meeting, policy makes might debate whether to signal openness to a smaller hike in December.

As of now, fed fund futures are pricing in 95% chance of a 75bps hike to 3.75-4.00% on November 2, pretty much a done deal.

But chance of another 75bps to 4.50-4.75% dropped notably to 45.6%, down from 75% on Thursday, and nearly 70% a week ago.

DOW broke near term resistance, not yet for S&P 500

DOW closed up 748.97 pts, or 2.47% on Friday, and scored the best week since June. The break of 30454.46 resistance confirmed short term bottoming at 28600.94. The close above 55 day EMA was also a positive sign. Yet, it's still too soon to declare the the down trend from 36965.83 has completed.

Next focus will be 61.8% retracement of 34281.36 to 28600.94 at 32145.61. Rejection by this level or below will maintain medium term bearishness for another fall through 28600.94 at a later stage.

Also, it should be noted that DOW's turn was not accompanied by corresponding development in S&P 500. That is, SPX is still hold below 3806.91 resistance and 55 day EMA. Rejection by this resistance zone will drag SPX through 3491.58 rather quickly, to resume the decline from 4818.62. If happens, that would also argue that DOW's rebound was just an overshoot.

10-year yield on track to 4.474 as up trend continues

10-year yield extended recent rally and reaccelerated to as high as 4.333. But it then retreated notably on Friday, on the above mentioned news, to close at 4.213. Nevertheless, there is no change in the overall outlook. Further rise is expected to 61.8% projection of 2.525 to 3.992 from 3.568 at 4.474 next. This will remain the favored case as long as 3.992 resistance turned support holds.

Dollar index extended consolidation staying in up trend

Dollar index extended the sideway consolidation pattern from 114.77, mainly because Dollar had been going nowhere except versus Yen. The impact from rising yields and stocks were counting each other.

Still, outlook will stay bullish as long as 55 day EMA (now at 110.38) holds. Break of 114.77 will resume the up trend towards 100% projection of 94.62 to 109.29 from 104.63 at 119.30, which is close to 120 handle.

Japan played their intervention poker beautifully

Talking about Yen, Japan played their intervention cards rather beautifully last week. There were signs of probing on both sides on 150. But buyers, or "speculators" as seen by Finance Minister Shunichi Suzuki were unmoved. Japan then kept the cards to the chest and waited patiently, while letting USD/JPY rose.

Then came the WSJ news as stocks and Dollar were starting to reverse. Japan then went all-in with intervention. This time, the so-called "speculators" turned their side and jumped in helping Japan shoot down USD/JPY.

For now, USD/JPY should have turned into a consolidation phase until further development. Deeper decline and break of 145.89 resistance turned support cannot be ruled out. But the pull back shouldn't go as far to 140.33 support. Another rebound is possible but buying would now turn very cautious above 150. As range trading continues, one might considering buying below 145 and taking profit at 150, or just ignore the pair.

Prospect of more near term rebound in Aussie

There is prospect of further rebound in commodity currencies if sentiment does continue to improve for the near term. Australian Dollar might start to reverse some of its fortune, after being an under-performer for most of the month.

It should be noted that Aussie's weakness, comparing to Kiwi and Loonie, came after RBA slowed down its rate hike. Yet, Deputy Governor Michele Bullock reminded people that RBA meets more frequently than others (11 times a year). And, the "policy rate trajectory has been as steep, or steeper, than other central banks".

Technically, AUD/CAD stabilized after meeting target of 61.8% projection of 0.9514 to 0.8733 from 0.9104 at 0.8621. Break of 0.8733 support turned resistance should confirm short term bottoming at 0.8596, and bring stronger rebound to 55 day EMA (now at 0.8830) and above.

AUD/NZD extended the decline from 1.1489, as a correction to whole up trend from 1.0278. It's now inside keys support zone of 1.0987/1.1168, close to 38.2% retracement of 1.0278 to 1.1489 at 1.1026 on oversold condition. There is prospect of a near term rebound from current level. Break of 1.1138 minor resistance will likely lift the cross to 55 day EMA (now at 1.1197) and above, as the second leg of the corrective pattern from 1.1489.

EUR/JPY Weekly Outlook

EUR/JPY's up trend resumed last week and hit as high as 148.38. But subsequent retreats indicates that it's turned into another consolidation phase. Initial bias is turned neutral this week first. Downside should be contained by 140.88/144.06 support zone to bring another rally. Break of 148.38 will resume larger up trend to 100% projection of 133.38 to 145.62 from 137.32 at 149.56, which is close to 149.76 long term resistance.

In the bigger picture, the up trend from 114.42 (2020 low) is still in progress for 149.76 (2014 high). Decisive break there will pave the way to 161.8% projection of 114.42 to 134.11 from 124.37 at 156.22. This will now remain the favored case as long as 137.32 support holds.

In the long term picture, there is sign of upside acceleration with strong break of long term channel resistance. Outlook will stay bullish as long as 134.11 resistance turned support holds. Sustained break of 149.76 (2014 high) will open up further rally, as resumption of the rise from 94.11 (2012 low), towards 169.96 (2008 high).

EUR/USD stayed in range trading last week and outlook is unchanged. Initial bias stays neutral this week first. On the downside, break of 0.9630 bring retest of 0.9534 first. Firm break there will resume larger down trend. however, break of 0.9998 resistance will resume the rise from 0.9534, and carry larger bullish implications.

In the bigger picture, down trend from 1.6039 (2008 high) is still in progress. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. In any case, break of 0.9998 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish even with strong rebound. However, considering bullish convergence condition in daily MACD, firm break of 0.9998 will confirm medium term bottoming, and bring further rise back to 1.0368 resistance first.

In the long term picture, long term down trend from 1.6039 (2008 high) is extending. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. This will now remain the favored case as long as 1.0635 support turned resistance holds.

USD/JPY's up trend extended to as high as 151.93 last week but retreated sharply, on Japan's intervention. Considering bearish divergence condition in 4 hour MACD, a short term top should be formed. Initial bias is mildly on the downside this week for deeper decline. But downside should be contained by 38.2% retracement of 130.38 to 151.93 at 143.69 to bring rebound. For now, outlook will stay neutral for more consolidation as long as 151.39 resistance holds, even in case of recovery.

In the bigger picture, up trend from 101.18 is still in progress, as part of the whole up trend from 75.56 (2011 low). 147.68 (1998 high) was already met and there is no clearly sign of topping yet. In any case, break of 140.33 support is needed to be the first sign of medium term topping. Otherwise, further rise is in favor to next target at 160.16 (1990 high).

In the long term picture, rise from 101.18 is seen as part of the up trend from 75.56 (2011 low). Sustained break of 100% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 149.26, will pave the way to 138.2% projection at 168.47. This will remain the favored case as long as 130.38 support holds.

GBP/USD stayed in consolidation below 1.1494 last week and outlook is unchanged. Initial bias remains neutral this week first, but further rally is in favor as long as 1.0922 minor support holds. On the upside, break of 1.1494 will resume the rise from 1.0351 to 61.8% projection of 1.0351 to 1.1494 from 1.0922 at 1.1628. On the downside, below 1.0922 will turn bias back to the downside for 1.0351 low instead.

In the bigger picture, fall from 1.4248 (2018 high) is resuming long term down trend from 2.1161 (2007 high). Next target is 100% projection of 2.1161 to 1.3503 from 1.7190 at 0.9532. There is no scope of a medium term rebound as long as 1.1759 support turned resistance holds.

In the longer term picture, long term down trend from 2.1161 (2007) high is still in progress. Next target is 100% projection of 2.1161 to 1.3503 from 1.7190 at 0.9532.

USD/CHF rose further to 1.0146 last week but retreated since then. Initial bias is neutral this week for some consolidations first. Downside should be contained above 0.9779 support. Break of 1.0146 will resume larger up trend to 1.0283 projection level.

In the bigger picture, current development suggests that up trend from 0.8756 (2021 low) is still in progress. Sustained break of 1.0063 will target 100% projection of 0.9149 to 1.0063 from 0.9369 at 1.0283, and then 1.0342 (2016 high). For now, this will remain the favored case as long as 0.9779 support holds, even in case of deep pull back.

In the long term picture, outlook is mixed with deeper than expected fall from 1.0063, but some support was seen from 55 week EMA (now at 0.9528). Overall, though, USD/CHF is seen as in sideway pattern from 1.0342 (2016 high). Range trading should continue until further development.

AUD/USD's rebound from 0.6169 extended higher last week and break of 0.6362 support turned resistance confirm short term bottoming. That came just ahead of 100% projection of 0.7660 to 0.6680 from 0.7135 at 0.6155. Initial bias is mildly on the upside for 0.6539 resistance first. Firm break there will target 55 day EMA (now at 0.6602).

In the bigger picture, down trend form 0.8006 (2021 high) is expected to continue as long as 0.6680 support turned resistance holds. Next target is 0.5506 low. Medium term momentum will now be closely monitored to gauge the chance of break of 0.5506.

In the long term picture, current medium term downside momentum raises the chance of resumption of long term down trend from 1.1079 (2011 high). It's still a bit early to judge the chance. But break of 0.5506 will target 0.4773 (2001 low).

USD/CAD stayed in consolidation below 1.3976 last week and outlook is unchanged. Initial bias remains neutral this week first. Downside of retreat should be contained by 1.3501 support to bring another rally. On the upside, firm break of 1.3976 will target 200% projection of 1.2005 to 1.2947 from 1.2401 at 1.4285.

In the bigger picture, up trend from 1.2005 (2021 low) is still in progress. Based on current impulsive momentum, it could be resuming long term up trend from 0.9056 (2007 low). Whether it is or it isn't, retest of 1.4689 (2016 high) should be seen next. This will now remain the favored case as long as 1.3222 resistance turned support holds.

In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern only, which might have completed at 1.2005. That is, up trend from 0.9506 (2007 low) is expected to resume at a later stage. This will remain the favored case as long as 1.2061 support holds, which is close to 50% retracement of 0.9406 to 1.4689 at 1.2048.

GBP/JPY rose to as high as 170.07 last week, and met 61.8% projection of 148.93 to 165.69 from 159.71 at 170.06. But subsequent retreat indicates it has already turned into consolidation. initial bias is neutral this week first. Downside should be contained above 159.71 support to bring another rally. Break of 170.07, and sustained trading above 169.10 will confirm larger up trend resumption.

In the bigger picture, current development suggests that up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will pave the way to retest 195.86 high. This will now remain the favored case as long as 148.93 support holds.

In the longer term picture, as long as 55 month EMA (now at 151.18) holds, rise from 122.75 could still extend higher at a later stage. Next target is 195.86 (2015 high).