Forex Analysis – October 07, 2022


Our previous Forex analysis can be viewed here

Major USD news at 1230 UTC today could cause major swings across the FX markets…

Technical Analysis

FOREX ANALYSIS: AUDUSD – Indecision

AUDUSD 1 Hour Chart

As suggested in yesterday’s analysis, price reversed around 0.6540.

AUDUSD was showing signs of potential upside but is now looking indecisive again. The moving averages confirm the market indecision – they have been crossing frequently and are moving sideways. Price is potentially ranging between 0.6365 and 0.6540.

Trading opportunities may exist around the support and resistance areas of the range, if the AUDUSD moves out of the range (break-out trade), around the previous diagonal support area and around the horizontal levels at 0.6395, 0.6440 and 0.6580.

FOREX ANALYSIS: EURGBP – Down-trending. End of the trend?

EURGBP 1 Hour Chart

Price has been moving sideways, as suggested in yesterday’s chart analysis.

EURGBP is down-trending and is currently in a strong retrace move. Price is above the moving averages and has formed a diagonal support area, so EURGBP may struggle to swing lower – the downtrend may becoming to an end. The moving averages are moving sideways, suggesting market indecision.

Trading opportunities could exist around the diagonal support area, around the moving averages and around any of the horizontal levels at 0.8665, 0.8695, 0.8845, 0.8885 and 0.9040.

FOREX ANALYSIS: EURUSD – Indecisive. Potential downside?

EURUSD 1 Hour Chart

As suggested in our previous analysis, EURUSD has been bearish.

Price is indecisive and is lacking trend direction. Recent price action has formed a bearish channel though and the moving averages are crossing bearish, so the EURUSD could start down-trending. Price is also down-trending on higher time-frames. EURUSD is currently nearing the support area of the bearish channel.

Opportunities to go short may exist around the dynamic resistance of the moving averages, around the bearish channel resistance area and around the horizontal levels at 0.9840, 0.9925 and 0.9995. A bearish move could be rejected or reverse around the channel support area and around the horizontal levels at 0.9745 and 0.9650.

FOREX ANALYSIS: GBPUSD – Up-trending. End of the trend?

GBPUSD 1 Hour Chart

GBPUSD found support around the bullish channel support area, as suggested in our previous Forex analysis.

Price is up-trending and is currently in a large retrace move. GBPUSD was moving within a large bullish channel but has recently closed below the channel support area, so the uptrend may becoming to an end. The moving averages confirm this – they have crossed bearish.

Trading opportunities could exist around the moving averages, around the diagonal resistance area, around the previous bullish channel support area and around the horizontal levels at 1.0900, 1.1040, 1.1225, 1.1365 and 1.1480.

FOREX ANALYSIS: USDCAD – Indecisive

USDCAD 1 Hour Chart

Price has been bullish.

Just like other USD pairs, the USDCAD is looking indecisive. The moving averages have been crossing frequently – confirming the market indecision. Price is up-trending on higher time-frames.

Trading opportunities may exist around the moving averages and around any of the identified horizontal levels at 1.3425, 1.3505, 1.3565, 1.3685 and 1.3820.

FOREX ANALYSIS: USDCHF – Indecision. Potential upside?

USDCHF 1 Hour Chart

As suggested in our last analysis, price has been moving sideways.

The USDCHF continues to be indecisive and lack trend direction. The moving averages confirm the market indecision – they have been crossing frequently and are moving sideways. Price action is forming a potential ascending triangle pattern, so USDCHF may become bullish.

Trading opportunities could exist around the diagonal support area, around the moving averages and around any of the horizontal levels at 0.9735, 0.9785, 0.9860, 0.9945 and 0.9965.

FOREX ANALYSIS: USDJPY – Ranging

USDJPY 1 Hour Chart

The USDJPY has been finding resistance around the range resistance area, as suggested in our last Forex chart analysis.

Price continues to be indecisive and range between the horizontal levels at 143.85 and 145.15. The moving averages continue to confirm the market indecision – they have been crossing frequently and are moving sideways. The major USD news today could bring some trend direction to this pair.

Trading opportunities may exist around the support and resistance areas of the range and if USDJPY moves out of the range (break-out trade). A break to the upside could find resistance around 145.75. A break to the downside could find support around 142.75 and 140.71.

METAL ANALYSIS: XAUUSD – Up-trending. Potential indecision?

XAUUSD 1 Hour Chart

As suggested in yesterday’s technical analysis, GOLD has started ranging.

Price is up-trending but is currently in a sideways retrace move. Price action has formed a range at 1706-1726. The moving averages confirm the current indecision – they are tightening and are moving sideways.

Trading opportunities could exist around the support and resistance areas of the range and if GOLD moves out of the range (break-out trade). Long opportunities could exist around the horizontal levels at 1689, 1682, 1673 and 1662.

Fundamental Analysis

Key Analysis

Global inflation, a European energy crisis, the war in Ukraine and the possibility of a 2023 global recession are driving the markets.

Recent European government interventions with energy prices may help to reduce rising inflation.

Ukraine has taken significant ground from Russia.

The BOJ has started intervening in the FX markets, in an attempt to strengthen the Yen.

GBP crashes to record lows.

Recent negative USD economic figures suggest that the dollar surge could becoming to an end.

Today’s Major Scheduled News

1230 UTC – CAD – Unemployment rate and employment change
1230 UTC – USD – non-farm employment change, unemployment rate, average hourly earnings

Interest Rate Analysis

A summary of recent central bank rate changes and statements…

Australia (AUD)

The Reserve Bank of Australia (RBA) has increased rates again, this time by 0.25%, rather than the expected 0.50%. Rates now stand at 2.60%. The rate increases throughout 2022 have been to tackle rising inflation, which is still too high, so further rate hikes are expected. The RBA have stated that the economic outlook is cloudy, due to inflation, the war in Ukraine and China’s potential recession, so the RBA will respond when necessary to tackle inflation and stabilise the Australian economy.

The RBA recently mentioned that there may be no more need for large rate hikes, so future rate hikes could be much lower (5-25 bps).

Canada (CAD)

The Bank of Canada (BOC) has raised it’s interest rate by 75bps, increasing the official bank rate to 2.5% – it’s fifth consecutive rate hike. The BOC have announced that further hikes are expected to tackle rising inflation. Short-term inflation expectations are still high.

Euro Area (EUR)

The European Central Bank (ECB) has increased it’s rates by 75bps, bringing the official rate to 1.25%. Further rate hikes are expecting in coming meetings but no large rate hikes are expected.

Japan (JPY)

The Bank of Japan (BOJ) continues to keep interest rates at the record low of -0.10%. The Japanese economy is making a steady but moderate recovery from the COVID crisis but not as great as initially thought – inflation and a resurgence of COVID cases are weighing on the Japanese economy. The BOJ will intervene in the FX markets in order to strengthen the Yen.

Switzerland (CHF)

The Swiss National Bank (SNB) have hiked rates by 75bps, bringing the official rate to 0.5% – interest rates being positive for the first time in over a decade. The SNB did not rule out further rate hikes in future or the possibility of intervening in foreign exchange markets. The rate increase is to tackle rising prices.

United Kingdom (GBP)

The Bank of England (BOE) have increased it’s official bank rate again. This time by 75bps. The official rate is now set to 2.25%. This is the 7th consecutive rate hike by the BOE. Further rate hikes are expected. The BOE has started purchasing government bonds to tackle the rapid decline of currency and bond prices.

United States (USD)

The Federal Reserve has raised the official funds rate by an additional 75bps – it’s fifth rate hike in 2022. The rate is currently now set at 3.25%. The increase in rates is to tackle rising inflation. The Fed currently plan to increase rates further – economists expecting a rate of around 4.00-5.00% by the end of 2022.

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