The dollar traded with a nuance during the Asian session with the yen and the Swiss franc. The overnight pullback in US equities was shallow and brief. The major indices managed to pare much of the earlier losses to close slightly lower. Investors just seemed cautious ahead of Friday’s jobs report. Meanwhile, commodity currencies are strengthening in the Asian session, while the euro and the pound are mixed.
Technically, in addition to the next move of the dollar, the development of the British pound is also worth noting. After two volatile weeks, EUR/GBP and GBP/CHF are now pressing the 55-day EMA (on opposite sides of course). The pound appears to be struggling to break through the EMAs decisively. A rejection from there could entice sellers to come back and push it back towards the short-term peak. As for the GBP/CHF, the break of the minor support at 1.0811 will indicate that the rebound from 1.0183 is over and will bring a deeper drop back to that level.
In Asia, at the time of writing, the Nikkei is up 1.01%. Hong Kong’s HSI index is down -0.17%. Singapore Strait Times is up 0.32%. Japan’s 10-year JGB yield is up from 0.004 to 0.254. Overnight, the DOW fell -0.14%. The S&P 500 fell -0.20%. The NASDAQ fell -0.25%. The 10-year yield rose from 0.142 to 3.759
Fed Bostic: Cut rates in 2023? not so fast
Atlanta Fed President Raphael Bostic said yesterday, “I would like to get to a point where the policy is moderately tight – between 4 and 4 1/2% by the end of this year – and then hold it there. level and see how the economy and prices react,”
There’s “a lot of speculation already that the Fed could start cutting rates in 2023 if economic activity slows and the inflation rate starts to fall,” Bostic said. “I would say: not so fast.”
“We must not let the emergence of (economic) weakness deter our efforts to reduce inflation,” he added. “We need to remain vigilant because this battle against inflation is probably only in its infancy.”
NZ Robertson not concerned about NZD outlook as NZD/USD extends rally
New Zealand Deputy Prime Minister Grant Robertson today said it would be a ‘difficult year’ with a ‘global downturn’. New Zealand would see “less demand and some slowdown”. But, “that does not mean, for me, a recession. There is a balance to be struck here.
“Monetary and fiscal policies must be coordinated, work together,” he said. “When interest rates rise, they will limit demand.” He also said he was “not concerned about the long-term outlook for the New Zealand dollar.”
NZD/USD extends the rally from 0.5563, but after all this is seen as a corrective move in a downtrend. The upside should be capped by a 38.2% retracement from 0.6467 to 0.5563 to 0.5908. A larger downtrend is likely to pick up again at a later stage down to the 2020 low at 0.5467.
On the data front
Australia’s AiG construction performance fell from 47.9 to 46.5 in September. The goods and services trade surplus narrowed from AUD 8.97 billion to AUD 8.32 billion in August, below expectations of AUD 10.0 billion.
Going forward, German Factor Orders, UK Construction PMI, Eurozone Retail Sales and ECB meeting minutes will be featured in the European session. US Challenger job cuts, unemployment insurance claims and Ivey PMI will be released later today.
GBP/USD Daily Outlook
Daily Pivots: (S1) 1.1206; (P) 1.1350; (R1) 1.1473; After…
The GBP/USD intraday bias remains neutral for now. On the downside, the break of 1.1023 minor support will indicate that the rebound from 1.0351 is complete. The intraday bias will be back down to retest 1.0351. On the upside, a firm break of the 61.8% retracement from 1.2292 to 1.0351 at 1.1551 will open the way to resistance at 1.2292.
Overall, the fall from 1.4248 (2018 high) resumes the long-term downtrend from 2.1161 (2007 high). The next target is a 100% projection of 2.1161 to 1.3503 from 1.7190 to 0.9532. There is no medium term rebound potential as long as 1.1759 support becomes resistance.
Economic Indicators Update
| GMT | Ccy | Events | Real | Provide | Previous | amended |
|---|---|---|---|---|---|---|
| 21:30 | USD | AiG construction performance index seven. | 46.5 | 47.9 | ||
| 00:30 | USD | Trade Balance (AUD) August | 8.32B | 10.00B | 8.73B | 8.97B |
| 06:00 | USD | Factory orders in Germany M/M August | -0.50% | -1.10% | ||
| 08:30 | GBP | Construction PMI Sept. | 48.1 | 49.2 | ||
| 09:00 | USD | Retail sales in the euro zone M/M August | -0.30% | 0.30% | ||
| 11:30 a.m. | USD | ECB monetary policy meeting accounts | ||||
| 11:30 a.m. | USD | Challenger job cuts Y/Y Sep | 30.30% | |||
| 12:30 | USD | Initial jobless claims (September 30) | 205K | 193K | ||
| 14:00 | BODY | Ivey PMI Sept. | 62.3 | 60.9 | ||
| 2:30 p.m. | USD | Natural gas storage | 125B | 103B |
