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Today’s Forex Focus: GBPUSD Pair

The GBPUSD pair is currently experiencing a positive trading trend, testing the MA 50. This situation calls for caution in the upcoming trades. For the bearish trend to remain valid today, it’s essential for the price to return below the moving average. However, a close above the moving average could propel the price towards additional gains, potentially reaching 1.2280.
The Stochastic indicator is clearly losing its positive momentum, which bolsters the chances of a decline. It’s worth noting that our anticipated target stands at 1.2030. The expected trading range for today lies between the support level at 1.2040 and the resistance level at 1.228. The forecasted trend for today is bearish.

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USD Index - Chart of the Day

The US dollar has been increasing in value recently. This was caused by a large number of bonds being sold, which increased the yield (or return) on US Treasury bonds. The yield on 10-year bonds went above 4.60% and almost reached 4.70%. But then, the situation changed - the bonds regained their earlier losses and the yield on 10-year bonds fell below 4.60%. This also caused the value of the US dollar to decrease.

If we look at the USD index (USDIDX) chart for daily intervals, we can see that the index increased by more than 7% in the last two months and reached 106.50 - the highest it's been since late-November 2022. However, USDIDX has already fallen about 1% from its peak and is getting close to a price range that's around 38.2% lower than the high point it reached in September 2022. The lowest point of this range is near the bottom of this zone, and if it falls below this point, it could mean that the value of the US dollar might start decreasing.

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USD Index - Chart of the Day

The US dollar has been increasing in value recently. This was caused by a large number of bonds being sold, which increased the yield (or return) on US Treasury bonds. The yield on 10-year bonds went above 4.60% and almost reached 4.70%. But then, the situation changed - the bonds regained their earlier losses and the yield on 10-year bonds fell below 4.60%. This also caused the value of the US dollar to decrease.

If we look at the USD index (USDIDX) chart for daily intervals, we can see that the index increased by more than 7% in the last two months and reached 106.50 - the highest it's been since late-November 2022. However, USDIDX has already fallen about 1% from its peak and is getting close to a price range that's around 38.2% lower than the high point it reached in September 2022. The lowest point of this range is near the bottom of this zone, and if it falls below this point, it could mean that the value of the US dollar might start decreasing.

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Silver

Silver prices have been rising strongly, boosted by lower bond yields, a weaker US dollar, gains in the Chinese market, and a generally better mood in global markets.

The future looks bright for silver due to increased demand from the solar power industry and limited supply from major mines. ANZ Research predicts that by 2025, solar power will increase silver demand to 225 million ounces, up from an estimated 161 million ounces in 2023.

Today's rise in silver prices is mainly due to global factors and speculators covering their short positions, expecting silver prices to fall further. Silver has been under pressure for several days due to the strong dollar and high yields.

As markets become more confident that interest rates may have reached their peak, some analysts predict that silver prices will rise if monetary policy is gradually relaxed worldwide.

Will solar energy increase the demand for silver?

According to the Silver Institute, the silver market had a deficit of 237.7 million ounces in 2022, and this deficit is expected to continue in the coming years. However, large inventories and holdings of individuals and investors are filling this gap.

Silver Institute analysts say that demand for silver from photovoltaic (PV) cells used in solar panels has tripled over the past eight years to 160 million ounces. This represents 14% of total silver demand in 2023, compared to 5% in 2014. There is a risk that the amount of silver used in panels could be reduced if prices become too high for producers, but there is limited scope for reduction given the usefulness of the metal.
Looking at the silver price chart, we can see that the price has risen above the 38.2% Fibonacci retracement of the upward trend from March 2020 and is now close to surpassing all three key moving averages, which are almost at the same level of $23.4 per ounce. If prices break above these averages, it could signal a potential rebound towards $25.7, where we see the 23.6% Fibonacci level. On a daily basis, despite today's strong increases, the RSI indicator is just over 53 points. The area around $22.5 has been a strong support for buyers in recent months - a possible decline around this level could signal longer-term weakness.
Looking at the SILVER chart and the dollar index (USDIDX, gold color), we see that a strong upward impulse has re-emerged as the dollar reduces the recent very strong gains. At the same time, the trend line has been maintained.

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US100 - Chart of the days

US index futures opened higher following the weekend, with US100 jumping almost 0.7% at futures trade launch. This is a response to US Congress passing a stopgap funding bill over the weekend that will ensure financing for the US government for 45 days. This means that a US government shutdown has been avoided, at least for now. US politicians will now attempt to work out a more enduring agreement before the new deadline passes in mid-November.

While the US government shutdown was never seen as a significant, plausible risk for the markets and discussions dragging close to the deadline were mostly attempts to win as many concessions from the other side as possible, some weakness could be seen on Wall Street on Friday, signaling that some investors positioned for a potential lack of agreement, and today's jump can be viewed as a retracement of that move.

Taking a look at the Nasdaq-100 futures chart (US100) at D1 interval, we can see that today's bounce plays well into the overall technical bullish setup. Index continues to climb following a bounce off the lower limit of the Overbalance structure. Bulls are trying to push the index back above the psychological 15,000 pts area today. Should they succeed, the way towards the major near-term resistance ranging below the 15,650 pts would be left open.

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Tesla

Wall Street is expected to open lower, with futures indices erasing earlier gains. Investors are shifting towards lower-risk positions as US 10-year bond yields surge and the dollar strengthens.

Final PMI data indicates a contraction phase in major economies despite better than expected results from Europe. US Manufacturing PMI improved due to increased employment and better supply availability, but inflation concerns persist due to rising producers' costs.

US ISM Manufacturing PMI shows contraction for the 11th month in a row, despite some recovery signs. While demand remains soft, production improved, and suppliers retained capacity. Discrepancies between ISM and PMI prices underscore the rapidly changing environment.

Goldman warns of the impact of rising rates on US corporate profits. Kevin McCarthy faces pressure from Joe Biden to fund Ukraine and from Matt Gaetz to cut government spending. Bill Ackman plans to pursue a deal with Elon Musk's X through Pershing Square's SPARC.

The US500 index is trading at 4320 points, down 0.20%, with selling pressure preventing recovery. It's set to retest the critical 4300 support zone.

Tesla's shares fell 4.0% as Q3 deliveries and production fell short of estimates. The company delivered 435,059 vehicles and produced 430,488, attributing the decline to planned factory upgrades. However, Tesla's 2023 volume target of 1.8 million vehicles remains unchanged.

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Yield Curves Rise as US Shutdown Averted, Inflation Remains High

The yield curves have steepened this week, with the 10-year UST and Bund yields reaching new highs. This comes after a potential US government shutdown was avoided, leading to higher yields and firmer riskier assets. Despite this, inflation remains high, with the core PCE release for September close to 4% and the core CPI estimate for the Eurozone at 4.5%.


ECB Cautious on Inflation, Italian Spreads Recover

Luis de Guindos, Vice President of the European Central Bank (ECB), confirmed in a recent interview that discussions about rate cuts are premature. He highlighted the challenges posed by increased oil prices on inflation expectations. Meanwhile, Italian government bond spreads have recovered, with the BTP Valore sale attracting significant demand.

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Oil Analysis

Oil prices have been dropping for four days straight after reaching their highest point in 13 months. The price of a barrel of WTI oil almost hit $94, as buyers tried hard to keep prices high.

This seems to be the third increase in prices since they fell in June. Starting from last Thursday, any attempts to raise the price during the day have been stopped by large sell orders. On Tuesday, WTI's price briefly fell below $87, which is 7.5% less than the highest point last week.

Worries about a slowing world economy led to large sell orders that stopped any attempts to raise the price during the day. This constant pressure seems to be more than just a temporary cooling off of the market and fits the usual pattern of three downward movements.

Last month, there was a divergence on the daily RSI timeframe when a higher price peak happened at the same time as a lower oscillator peak. This often means that bullish momentum is running out. It's also worth noting that the index has already moved away from the overbought zone, which shows the start of the decline.

The next potential drop in price could be to the $84.4 per barrel area. The 50-day moving average is around this area, as are the price peaks from early August and mid-April.

However, oil prices could drop even further. The slowing global economy and decreasing final demand are now working against it. Moreover, oil has been rising against a rising dollar and falling markets for a long time. And now it might catch up with the falling markets with even greater force.

An important signal from exporters: there were reports last month of increased oil exports from Russia and Saudi Arabia, which reduced the market deficit and raised questions about whether the cartel's production limit is really as strict as it seems.

More solid support for oil might only come with a drop to $78. That's the 50-week moving average, but we wouldn't be surprised to see a drop to $75 by the end of the year. These are high levels by historical standards, but they no longer seem like they're holding back the economy or a good reason for further policy tightening.

From a global perspective, lower oil prices will now be good for equity indices rather than a sign of decreasing risk appetite, as is usually the case.

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USDJPY Takes a Dive, Is Bank of Japan Stepping In?

The USDJPY pair saw a significant drop this afternoon. The shift was swift and substantial, happening just as the pair reached the 150.00 mark - a peak not seen since October 2022! This level is crucial as it's often considered the trigger point for intervention by the Bank of Japan, as has happened in the past. Before this drop, the pair was climbing due to a strengthening US dollar, spurred on by a rise in JOLTS job openings data for August.

The USDJPY fell from around 150.00 to approximately 147.30 - a nearly 2% drop. Although much of this decline has been recovered, the pair is still trading close to the 149.00 mark.

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Asia Market Wrap:

Asian markets are seeing a downturn, reflecting a global bond market sell-off due to fears of prolonged high interest rates. This has affected various assets, with global equities taking a significant hit.

The ISM manufacturing data and the JOLTS report suggest a hawkish outlook. The US factory sector, in contraction for 11 months, shows signs of potential expansion. The JOLTS report highlighted a large gap between labour supply and demand, leading to increased wages.

Amid strong economic data and predictions of higher rates from experts like Jamie Dimon and Ray Dalio, bondholders are nervous. Navigating such bond markets requires courage.

The US economy remains strong, with an estimated annualized growth rate of 4.2% in Q3, up from 2.1% in Q2. This is surprising given the Federal Reserve's aggressive monetary policy tightening. Factors like pent-up pandemic demand, job creation, and wage increases contribute to this growth.

However, the US economy is expected to slow down significantly, potentially below 1% in Q4 and may stall next year. This is due to the impact of the Federal Reserve's large interest rate hikes last year. The housing market is particularly affected, with 30-year mortgage rates at a 23-year high of over 7%, leading to low home sales and affordability issues. Bank lending standards are tightening. Services could be affected as households cut back on non-essential purchases and many have depleted their pandemic savings. Additionally, many student loan borrowers have resumed repayments after a 3.5-year break, adding to consumer financial pressures.

The current economic slowdown aligns with the Federal Reserve's aim to control inflation. However, rising oil prices have paused the steady decrease in inflation, which had fallen from a peak of 9.1% in summer 2022 to 3.0% in June, then rose to 3.7% in August. On the bright side, core inflation, excluding food and energy, has remained stable at near two-year lows of 4.3%, down from 6.6% last fall. This is due to smoother global supply chains and slower wage growth. But services inflation remains high, suggesting a return to the Fed's 2% target won't likely happen until early 2025.

The theme of "higher for longer" has pushed 10-year Treasury yields up by 130 basis points over the past five months, reaching a 16-year high of 4.8%. It's expected that yields will drop to 4.25% by year-end and further to 3.75% in late 2024, but this will likely need US data to show a downturn, a looser labour market, and lower inflation to convince investors.

The quick reversal of the US Treasury yield curve is significant. This change could lead to imminent recession warnings. If the unemployment rate increases even slightly, it could trigger recession alarms.

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EURUSD

As we move into the second half of 2023, traders have seen the EURUSD fall steadily since mid-July. This downward trend is clearly marked by parallel black lines, showing a strong bearish trend. This has led to opportunities for consistent bearish positions.

Looking at the trend, it's clear that the pair is weak, especially with the repeated tests of the lower boundary of the channel in recent times. Each time it falls towards this key support level, buyers' step in, temporarily stopping the bearish momentum and hinting at a possible break from the continuous fall.

Despite this bearish trend, there are signs of potential bullish activity. The EURUSD seems to be forming a 'double bottom', marked by yellow rectangles that represent two significant lows in the pair's movement. This pattern often signals a possible reversal, particularly when it appears after a significant downtrend.

Traders are eagerly waiting for a key breakout above the upper black line of the downward channel and an important green horizontal resistance. This line serves as the neckline of the suggested double bottom and is a critical level for those hoping for a bullish turn. A strong daily close above these resistances could signal an exciting move into bullish territory, while a rejection could reinforce the current downtrend.

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WTI Oil

WTI oil is set to continue its downward trend after a brief consolidation period on early Thursday. This follows a significant drop the previous day, marking the largest daily loss since July 5, 2022.

The sentiment has been affected by concerns over demand following recent weak economic data, suggesting a potential further slowdown in global economic growth.

The OPEC+ group, in their meeting on Wednesday, decided to maintain their current oil output policy. Saudi Arabia and Russia have chosen to keep their voluntary output cut unchanged for the rest of the year. Oil prices have dropped to a one-month low, with Wednesday's sharp fall contributing to a reversal pattern on the daily chart.

The price has broken through a key Fibonacci support level at $84.31, indicating that the major downtrend from the 2023 high of $95.00 may continue.

Despite strong bearish momentum, there are signs that the downtrend may start to weaken. However, any price increases should be limited and present better selling opportunities. The previous consolidation floor and broken Fibonacci level at $88.00/40 should limit any significant price increases.

Resistance: 84.90; 86.00; 87.54; 88.00.
Support: 83.88; 81.71; 81.00; 80.00.

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GBPUSD Technical Analysis

The GBPUSD pair started to lose value early on Thursday. The recovery it made on Wednesday was halted by the 10-day moving average (10DMA) at 1.2173. The UK's construction sector performed poorly in September, which is a negative sign. The pair might continue to lose value, with a risk of falling to 1.20 or even 1.1988. It might move within the range of 1.2074 to 1.2173 before falling again. A break above the 10DMA could reduce this downward pressure.

It might move within the range of 1.2074 to 1.2173 before falling again. A break above the 10DMA could reduce this downward pressure.

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USDJPY Technical Analysis

The USDJPY is currently around the middle of Tuesday's range of 150.16 to 147.29. This movement was caused by signs that Japan might step in to help their weakening currency, the yen.

Recent reports from the Bank of Japan say there was no such intervention. However, people are still wary because the chance of intervention is high. They're waiting for the US September NFP report, which will give more information about the US job market and what the Federal Reserve might do next.

Daily technical studies are still positive, but the 4-hour structure has weakened. This suggests there's a risk of a downturn, even though strong bids on Tuesday have offset some of this risk.

The NFP report could trigger new activity and provide fresh signals for direction. If the September numbers are solid (at or above the expected 170K), it would ease the Federal Reserve and allow for higher interest rates for a longer time.

On the other hand, if hiring in September is weaker than expected, it would mean that the tight job market is being hurt by high borrowing costs. This could lead to worries about a major economic slowdown and require a more careful approach from the Federal Reserve.

We can expect new direction signals if either pivot point is broken. If it drops below 147.29 (Tuesday's low), there's a risk of a deeper drop. If it breaks above 150, it could signal a continuation of the bullish trend, although there's still a risk of intervention.

Resistance: 148.72 - 149.31 - 149.7
Support: 148.25 - 147.29 - 146.10 - 145.9

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US Dollar Index Analysis

The US Dollar Index is currently trading in a tight range this Friday morning. The market is in a state of anticipation as it awaits the release of the US Non-Farm Payrolls (NFP) report, a key event this week.

The index remains above the trendline support at 106.01, following a two-day pullback from its 2023 peak at 107.03. This pullback appears to be a healthy correction of the larger uptrend, providing an opportunity for traders to re-enter the bullish market at better levels.

Daily studies continue to support a bullish outlook, suggesting a potential renewed push through the critical resistance zone at 107.00. A break above this level would signal a continuation of the bullish trend.

However, today's direction will likely be influenced by fundamental factors as traders seek more information about the state of the US labor market. This information will directly impact the Federal Reserve's perspective on future interest rates.

Job growth in the US is expected to slow slightly in September (NFP Sep 170K forecast vs Aug 187K), but the unemployment rate is anticipated to decrease from a 1 ½ year high (Sep 3.7% forecast vs Aug 3.8%). Wage growth is expected to remain strong (Sep 0.3% vs Aug 0.2%).

These forecasted numbers suggest that the US labor sector remains robust and is least affected by high borrowing costs among the economy's key sectors. Any expected easing is not likely to significantly impact the overall positive outlook.

In such conditions, the Federal Reserve may opt for another rate hike by year-end or more likely, maintain tight monetary policy for some time. This is because recent drastic measures to control inflation have not yet had the desired impact on the economy.

Two other reports from the US labor sector released earlier this week showed mixed results. Job openings rose well above forecasts, while hiring in the private sector fell significantly last month.

If the September NFP report exceeds expectations, it would reinforce the Federal Reserve's hawkish stance and further support the dollar. However, if the NFP report misses expectations, demand for the dollar would ease.

Initial direction signals are expected on a sustained break of trendline support (bearish) or a lift above pivotal barriers at 107.00 zone (bull

Resistance: 106.96; 107.13; 107.88; 108.79.
Support: 106.01; 105.50; 105.13; 104.32.

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Strong Job Data Impacts Investments and Oil Prices

The path to a safe economic slowdown, which doesn't harm investments, is tricky. After the release of the latest job data (NFP data), people are worried. They think the fast growth might affect one of the main goals of the Federal Reserve (the Fed). The job data shows that there's not much improvement in job balance, so the Fed might need to take more actions. This strong job data could be seen as bad for investments and might make the dollar stronger.

Oil prices were already going down because people were scared of a recession caused by high interest rates. The strong job data might limit the increase in oil prices. If US 10-year loan interest rates get close to 5%, it might cause another drop in oil prices.

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EURUSD: Euro Struggles Amid New Geopolitical Concerns

The Euro is facing renewed pressure, nearing the 1.05 mark due to fresh geopolitical issues in the Middle East. Investors are gravitating back towards the US dollar, a traditional safe haven currency.

Despite a brief surge on Friday, where the Euro almost reached 1.06 after the announcement of new US jobs, it's back under pressure. This surge was in line with my previous predictions, where I suggested not betting on the US dollar below 1.05 due to a potential strong response from the Euro.

However, this response was short-lived due to escalating tensions in the Middle East following a Palestinian attack on Israel. If not for this, the Euro's rally might have lasted longer. Friday's job report was a boon for the US economy as it exceeded expectations, reinforcing the labor sector as a key strength and helping to keep inflation in check. There's still a slim chance that the Federal Reserve might increase rates again.

Friday afternoon's exchange rate behavior was deceptive. The announcement of new jobs led many investors to back the dollar, only to close their positions at a loss soon after. The Euro's strong response, resulting in weekly gains after 11 straight weeks of losses, serves as a reminder of its resilience under pressure. The future is uncertain with new factors coming into play. Increased geopolitical instability could cause unpredictable shocks in global markets.

It might be wise to adopt a wait-and-see approach. However, I still believe in buying the Euro on dips and particularly at new local lows.

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Bitcoin is better than digital Gold

Bitcoin and gold are both seen as valuable assets, according to a recent report by Matrixport. Bitcoin's popularity has surged due to its digital nature, making it a desirable asset. Currently, Bitcoin's market value is $540 billion, which is about 10.8% of the total value of physical gold. Gold ETFs, on the other hand, are worth $200 billion.

The report suggests that if the U.S. Securities and Exchange Commission (SEC) approves a Bitcoin ETF, it could attract an investment of $20 - $30 billion. This could potentially cause a significant increase in Bitcoin's value. However, the SEC has been slow in making a decision on this matter and has postponed all new applications until October. Despite this, the crypto market remains optimistic about the potential influx of mainstream investment.

Interestingly, Bitcoin has an advantage over gold. You can remember your private keys, which means there's no risk of them being taken away.

Matrixport's head of research, Markus Thielen, pointed out that storing wealth in gold is becoming less popular in today's digital age. It also has limitations when it comes to international transactions. In contrast, Bitcoin allows for quick and discreet transfers of value across borders.

In conclusion, given the current technological advancements, Bitcoin serves two main purposes. It acts as a store of value similar to gold and as a speculative financial asset.

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