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Three central banks raised interest rates last week.
The Bank of Canada (BoC) raised its interest rate by 50bps to 3.75%. The BOC believes that they should hike interest rates further to curb inflation. Even though the world and the Canadian economies are improving, inflation remains too high.
The European Central Bank boosted interest rates by 75bps for the third time. However, the ECB warned that the European economy could weaken sharply in the third quarter, affecting the fourth quarter in 2022 and the first quarter in 2023.
Meanwhile, the Bank of Japan maintained negative interest rates and stated that it would not hesitate to loosen more if necessary.
Last week, the US dollar fell to a three-week low before regaining strength at the end of the week as traders assessed whether the Federal Reserve would reduce the rate hikes despite concerns that the world’s largest economy is slowing. For the week, the USD index (USDX) lost 0.95%.
(All data taken from the MT4 VT Markets)
(Picture taken from forexfactory.com)
The US Federal Reserve, Reserve Bank of Australia, and Bank of England have upcoming interest rate decisions scheduled throughout the week.
The US will also release its Non-Farm Employment Change data this week, while New Zealand and Canada will release their Employment Change figures.
The Reserve Bank of Australia (RBA) increased the cash rate by 25bps to 2.6% during its October meeting after hiking the benchmark interest rate by 50bps in each of the prior four months and 25 basis points in May.
RBA said that inflation in Australia was too high and that a further increase in prices is expected over the months ahead.
Analysts predict that the RBA will raise another 25bps at this month’s meeting.
The ISM Manufacturing PMI decreased in September to 50.9, reflecting the slowest growth in factory activity since 2020.
Based on historical trends, we expect that the index will rise to 51 for October.
In the second quarter of 2022, New Zealand’s unemployment rate rose to 3.3% from 3.2% in the previous quarter. Employment data remained unchanged (0%).
The unemployment rate for the third quarter of 2022 is forecast at 3.2%, with employment data to rise by 0.4%.
Last month, the Federal Reserve boosted the federal funds rate by 75bps to 3%-3.25%. This increase is the third consecutive three-quarter point increase.
Analysts expect the Fed to raise its target rate by another 75bps this month.
The Bank of England raised its key interest rate by 50bps to 2.25% in September, marking the 7th consecutive increase.
Analysts expect a further 75bps increase this month.
The Institute for Supply Management’s Services Purchasing Managers Index declined to 56.7 in September from 56.9 in August, but still above the historical average of 55.
In September 2022, Canada added 21,100 jobs, the first rise in employment since May.
The unemployment rate in Canada declined to 5.2% in September of 2022 from 5.4% in the month before, showing a tight Canadian labour market.
Analysts expect jobs to reduce by 5,000 in October as well.
US average hourly earnings held steady at 0.3% in September, as employers added 263,000 jobs and the unemployment rate fell to 3.5%.
Analysts estimate that the average hourly earnings will remain at 0.3% for the month, and an additional 200,000 jobs will be created, with unemployment falling below 3.5%.
Our previous week’s conclusion for gold is that we expect gold to try to achieve the 20 and 50-candle moving averages daily in the $1,664 – $1,693 range, reaching its highest price at $1,674.
On a weekly timeframe, we can see that the Stochastic Indicators have now crossed lower again. Gold prices remain below the 20, 50, and 200-candle moving averages.
Our Weekly resistance levels are at $1,697 and $1,738, with the support levels at $1,614 and $1,559.
Meanwhile, the Stochastic Indicators have crossed back lower daily after failing to reach the overbought level. The price is currently trading below the 20, 50, and 200-candle moving averages.
Our Daily resistance levels are at $1,679 and $1,695, with the support levels at $1,634 and $1,611.
Conclusion: With the Fed deciding how much to raise interest rates this week, we can expect the dollar to strengthen, putting pressure on gold to fall back to our lowest level in a few weeks at $1,614. If the Fed takes a hawkish tone in their meeting minutes, gold may test our Support level of $1,611.
Last week, we mentioned that we are looking at the ECB rate decision and monetary policy, as well as the Flash Services and Manufacturing Data from the Eurozone. We also expected some positive results in EURUSD.
We forecasted that the EURUSD would attempt to break through our resistance level of 0.9872 and go higher to the 0.9940 level, which was reached by EURUSD, with an increase to our weekly resistance levels of 1.00906 before falling back to close at 0.9665.
The Stochastic Indicator is progressively rising in the weekly timeframe, but the price remains within the downward channel, indicating that upward movement is still limited. The price continues to trade below the 20, 50, and 200 candle moving averages.
Our Weekly resistance levels are now at 1.0090 and 1.0185, with the support levels at 0,9860, 0.9625 and 0.9533.
In our daily timeframe, we can see that our stochastic indicators are inside the overbought level and have started to move lower, trying to exit the overbought level. Price is still trading below the 200-candle moving averages but has broken above the 20 and 50-candle moving averages.
Our Daily resistance levels are now at 1,0090 and 1,0192, while the support levels are at 0.9940 and 0.9666.
Conclusion: Last week’s ECB rate decision and monetary policy showed a dovish comment from Lagarde. The EURUSD could make another lower move. We expect the EURUSD to attempt to trade lower within the weekly channel and move back below our daily support at 0.9940.
Last week, we concluded that the market would see some upward activity and that the DJ30 would rise to our first weekly resistance level of 31362. Last week, the DJ30 surged higher, breaking through all our weekly and daily resistance levels to conclude the week at 32983.
On the Weekly timeframe, we can see that the Stochastic Indicator shows a strong upward movement. The price can break above all the 20 and 50-candle moving averages.
Our Weekly resistance levels are now at 33763 and 34785, with the support levels at 32339, 31353 and 30126.
In our daily timeframe, we can see that our stochastic indicators are inside the overbought level. The price is now moving above the 20, 50 and 200-candle moving averages.
Our Daily resistance levels are at 34188 and 35324, while the support levels are at 31709 and 30151.
Conclusion: With the Fed deciding how much to raise interest rates this week, we can expect the dollar to strengthen, putting pressure on the DJ30 to fall back and try to break below the weekly 20-candles moving average of 32399 and the daily 200-candles moving average of 32260.
USOUSD (WTI) was up for the week last week, driven by signs of a rising US economy, tight crude and product markets, and confidence about recovering Chinese oil demand. Price is capable of reaching our last week’s conclusion as well as our daily resistance levels.
In the Weekly timeframe, we can see that the Stochastic Indicator is rising. The price is moving below the 20 and 50-candle moving averages and above the 200-candle moving average.
Our Weekly resistance levels are at 93,86 and 100,90, with the support levels at 83,66 and 76,09.
In our daily timeframe, we can see that our stochastic indicator is also rising, entering the overbought territory. At the same time, prices can break above the 20 and 50-candle moving averages but remain below the 200-candle moving average.
Our Daily resistance levels are at 88,30 and 89,98, while the support levels are at 85.35 and 81.30
Conclusion: We anticipate some good market activity because we are still seeing the effects of the supply cut decision and increased demand in China. We expect the USOUSD to rise further, reaching our daily resistance levels of 88.30 and 89.98 to reach the weekly 50-candle moving average of 89.77, based on the strong stochastic indicators from both the weekly and daily timeframes.
We expected some upward movement in the market last week. The NAS100 can reach our forecasted levels at our weekly 200-candle moving averages of 11566 and our daily resistance level of 11667.
In the Weekly timeframe, we can see that the Stochastic Indicator is exiting the oversold level. The price is still below the 20, 50, and 200- candle moving average.
Our Weekly resistance levels are at 11575 (200-candles moving average) and 12159, with the support levels at 10836 and 10350.
In our daily timeframe, we can see that our stochastic indicators touched the overbought level yet crossed down to expect lower movement but ended the week with higher movement. Price is still moving below the 50, and 200-candle moving averages but can break above the 20-candle moving average.
Our Daily resistance levels are at 11667 and 11974, while the support levels are at 11251 and 10677.
Conclusion: With the Fed deciding how much to raise interest rates this week, we can expect the dollar to strengthen, putting pressure on the NAS100 to fall back and move back below our weekly 200-candle moving average and try to reach back our daily support level at 11250.
When former Chancellor Rishi Sunak was proclaimed the Conservative Party leadership election winner on Monday, the GBPUSD achieved a weekly high.
Our conclusion from last week was that the GBPUSD was able to break over our resistance level at 1.1411.
In the Weekly timeframe, we can see that the Stochastic Indicator is still moving higher, indicating that there is significant upward momentum. The price is still below the 20, 50, and 200-candle moving averages.
Our Weekly resistance levels are at 1.1755 and 1.1990, with the support levels at 1.1396 and 1.1065.
On the daily timeframe, we can see that our stochastic indicator has entered the overbought zone and is beginning to cross lower. Price is now above the 20- and 50-candle moving averages, but it is still below the 200-candle moving average.
Our Daily resistance levels are at 1.1735 and 1.1900, while the support levels are at 1.1460 and 1.1265.
Conclusion: Markets are still waiting to see what the new Prime Minister will do. This week should see some consolidation movement. We predict GBPUSD to rise gradually to our weekly resistance level of 1.1755.
The USD index (USDX) dipped to a three-week low last week before regaining momentum at the week’s end as traders assessed whether the Federal Reserve would halt the pace of rate hikes despite fears that the world’s largest economy is slowing. USDX is capable of breaching all of our support levels.
On the Weekly Time Frame, we can observe that the Stochastic Indicator has moved lower after exiting the overbought zone. The price is still above the moving averages of 20, 50, and 200 candles.
Our Weekly resistance levels are at 111.70 and 113.83, with the support levels at 109.25 and 107.97.
Meanwhile, the Stochastic Indicator shows a rising movement within the oversold zone on the daily timeframe. Price is now trading below the 20 and 50-candle moving averages while remaining above the 200-candle moving averages.
Our Daily resistance levels at 110.85 and 111.50, with the support levels at 108.95 and 108.
Conclusion: We can expect the dollar to rise as the Fed decides how much to hike interest rates this week. We expect that price will attempt to break through our resistance levels, break above the daily 20 and 50-candle moving averages, and move back over 111.50.
The USDJPY closed the week flat, barely 0.09% after being pulled down by the weak USD, and concluded the week higher on Friday due to the BOJ’s monetary policy continuing to drag on the JPY. Following our conclusion from last week, the USDJPY was able to breach below the daily 20-candle moving average yet conclude the week higher.
On the Weekly timeframe, we can see that the Stochastic Indicator is inside the overbought zone and attempting to move downward to exit the overbought zone. The price remains above the 20, 50, and 200-candle moving averages.
Our Weekly resistance levels are 151.42 and 156,28, with the support levels at 143,45 and 138,49.
The stochastic indicator attempts to reach the oversold level on the daily timeframe. Price is still above the 20, 50, and 200-candle moving averages, rising after falling below the 20-candle moving average.
Our Daily resistance levels are 149.35 and 151.99, while the support levels are 144.66 and 142.19.
Conclusion: We’re still waiting for Japan to intervene in the currency market. We expect the USDJPY to rise due to the Fed’s rate decision. We estimate that the USDJPY will reach our barrier level of 149.35.
