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Tips for beginner traders in EUR/USD and GBP/USD on August 17, 2022

Details of the economic calendar for August 16

The UK's Office for National Statistics (ONS) report on the labor market yesterday showed unemployment rate stabilized at around 3.8%. Employment in the country increased by 160,000 against 296,000 in the previous reporting period. Forecasts predicted that employment would grow by 256,000. At the same time, the change in the number of applications for unemployment benefits in July decreased by 10,500, which is good, but they predicted -32,000.

Statistics for the UK stand out only by the unemployment rate, since everything is ambiguous on other indicators. The pound sterling stood still at the time of publication.

During the American trading session, data on the construction sector in the United States were published, which recorded a widespread decline in performance.

Details:

U.S. Building Permits Issued – Prev. 1.696M; Fact. 1.674M.

U.S. Housing Starts – Prev. 1.599M; Fact. 1.446M.

Subsequently, data on the volume of industrial production were published, which recorded a slowdown from 4.02% to 3.9% YoY, and increased by 0.6% MoM.

Conclusion:

Data on the US came out negatively; the dollar was under pressure from sellers.

Analysis of trading charts from August 16

The EURUSD currency pair overcame the support level of 1.0150 locally during an intense downward movement, but the sellers failed to stay below the reference value of 1.0100. As a result, there was a pullback in the market above the support level.

The GBPUSD currency pair rebounded from the psychological level of 1.2000 with surgical precision. As a result, there was an increase in the volume of long positions, strengthening the pound sterling by about 100 points.

Economic calendar for August 17

At the opening of the European session, data on UK inflation was published, which recorded an increase from 9.4% to 10.1%. Such a high level of inflation is likely to lead to an even stronger increase in the interest rates of the Bank of England.

In Europe, the second estimate of GDP for the second quarter will be published, where no reaction is expected since it should coincide with the first estimate, which is already included in the current quotes.

During the American trading session, traders expect retail sales data in the United States, the growth rate of which is likely to slow down from 8.4% to 8.1%. Even with a possible slowdown, retail sales are still at a high level. However, the very fact of a slowdown amid fears of a recession will be a catalyst for fear among investors. Thus, the US dollar may be under pressure.

Near the closing of the European session, and when Western traders will be in the active phase, the FOMC minutes will be published.

Time targeting:

EU GDP – 09:00 UTC

US Retail Sales – 12:30 UTC

FOMC protocol – 18:00 UTC

Trading plan for EUR/USD on August 17

Presumably, the area of the level of 1.0150 is still putting pressure on sellers. For this reason, one of the possible scenarios for the price development is a rebound towards 1.0240.

As for the prolongation of the downward cycle, this scenario will be relevant only after holding the price below 1.0100 for at least a four-hour period. In this case, the quote will rush towards the parity level.

The pullback stage may well slow down the move around 1.2120/1.2150. In this case, there will be a gradual increase in the volume of short positions, returning the quote to the psychological level of 1.2000.

Prolonging the current pullback will be considered if the price holds above the value of 1.2160 in a four-hour period.

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Dollar - period. USD again trumps on all fronts

The FOMC minutes, published on Wednesday, became another springboard for the dollar. Today, the US currency, inspired by the hawkish mood of the Federal Reserve officials, is growing in all directions.

Temporary weakness
Yesterday investors focused on the minutes of the FOMC meeting. Immediately after its release, the dollar was defeated, but a little later the market interpreted the report in favor of the greenback.

Short-term pressure on the USD came from Fed officials' concerns about a recession. During the meeting, it was noted more than once that sectors of the economy that are sensitive to higher interest rates have already begun to show signs of slowing down.

Some Fed members fear that as part of their commitment to bring inflation under control, the central bank may tighten policy more than is necessary to restore price stability. In this case, the American economy is unlikely to survive.

The rhetoric of the FOMC meeting participants initially seemed dovish to the market. After the release of the minutes, the probability of a rate hike by 75 bps fell to 40% in September, while earlier traders estimated it at 52%.

Against this background, the yield of US government bonds began to decline, which provoked a fall in the dollar index. The greenback's low from yesterday was the 106.39 mark.

The euro won the most from the short-term rebound of the greenback. After the release of the July minutes, the EUR/USD pair rose by almost 50 points and reached the level of 1.0202.

This helped the euro to close the day with a slight increase (+0.13%), while other major currencies, on the contrary, sank in tandem with the USD.

Invincible Hulk
Despite short-term weakness, the dollar index finished Wednesday's session with growth. The revaluation of the FOMC minutes by the market helped it recover.

When the first emotions subsided, the main thing came to the fore: the Fed still intends to fight inflation, which implies further aggression towards interest rates.

At the July meeting, absolutely all of its participants agreed to raise rates by 75 bps. Moreover, many of them supported the view that the Fed will continue to move at the same pace if necessary.

Of course, by "necessary" we mean the persistence of inflationary pressures. At this stage, Fed members do not see convincing signs of a decrease in price growth, so they do not exclude that even more efforts will be needed to resolve the situation.

As for the economy, politicians said they would closely monitor its adaptation to the new monetary rate and take all necessary measures to prevent a recession.

In the ranks of the Fed, they do not deny a possible slowdown in economic growth, but at the same time officials manage to remain optimistic. Many of them believe that thanks to a strong labor market, US GDP could grow in the third quarter.

The data on retail sales in America, which were published on Wednesday, also helped reduce fears of a recession.

The US Department of Commerce said that in July the indicator rose by 10.3% year on year, which is higher than the forecast estimate (8.3%) and more than the previous month's value (8.5%).

A positive retail sales report coupled with hawkish FOMC minutes provided strong support for the dollar. Yesterday, the US currency managed to strengthen against its competitors by almost 0.1%.

The most important outsider was the Australian dollar. It plunged 1.23% against the greenback. The aussie's appeal has also been eroded by heightened concerns about Chinese demand for commodities, including iron ore.

The greenback soared 0.98% against the New Zealand dollar, negating the earlier growth of the NZD. Recall that on Wednesday the Reserve Bank of New Zealand increased interest rates by 50 bps to 3%, and signaled the continuation of the aggressive rate in the coming months. This triggered the rise of the kiwi.

The US dollar jumped 0.55% against the Japanese yen to 134.97. Such significant dynamics is a completely logical reaction of the USD/JPY pair to another increase in the gap between the yields of US and Japanese government bonds.

The greenback edged up 0.34% against the pound. The pound's weakening on Wednesday was also facilitated by the release of July statistics on inflation in the UK.

The report showed that consumer prices in the peninsula hit 10.1% last month, the highest in 40 years.

Double-digit inflation has heightened investor fears that the Bank of England will have to be even more aggressive on rates. This raises the already high risk of a recession in Britain.

Brilliant outlook for USD
"Now the overall picture for the dollar looks very positive. It is in a strong upward trend across the board," notes analyst Matt Simpson.

On Thursday morning, under the pressure of the greenback, the euro, the only currency from the group of 10, which showed growth yesterday in tandem with the USD, could not resist.

EUR/USD fell to 1.0150 amid growing recession risks. Recall that yesterday Eurostat presented the second estimate of the eurozone GDP for the second quarter. The indicator was revised downward.

Also, the euro is under strong pressure from the energy crisis flaring up in the eurozone, which is aggravated by abnormal heat.

Record high temperatures and a lack of rainfall caused the Rhine to dry up in Germany. Since the water level in the river has fallen below the critical level of 40 cm, the transport of coal, food and other goods has been significantly reduced.

Also, the appetite for the euro is now declining amid anti-risk sentiment among investors. The safe dollar is in high demand due to another escalation in geopolitical tensions between the US and China. Washington just announced official trade talks with Taiwan earlier this fall.

As you can see, the EUR/USD pair has fallen into a "perfect storm". According to analysts' forecasts, the dollar will continue to strengthen against the euro in the foreseeable future. Its growth is also expected in other directions.

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Tips for beginner traders in EUR/USD and GBP/USD on August 19, 2022

Details of the economic calendar for August 18

The annual inflation rate in the euro area accelerated to 8.9% in July from 8.6% a month earlier, eventually updating the historical record. The market ignored the data since it completely coincided with the preliminary estimate. Nevertheless, rising inflation in the EU points to further steps by the ECB to raise interest rates.

During the American trading session, weekly data on jobless claims in the United States were published, where, despite the divergence of forecasts, we still saw an increase in their volume.

Statistics details:

Continuing claims for benefits increased from 1.430 million to 1.437 million.

Initial claims for benefits decreased from 252,000 to 250,000.

Analysis of trading charts from August 18

The EURUSD currency pair, after a short stagnation within the 1.0150 level, managed to regroup trading forces. As a result, traders managed to properly increase the volume of dollar positions. This step led to a breakdown of the reference value of 1.0100.

On the trading chart of the daily period, there is an attempt to prolong the medium-term downward trend. The recovery of the dollar relative to the recent correction is 72%.

The GBPUSD currency pair noticeably accelerated the decline, which led to the breakdown of the psychological level of 1.2000. Typical speculative interest has accelerated the sale of the pound by more than 140 points, placing the quote below 1.1900.

On the trading chart of the daily period, there is also an attempt to resume the medium-term downward trend. The recovery of dollar positions relative to the recent correction is 72%.

Thus, based on the daily charts, it can be seen that EURUSD and GBPUSD are moving after, actively restoring the downward trend.

Economic calendar for August 19

At the opening of the European session, UK retail sales data were published, its rate of decline slowed down from -6.2% to -3.0%. And let's talk about the decline in sales. The very fact of slowing down this process is important.

Important statistics in Europe and the US are not expected.

Trading plan for EUR/USD on August 19

Despite the local signal of oversold euro in the short term, the market remains in a downward interest. Thus, the subsequent price retention below the 1.0100 mark may push the quote towards parity.

Traders will consider an alternative scenario if the price returns above 1.0100 in a four-hour period.

Trading plan for GBP/USD on August 19

The current price change suggests a recovery of the downward trend relative to the recent correction. Keeping the price below the 1.1880 mark may well prolong the set inertial move in the direction of the local low of the medium-term trend at 1.1750.

It is worth considering that the signal about the oversold of the pound sterling is already taking place in the short-term and intraday periods. Thus, a technical pullback in the market cannot be ruled out.

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Tips for beginner traders in EUR/USD and GBP/USD on August 19, 2022

Details of the economic calendar for August 18

The annual inflation rate in the euro area accelerated to 8.9% in July from 8.6% a month earlier, eventually updating the historical record. The market ignored the data since it completely coincided with the preliminary estimate. Nevertheless, rising inflation in the EU points to further steps by the ECB to raise interest rates.

During the American trading session, weekly data on jobless claims in the United States were published, where, despite the divergence of forecasts, we still saw an increase in their volume.

Statistics details:

Continuing claims for benefits increased from 1.430 million to 1.437 million.

Initial claims for benefits decreased from 252,000 to 250,000.

Analysis of trading charts from August 18

The EURUSD currency pair, after a short stagnation within the 1.0150 level, managed to regroup trading forces. As a result, traders managed to properly increase the volume of dollar positions. This step led to a breakdown of the reference value of 1.0100.

On the trading chart of the daily period, there is an attempt to prolong the medium-term downward trend. The recovery of the dollar relative to the recent correction is 72%.

The GBPUSD currency pair noticeably accelerated the decline, which led to the breakdown of the psychological level of 1.2000. Typical speculative interest has accelerated the sale of the pound by more than 140 points, placing the quote below 1.1900.

On the trading chart of the daily period, there is also an attempt to resume the medium-term downward trend. The recovery of dollar positions relative to the recent correction is 72%.

Thus, based on the daily charts, it can be seen that EURUSD and GBPUSD are moving after, actively restoring the downward trend.

Economic calendar for August 19

At the opening of the European session, UK retail sales data were published, its rate of decline slowed down from -6.2% to -3.0%. And let's talk about the decline in sales. The very fact of slowing down this process is important.

Important statistics in Europe and the US are not expected.

Trading plan for EUR/USD on August 19

Despite the local signal of oversold euro in the short term, the market remains in a downward interest. Thus, the subsequent price retention below the 1.0100 mark may push the quote towards parity.

Traders will consider an alternative scenario if the price returns above 1.0100 in a four-hour period.

Trading plan for GBP/USD on August 19

The current price change suggests a recovery of the downward trend relative to the recent correction. Keeping the price below the 1.1880 mark may well prolong the set inertial move in the direction of the local low of the medium-term trend at 1.1750.

It is worth considering that the signal about the oversold of the pound sterling is already taking place in the short-term and intraday periods. Thus, a technical pullback in the market cannot be ruled out.

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Asian markets close mixed on Monday

Asian stock markets were mixed on Monday. The Shanghai Composite and the Shenzhen Composite gained 0.57% and 0.64% respectively, while the Hang Seng Index went up by 0.12%. The Nikkei 225 decreased by 0.55%, the S&P/ASX 200 fell by 0.96%, and the KOSPI lost 1.15%.

Investors are awaiting new information from Fed chairman Jerome Powell regarding the further monetary policy course of the US central bank. Powell is set to give a speech this week.

Furthermore, market players took note of the Chinese central bank decreasing two of its key interest rates. The People's Bank of China cut its one-year loan prime rate to 3.65% from 3.7%. The five-year rate was cut to 4.3% from 4.45%. The move was not unexpected – earlier, the PBoC decreased its medium-term lending facility loan rate by 10 basis points to 2.75%.

The Chinese central bank's rate cuts are aimed at boosting the country's economic growth, which has slowed down due to rising energy prices, weak property market, and COVID-19 lockdowns.

On the Hang Seng Index, the biggest movers were Agile Group Holdings, Ltd. (+6%), CIFI Holdings (Group), Co. (+7%), Country Garden Holdings, Co., Ltd. (+3%), and China Resources Land, Ltd. (+2%)

Shares of Sinopec Engineering (Group), Co. gained 4% after the company reported that its net profit increased by 0.6% in the first half of 2022.

In Japan, the worst-performing stocks on the Nikkei 225 were Hino Motors, Ltd. (-3.5%), CyberAgent, Inc. (-3.1%), and Nippon Sheet Glass Co., Ltd. (-2,9%).

The share price of Ai Holdings, Corp. advanced by 5%, thanks to the company's net profit jumping by 32% in the previous fiscal year.

In South Korea, Samsung Electronics, Co. and Hyundai Motor, Co. lost 1.6% and 0.5% respectively.

In Australia, BHP shed 0.2%, while Rio Tinto declined by 0.53%.

Shares of NIB, Ltd. gained 6.6% thanks to the company's operating profit exceeding market expectations.

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Technical analysis recommendations on EUR/USD and GBP/USD for August 23, 2022​​​​​​​

EUR/USD

Higher timeframes

Last week's sentiment retained its strength and predominance, which contributed to the continuation of the decline. Bears managed to close the last day below the indicated reference points of psychological support (1.0000) and the minimum extremum (0.9952). If bulls recover their positions, the passed levels of 1.0000 and 0.9952 can exert attraction and resistance. Reliable consolidation below 1.0000 and 0.9952 will restore the downward trend of the higher timeframes. The reference points for a further decline in the current situation can be the psychological level (0.9000) and the minimum extremum of 2000 (0.8225).

H4 – H1

Bears currently have the advantage on the lower timeframes. They are now testing the first support for the classic pivot points (0.9896). Further reference points for the decline within the day are two other supports of the classic pivot points—0.9851 (S2) and 0.9775 (S3). With the correction developing, bulls will need to focus on passing the key levels, which are now the resistance levels 0.9972 (central pivot point of the day) and 1.0088 (weekly long-term trend). Intermediate resistance can be noted at 1.0017 (R1).

GBP/USD

Higher timeframes

Yesterday, bears updated the minimum extremum and tested its support (1.1759). Soon, the result of interaction with the level will form. As the downward trend movement continues, the next reference point will be the minimum extremum of 2020, fixed at 1.1411.

H4 – H1

The pair continues to decline, there is a downward trend, and the main advantage in the lower timeframes belongs to the bears. The reference points for the decline within the day are the support of the classic pivot points (1.1725 – 1.1685 – 1.1630). A corrective rise, consolidation above the key levels of 1.1780 (central pivot point of the day) – 1.1936 (weekly long-term trend) and a reversal of the moving average will help change the current balance of power. Intermediate resistance on this path can be provided by the resistance of the classical pivot points (1.1820 – 1.1875 – 1.1915).

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USD/JPY: sadness, melancholy, sorrow...

After a multi-day rally on Tuesday, the USD/JPY pair reversed sharply to the downside and bounced down hard. This morning, the bulls are struggling to regain the advantage, but the bears are gaining.

Who brought down the dollar?
Yesterday, nothing foreshadowed a catastrophe of this magnitude. Ahead of the release of the next batch of US economic data, the dollar index reached a multi-year high of 109.27.

In the first half of the day, the greenback felt the strong support of the Federal Reserve's hawks, which helped it strengthen against the yen to a 5-week peak of 137.70.

However, US statistics turned out to be worse than forecasts and traders were disappointed, as a result of which the USD/JPY pair abruptly changed direction and shot down to the level of 135.80.

Literally overnight, the dollar plunged against the Japanese currency by 100 points, or 0.7%. The key pressure on it was increased concerns about the slowdown in the American economy.

The risk of recession has increased due to the pessimistic data provided by S&P Global. The agency reported that in August, the composite purchasing managers' index fell from the July value of 47.7 to the level of 45, which is the lowest since February 2021.

The PMI in the services sector showed an even more significant drop this month. The indicator dropped from 47.3 to 44.1, while economists, on the contrary, expected an increase to 49.2.Fresh statistics on the US real estate market, which was published on Tuesday, also added fuel to the fire. New home sales in the US fell by more than 12% in July, to the lowest level in six years (from 585,000 to 511,000).

In addition, the dynamics of the index of manufacturing activity from the Richmond Fed, which was also published yesterday, turned out to be negative. The index fell to -8.0 in August from the previous reading of 0.0.

Taken together, all of these data pointed to signs of a slowdown in US economic growth. Now the markets are once again fearing that the Fed may loosen its hawkish grip on inflation with the looming recession.

The resumption of speculation about a less aggressive rate hike has awakened the dollar bears. They increased their pressure on the USD, even though in the coming days Fed Chairman Jerome Powell may trample on the root of all doubts about the US central bank's decisiveness.

Caution: High volatility!
Most analysts predict that in the short term, the USD/JPY pair will continue to storm strongly. The high volatility of the asset will be associated with the continuing uncertainty about the Fed's future course.

Now traders expect that Powell's speech on Friday at the 3-day Fed symposium in Jackson Hole will bring clarity to this issue.

Many experts are betting that Powell will remain true to the current monetary rate despite the increasing risks of recession.

This opinion is supported by recent hawkish comments by members of the Fed. So, yesterday, the president of the Federal Reserve Bank of Minneapolis Neil Kashkari said that the central bank will have to act more aggressively for a longer time if inflation turns out to be much more stable than expected.

According to analysts, any hint by the head of the Fed to further tightening at a given pace can inspire the dollar to new highs. And most of all, in this case, the yen will suffer again.

Recall that this year, the JPY plunged more than other currencies from the group of 10 against the dollar due to the divergence in the monetary policy of the Fed and the Bank of Japan.

According to forecasts, after Jackson Hole, bulls can push the USD/JPY pair to the psychologically important 140 mark.

However, let's not force things, especially since today we are expecting a new batch of important economic data from the United States.

Statistics on basic orders for durable goods will be published on Wednesday. According to economists, the indicator will be 0.2% against the previous value of 0.4%.

If the forecast is justified and the volume of orders falls, this will indicate a decrease in the activity of manufacturers, which will be another blow to the gut for the dollar.

In the near future, the USD/JPY pair risks being far down again. The technical picture also gives hope to intraday bears: a pullback of the RSI (14) and bearish MACD signals.

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Powell vs dollar: will he support or let it float freely?

At the start of the symposium in Jackson Hole, the intrigue about the succeeding dynamics of the dollar increases. Market participants are tensely waiting for what Federal Reserve Chairman Jerome Powell will say and how his speech will affect the current monetary policy and the prospects of the greenback.

At previous symposiums, Powell paid attention to very important issues. In 2020, he announced monetary stimulus for the American economy affected by the COVID-19 pandemic. Last year, the key moment was the statement about the temporary nature of inflation and the curtailment of incentives. Powell's mistake. His stance on inflation has cost the world and American economies dearly, although this situation is fixable.

In 2022, the theme of the event is a reassessment of the current constraints in the economy, namely a large-scale price increase and ways to combat off-scale inflation. Experts are considering two scenarios of Powell's speeches:

1) Basic

The head of the Fed will once again pay attention to extremely high inflation, stressing that the monetary authorities will fight it. The US central bank will do everything possible to maintain economic growth in the United States.

2) Negative

Powell will confirm that the Fed is following the chosen course and is ready to aggressively raise rates to combat inflation. Against this background, the US economy will experience strong pressure. In addition, there may be an increase in yields and a correction in the markets. However, there are no prerequisites for the implementation of the second scenario.

According to experts, Powell's actions will determine the further dynamics of the greenback. Market participants expect that Powell's speech will clarify the immediate prospects of monetary policy. According to analysts, Powell "will try to manage market expectations" while maintaining the hawkish position of the Fed. On Thursday, August 25, at the symposium that began in Jackson Hole, representatives of the Fed confirmed their intention to raise rates and keep them at a high level until inflation weakens. At the same time, investors remain optimistic about the US currency and cautious with a negative bias towards the European one.

The dollar showed confidence this week, gaining momentum after the release of positive macroeconomic data. As a result, in the second quarter of 2022, the US GDP growth rate was revised upward (from -0.9% to -0.6%). At the same time, the number of applications for unemployment benefits decreased more than expected. After the statistics were released, profitability in the US peaked, but then retreated slightly from high levels.

Experts have recorded a steady growth of the greenback over the current year (by 13.5% against a basket of key currencies). The US currency has risen to its highest level in 20 years, while the euro has fallen by about 12% to below parity, which has not been the case for two decades. At the moment, there are many USD bulls on the market betting on its rise. Traders and investors are confident that the dollar has the strength to continue growing thanks to the hawkish attitude of the Fed and inspiring economic indicators in the United States.

Against this background, the European currency is noticeably losing to its American competitor. The energy crisis in Europe and the European Central Bank's unstable stance on raising rates add fuel to the fire. At the same time, most representatives of the central bank support an interest rate hike by 50 bps. However, many investors are deterred by the deteriorating economic prospects of the eurozone and constantly rising inflation. Against this background, the inflationary situation in the United States looks much more stable than on the other side of the ocean.

According to analysts, double-digit inflation in the eurozone is due to the long-term Russian-Ukrainian conflict, which provoked the energy crisis. Economists fear that the euro bloc countries will fall into the so-called "downward spiral of wage and price growth", from which it is difficult to get out. Against this background, long positions on the euro sharply plunged, which was under pressure.

The failures of the European currency play into the hands of the American one, experts emphasize. According to JPMorgan analysts, the greenback was supported not only by "encouraging economic data" on inflation and employment in the United States, but also by the "growing vulnerability" of the European economy. Recall that in July, the consumer price index in the United States rose by 8.5% in annual terms. At the same time, the unexpected increase in the number of jobs reduced market fears about the onset of a recession.

The US currency has received strong support thanks to the Fed's aggressive rate hike. According to investment analysts at U.S. Bank Wealth Management, this trend will continue in the near future. Against this background, the EUR/USD pair maintains a bearish trend, and the euro still looks vulnerable. Experts note the growing downside risks in relation to the euro.

In the short term, the EUR/USD pair is able to test the parity level again. The euro is still showing weakening, having failed to hold the 1.0000 mark. According to experts, the recovery above the level of 1.0030 will support the single currency. However, now it is rapidly sinking. The EUR/USD pair was near 0.9963 on the morning of Friday, August 26. Currently, experts consider the 0.9950 mark to be the support line, the breakdown of which will pull the pair to the low level of 0.9900.

Earlier, currency strategists at Capital Economics announced a prolonged period of the euro's weakness amid deteriorating economic conditions in the eurozone. Against this background, the dollar has every chance of rising, as markets expect the Fed to raise rates again in September. The implementation of such a scenario will increase pressure on the euro. However, any signals from the head of the central bank that the Fed recognizes the stabilization of the inflation rate will allow the markets to interpret what has been said in favor of easing the monetary policy. Misinterpretation of Powell's statements can shake the dollar's position and help the short-term recovery of the EUR/USD pair, experts believe.

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JPY is not a tenant. Powell and Kuroda signed the yen's death sentence

The Japanese currency is flying down at the start of the new week. The reason for the next peak of the JPY is still the same – the divergence in the monetary policy of the Federal Reserve and the Bank of Japan, which intensified after Jackson Hole.

The main event of last week was the annual Fed symposium in Jackson Hole, and its climax was the speech of the chairman of the US central bank.

As expected, Fed Chairman Jerome Powell stressed his firm intention to fight inflation by further raising interest rates.

– The restoration of price stability will take some time and will require the "decisive" use of the central bank's tools, – the official said during his speech at the forum.

The market interpreted this comment as hawkish, which provoked a sharp jump in the yield of US government bonds and, as a result, a large-scale rally of the dollar.

The DXY index updated its 20-year high on Monday morning, jumping to the level of 109.4.

The Japanese currency suffered the most from the strong greenback. In just a couple of hours, the Japanese fell by almost 0.6% and reached a 5-week low of 138.60.

The current weakness of the JPY is also dictated by the dovish tone of the head of the BOJ. Like his American counterpart, BOJ Governor Haruhiko Kuroda did not present any surprise at the Jackson Hole symposium.

Earlier, Kuroda repeatedly stated that the normalization of monetary policy could cause serious damage to the Japanese economy, which has not yet recovered after the COVID-19 pandemic.

Last Saturday, Kuroda again made it clear that he remains faithful to the ultra-soft course and will continue to adhere to it until "wages and prices will not grow in a stable and sustainable manner."

According to experts, this comment by the head of the BOJ was the last nail in the coffin of the Japanese currency.

In the near future, the yen will not only continue to fall, but also, most likely, will reach another record low against the dollar.

At the time of release, the USD/JPY pair rose above the 139 level and was aimed at the psychologically important 140 mark.

Most currency strategists believe that in the short term, the asset will be able to cross the key barrier that proved impregnable last month.

The probability of such a scenario developing is now very high. In the light of recent speeches by Powell. The markets expect that the wide difference in interest rates between Japan and the United States will remain longer than predicted.

This significantly strengthens the bulls' positions on the USD/JPY pair. According to experts, the upward trend of the asset will continue until at least one of the central banks signals a change in its current monetary rate.

We also draw your attention to the fact that this week the US dollar may receive another strong growth momentum. On Friday, traders expect the release of the US employment report for August.

We also draw your attention to the fact that this week the US dollar may receive another strong growth momentum. On Friday, traders expect the release of the US employment report for August.

If the data from the labor market turns out to be strong, it will push the greenback to new heights and send the yen even deeper to the bottom.

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Tips for beginner traders in EUR/USD and GBP/USD on August 30, 2022

Details of the economic calendar for August 29

The new trading week usually starts with an empty macroeconomic calendar. Important statistics were not published in Europe and the United States, while the UK observed a holiday.

Investors and traders were able to digest everything said by the head of the Fed last Friday, and a pullback in the US dollar appeared on the market.

Information from the Fed was by no means a catalyst for price surges in the euro and the pound, but it was an integral part of the entire information and news background.

What was the leverage for buying the euro?

Initially, the euro was inspired by the news that gas prices in the EU fell by almost 20% after Germany's statement about full storage facilities.

After that, information began to appear in the media that the ECB could start raising interest rates more sharply.

This news has become a catalyst for the growth of the euro.

Analysis of trading charts from August 29

The EURUSD currency pair opened the new trading week with a roll towards the parity level (1.0000). The activity was so strong that there was an inertial move of about 90 points.

The GBPUSD currency pair reached 1.1650 during an intensive downward movement, against which there was a reduction in the volume of short positions as a result of a technical pullback. In this case, the incentive to buy the pound sterling was the positive correlation with the euro, which has significantly strengthened in value over the past day.

Economic calendar for August 30

Today, data on the UK lending market will be published, which is expected to decline. This is a negative factor for the UK economy, which may lead to the weakening of the pound sterling.

During the American session, data on housing prices in the United States will be published, where a decrease is expected based on the forecast. Data on JOLTS job openings for July is also expected.

Time targeting:

UK lending market – 08:30 UTC

US House Price Index – 08:30 UTC

US JOLTS Job Openings – 14:00 UTC

Trading plan for EUR/USD on August 30

Despite the existing price changes, the quote is still within the weekly amplitude of 0.9900/1.0050. In order for a shift in trading forces to occur, which will lead to a full-fledged move, the quote must be kept outside of a certain control value for at least a four-hour period.

We concretize the above:

The upward move in the currency pair is taken into account after holding the price above the value of 1.0050 in a four-hour period.

The downward trend should be considered after holding the price below 0.9900 in a four-hour period.

Excerpt on indicator analysis

Comprehensive indicator analysis indicates multidirectional interest in the short term due to price stagnation within the parity level. Indicators in the intraday period are focused on the recent upward momentum from the value of 0.9900. In the medium term, the indicators are still focused on the downward trend.

Trading plan for GBP/USD on August 30

In this situation, the pullback returned the quote to the area of the previously passed level 1.1750, where the upward cycle slowed down. In order for a subsequent increase in the volume of long positions, which will lead to a pullback prolongation, the quote needs to stay above 1.1780 for at least a four-hour period.

Otherwise, we are waiting for the completion of the pullback stage, followed by a price rebound from 1.1750. This scenario does not rule out updating the local low of the downward trend.

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Hot forecast for EUR/USD on 31/08/2022​​​​​​​

Today, the reason for the weakening of the US dollar will be preliminary data on inflation in Europe, which should accelerate from 8.9% to 9.1%. And this means that the European Central Bank will actively raise interest rates, which will cause the single currency to strengthen. And it will already pull other currencies with it. Given the high significance of inflation, the published data on employment in the United States, which, by the way, should increase by 180,000, will have little effect.

The EURUSD currency pair was conditionally standing in one place yesterday. The movement took place between the parity level and the variable value of 1.0050. In fact, there was a process of accumulating trading forces on the market, where traders took a break, which in the end can become a lever for speculative jumps.

The RSI H4 technical instrument is moving in the upper area of the 50/70 indicator, which, from the point of view of indicator analysis, indicates the prevailing upward interest in the market. Take note that the quote has been moving in the 0.9900/1.0050 horizontal channel for the second week already. Thus, the signal from the RSI H4 indicator may be unstable.

MA moving lines on Alligator H4 have many intersections, which corresponds to the flat stage. Alligator D1 is directed downwards, there is no intersection between the MA lines. This signal from the indicator corresponds to the direction of the main trend.

Expectations and prospects
Despite the existing stagnation, the quote is still moving within the sideways range of 0.9900/1.0050. For this reason, the main decisions will be made by traders after one of the values of the current range is surpassed.

An upward movement in the currency pair is taken into account after keeping the price above the value of 1.0050 in a four-hour period.

A downward trend should be considered after keeping the price below 0.9900 in a four-hour period.

Complex indicator analysis in the short-term and intraday periods have a variable signal due to the current flat. Indicators in the medium term are focused on a downward trend.

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Hot forecast for EUR/USD on 02/09/2022

Yesterday, the single currency showed a rather impressive decline, falling below parity again. And it started during the European trading session, under the influence of the actual European macroeconomic statistics. In particular, the final data on the index of business activity in the manufacturing sector turned out to be worse than the preliminary estimate, and fell from 49.8 points to 49.6 points. While the preliminary estimate showed a decrease to 49.7 points. In addition, the data on unemployment also turned out to be not the best, although formally, it fell from 6.7% to 6.6%. But in fact, it remained unchanged, as the previous data were revised upwards.

Unemployment rate (Europe):

But in the United States, the final data on the index of business activity in the manufacturing sector turned out to be better than the preliminary estimate, which showed a decrease from 52.2 points to 51.3 points. In fact, it dropped to 51.5 points. However, the strengthening of the dollar is still somewhat surprising, as the data on applications for unemployment benefits do not inspire optimism. Of course, the number of initial requests decreased by 5,000. But the number of repeated requests increased by 26,000. And this is quite a lot.

Number of retries for unemployment benefits (United States):

It is possible that the dollar's growth is purely speculative in anticipation of today's release of the report of the United States Department of Labor. And while the unemployment rate is projected to remain unchanged, data on employment change clearly indicate a high potential for its growth. In addition, 310,000 new jobs should be created outside of agriculture, against 528,000 in the previous month. Such a strong decline in the rate of job creation clearly hints that the US labor market is losing momentum, and the situation is starting to worsen, which will be the reason for a sharp weakening of the dollar.

Number of new non-agricultural jobs (United States):

The EURUSD currency pair showed local speculative interest in short positions yesterday. As a result, the quote fell below the parity level, having almost reached the lower boundary of the sideways range of 0.9900/1.0050.

The technical instrument RSI H4 crossed the middle line 50 from top to bottom during the downward momentum. As a result, the indicator settled in the lower area of 30/50, which indicates the downward mood of market participants. It should be noted that the signals from RSI H4 are of a variable nature due to the fact that the quote, as before, is moving within the sideways formation.

MA moving lines on Alligator H4 have many intersections, which corresponds to the flat stage. Alligator D1 is directed to the downside, there is no intersection between the MA lines. This signal from the indicator corresponds to the direction of the main trend. In this case, the strengthening of the downward signal will occur at the moment when the MA (D1) lines are kept below the parity level.

Expectations and prospects

The convergence of the price with the lower limit of the flat 0.9900 led to an increase in the volume of long positions, as a result, a rebound appeared on the market. Despite the variable speculative interest, the quote is still in the sideways on the basis of a downward trend. Thus, the work can be built on the basis of two tactics: Rebound or breakdown relative to one or another control border.

Concretize the above

The bounce tactic is seen by traders as a temporary strategy.

The breakout tactic is considered the main strategy because it can indicate the subsequent price move.

Complex indicator analysis in the short-term and intraday periods have a variable signal due to the current flat. At this time, the indicators indicate a long position due to the price rebound from the lower border of the flat. Indicators in the medium term are focused on a downward trend.

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Tips for beginner traders in EUR/USD and GBP/USD on September 5, 2022

Details of the economic calendar for September 2

European Union Producer Price Index came out with a significant margin, rising from 36.0% to 37.9%. This news stimulated the euro to rise against the dollar.

The main event of the past week was the United States Department of Labor report, which slightly surprised market participants. The unemployment rate was forecast to remain unchanged at 3.5%. However, unemployment in the US rose to 3.7%, which was a catalyst for a local sell-off of the dollar, yet this is a possible signal for the Fed to take some easing measures. There is one important remark in this reflection, the regulator is ready to turn a blind eye to many things in order to overcome rising inflation.

Meanwhile, jobs created outside of agriculture came out in line with the consensus forecast, 315,000.

The reaction of the US dollar took place within the framework of speculation. In the beginning there was a sale and then a buy-off.

Analysis of trading charts from September 2

The EURUSD currency pair ended last week with an intense downward move. As a result, there was an inertial movement in the market for the US dollar, which returned the quote to the level of 0.9900.

The GBPUSD currency pair resumed its decline after a short stop. This step led to a subsequent update of the low of the medium-term trend, where only a few points remained to pass before the bottom of 2020.

Economic calendar for September 5

The new trading week starts with a holiday in the United States. The key player of the financial market will return on Tuesday. Trading volumes may decline at first.

As for statistical data, the publication of the final indicators on the index of business activity in the services sector in Europe and the UK is expected. If the data coincide with the preliminary assessment of the reaction in the market, it is not worth waiting. At the same time, Eurozone retail sales data is to be published. Its rate of decline may slow down, which is a positive signal for the euro.

Time targeting:

USA - Labor Day (holiday)

EU Services PMI – 08:00 UTC

UK Services PMI – 08:30 UTC

EU Retail sales volume – 09:00 UTC

Trading plan for EUR/USD on September 5

With the opening of the European session, a local level of 0.9900 appeared. The sale of the euro was associated with a sharp jump in gas prices in Europe. At the opening of trading, prices jumped by 30%, to $2,800 per thousand cubic meters.

The reason for the increase in the cost of gas lies in the message of Gazprom on Friday evening that the maintenance of the only working turbine of SP-1 revealed "gross violations" and the gas pipeline will not work without their elimination.

In order to confirm the signal about the prolongation of the long-term downward trend for the euro, the quote must be kept below the level of 0.9900 steadily in the daily period. In this case, a path will open in the direction of 0.9850–0.9500.

Otherwise, the amplitude 0.9900/1.0150 has every chance for further formation.

Trading plan for GBP/USD on September 5

Despite the growing oversold level of the pound sterling, the market remains an inertial course, where speculators ignore the overheating of short positions in vain. The low of 2020 (1.1410) may play as support on the sellers' path.

In this situation, traders will consider two possible options for price development:

The first scenario comes from a rebound from the 2020 local low area. In this case, an increase in the volume of long positions is possible, which at the beginning will slow down the downward cycle, after which a rebound will occur.

The second scenario considers the lack of reaction of traders to technical signals about the oversold pound and the support level. In this case, holding the price below 1.1400 in the daily period will lead to a prolongation of the long-term trend.

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Tips for beginner traders in EUR/USD and GBP/USD on September 6, 2022

Details of the economic calendar for September 5

Data on indices of business activity in the services sector in Europe and the UK were published, which came out worse than expected.

Details of statistical indicators:

Eurozone services PMI fell from 51.2 to 49.8 points against the expectation of 50.2 points. The composite index fell from 49.9 to 48.2 points.

The euro was already heavily oversold at the time of the release of the data, so it was difficult to fall further.

UK services PMI fell from 52.6 to 50.9 points, with forecast of a decline to 52.5 points. The composite index fell from 52.1 to 49.6 points.

The pound sterling, like the euro, was oversold; there was no reaction to the statistics.

Data on retail sales in the euro area were also published: its rate of decline slowed down from -3.2% to -0.9% YoY. Despite the fact that the data came out worse than expected (-0.7%), the euro ignored them.

The reason for the lack of response to statistical indicators arose due to the commodity market.

Yesterday, with the opening of trading, there was a sharp increase in the cost of gas in Europe, which jumped by 30% to $2,800 per thousand cubic meters.

The reason for the increase in the cost of gas lies in the message of Gazprom on Friday evening that the maintenance of the only working turbine of SP-1 revealed "gross violations" and the gas pipeline will not work without their elimination.

Speculators worked out this information flow in the form of a sell-off of the euro, where, through a positive correlation, it followed the euro and the pound sterling.

As soon as the price of gas began to recover relative to the morning jump, the euro began to strengthen, followed by the pound.

Analysis of trading charts from September 5

The EURUSD currency pair opened a new trading week with an intensive decline, during which the quote temporarily fell below 0.9900. The speculators failed to stay outside the control value, which resulted in a technical pullback.

The GBPUSD currency pair, through a positive correlation with EURUSD, first rushed down, almost reaching the 2020 low, and then moved into the pullback stage.

Economic calendar for September 6

The United States is coming off a three-day holiday today, and service sector PMI data will be released.

In the UK, data on the index of business activity in the construction sector will be released, where they predict its decline. Not the best signal for the pound sterling, but it is worth considering that it is already oversold in the market.

Time targeting:

UK Construction PMI (Aug) – 08:30 UTC

US Services PMI (Aug) – 13:45 UTC

Trading plan for EUR/USD on September 6

Despite the speculative activity, the quote is still within the range of 0.9900/1.0050. Thus, traders are guided by the borders of the flat, working according to the method of breakdown or rebound from the given values.

Trading plan for GBP/USD on September 6

With the pound losing more than 800 pips in value in three weeks, a pullback/correction was brewing in the market due to short overheating. In this situation, holding the price above 1.1620 will lead to the subsequent strengthening of the pound towards 1.1750.

As for the prolongation of the downward trend, it is necessary to keep the price below the value of 1.1400 in the daily period.

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Tips for beginner traders in EUR/USD and GBP/USD on September 7, 2022

Details of the economic calendar for September 6

The further aggravation of the energy crisis in Europe puts pressure on the markets, which does not allow the euro to move into the stage of a full correction.

German Chancellor Olaf Scholz said yesterday that the energy crisis will last for several more years. This statement caused the euro to accelerate its decline.

Meanwhile, UK's construction Purchasing Managers' Index (PMI) was published, which rose to 49.2 instead of the expected decrease from 48.9 to 48.0. However, the market ignored the statistics.

During the American trading session, the US services Purchasing Managers' Index (PMI) was published, which fell more than expected from 47.3 to 43.7. Again, there was no reaction to the statistical data.

Analysis of trading charts from September 6

The EURUSD currency pair is stubbornly trying to prolong the downward trend, as indicated by a number of attempts by traders to stay below the 0.9900 level in the daily period. There is no clear signal of prolongation for the Tuesday period.

The GBPUSD currency pair, after a short pullback, again rushed down towards the local low of 2020 (1.1410). This move indicates the continuing downside mood among traders in the market.

It is worth noting that the pound sterling has a positive correlation with the euro. Thus, we observe identical cycles in the market.

Economic calendar for September 7

Today, the publication of the third estimate of Eurozone GDP is expected, where there will be no reaction in the market if the data coincides with the previous two estimates. If there is a discrepancy in the statistical data, then a speculative activity may appear depending on the indicators.

Time targeting:

EU GDP – 09:00 UTC

Trading plan for EUR/USD on September 7

Market participants still expect the price to hold below 0.9900 in the daily period. This move will indicate the possibility of further weakening of the euro towards 0.9500. It is worth considering that a variable level of 0.9850 stands in the way of the downward cycle. Thus, a confirming signal about the downward move will be received after its breakdown.

The upward scenario considers the absence of holding the price beyond the control values. In this case, another rebound is possible, with the price returning above the parity level.

Trading plan for GBP/USD on September 7

In order for a signal to prolong the long-term downward trend to appear, the quote needs to be firmly held below 1.1400 in the daily period.

In the opposite case, it is impossible to exclude the scenario of a price rebound from the 2020 low area with a subsequent amplitude of 1.1450/1.1600.

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Hot forecast for EUR/USD on 08/09/2022

The single currency has come close to parity, and this has nothing to do with the third assessment of the eurozone GDP in the second quarter. Which, by the way, turned out to be somewhat better than the previous one, which showed a slowdown in economic growth from 5.4% to 3.9%. According to the latest data, the growth rate slowed down to only 4.1%. So Europe is a little further away from recession than previously thought. But the euro did not immediately start rising after the release of the data, but only after a couple of hours. This happened amid growing confidence that the European Central Bank will raise the refinancing rate by 75 basis points today. It is quite obvious that this is the main driving force and the central event of the week. More important than this is the upcoming board meeting of the Federal Open Market Committee. The very fact of raising the refinancing rate, although it will lead to further growth of the single currency, is not strong. Yes, and not long. In fact, much more important is what ECB President Christine Lagarde will say during the subsequent press conference. If Lagarde announces a further significant tightening of monetary policy, then the euro's growth will be quite serious and prolonged. Otherwise, everything will return to normal pretty quickly, and the single currency will again fall below parity.

Change in GDP (Europe):

The EURUSD currency pair tried to overcome the control value of 0.9900 for three consecutive days, but the market participants failed to stay below it in the daily period. As a result, there was a price rebound, which led to a reverse move towards the parity level.

Technical instruments RSI H4 jumped above 60 due to the pullback stage. This is the highest indicator since August 12. In the case of further growth in the value of the euro, there may be a premature overheating of long positions. At the same time, RSI D1 is moving in the lower area of the indicator, which corresponds to a downward trend in the medium term.

Moving MA lines on Alligator H4 have primary intersections with each other. This signal emerged due to a sharp price momentum during the past day. In this case, it indicates a slowdown in the downward cycle. The Alligator D1 indicator line is directed downward, which corresponds to the direction of the main trend.

Expectations and prospects

Despite the possible overheating of long positions in short-term time periods, speculators can still send the euro up due to the results of the ECB meeting. In this case, local price movement above 1.0050 is not excluded.

In the work, it is worth considering that speculative hype is not the basis for a stable price movement. In the event of a slight change in the mood of speculators, mass consolidation of long positions is possible, which will lead to a reverse price movement.

Comprehensive indicator analysis in the short-term and intraday periods indicate an upward signal, due to the rollback stage from the value of 0.9900. In the medium term, technical instruments, as before, are focused on a downward trend.

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Analysis and trading tips for EUR/USD on September 9​​​​​​​

Analysis of transactions in the EUR / USD pair

Euro tested 0.9985 at the time when the MACD was far from zero, which limited the downside potential of the pair. Sometime later, it tested the level again, but this time the market signal that was to buy, which led to a price increase of around 40 pips. In the afternoon, another buy signal was formed at 0.9941, and this also resulted to a rise of more than 40 pips.

The ECB's decision to raise rates by 0.75% led to a slight decrease in euro because markets already expected that outcome. But after Christine Lagarde said another increase is possible in October, demand rose, which led to the rise of EUR/USD. US data on jobless claims and speech of Fed Chairman Jerome Powell were ignored by markets.

A number of reports are scheduled to be released today, including the change in the volume of industrial production in France. There will also be another speech from ECB President Christine Lagarde, which may add optimism in markets. The EU economic summit and Eurogroup meeting may also have a positive impact on euro, especially if decisions are made to support the population and pay off their energy debts. In the afternoon, there are no important statistics in the US, except for changes in the volume of stocks in wholesale warehouses. There will be presentations from FOMC members Charles Evans, Christopher Waller and Esther George, but all of them are likely to talk about further increases in interest rates.

For long positions:

Buy euro when the quote reaches 1.0078 (green line on the chart) and take profit at the price of 1.0135. Growth may continue today as the ECB raised interest rates by 0.75%.

Take note that when buying, the MACD line should be above zero or is starting to rise from it. Euro can also be bought at 1.0042, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0078 and 1.0135.

For short positions:

Sell euro when the quote reaches 1.0042 (red line on the chart) and take profit at the price of 0.9998. Pressure will return if the Fed remains hawkish on its monetary policy.

Take note that when selling, the MACD line should be below zero or is starting to move down from it. Euro can also be sold at 1.0078, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.0042 and 0.9998.

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But we don't care: USD/JPY is rushing like a tank, ignoring all the negative factors

After Friday's fall, the dollar-yen pair finds the strength to rush upward. The asset demonstrates a confident upward trend at the beginning of the week, despite the predominance of negative factors.

Recall that last Friday the USD/JPY pair underwent intense sales. The quote fell by more than 1%, being under pressure from the growing risk of foreign exchange intervention.

The Japanese authorities significantly tightened their warning of their intervention after the yen came close to a new 24-year low of 145 in the middle of the week.

Many analysts believe that this key threshold is a red line for the Japanese government. As soon as the yen crosses it, officials will move from words to deeds.

Over the weekend, the risk of actual rather than verbal intervention increased significantly. On Sunday, Deputy Cabinet Secretary General Seiji Kihara said the authorities were deeply concerned about the excessive fall in the yen.

According to him, in the near future the government should take a number of measures in order to stop the depreciation of the national currency.

At the same time, Kihara refused to give any comments on the country's monetary and credit rate. This once again confirms that at this stage, Japanese politicians are not considering the possibility of helping the yen by raising interest rates.

The only option now being discussed at the top echelon is foreign exchange intervention. But will it bring the desired result if it is one-sided?

– For intervention to be effective, support from the Federal Reserve and other central banks is needed. However, right now, as major central banks fight inflation with policy tightening, global official support for the yen looks unlikely, said National Australia Bank currency strategist Rodrigo Catril.

The expert is confident that the yen will stop falling only as a result of a change in the exchange rate of the Bank of Japan.

To strengthen the currency, the central bank must abandon its ultra-soft policy and start raising the rate. Otherwise, the yen is waiting for a further collapse.

With no signs of BOJ capitulation on the horizon right now, the market has no choice but to ignore yet another warning of FX intervention.

Traders are well aware that even in the event of an actual intervention, the recovery of the yen will be very short-lived, so they resume long positions on the USD/JPY pair again.

The asset returned to the area above 143 on Monday morning.

Even the news that Japan intends to further weaken border controls when entering the country did not prevent its rise.

According to the Nikkei newspaper, the Japanese government may lift all current restrictions on foreign nationals entering the country by October.

The authorities hope that the rise in inbound tourism will help revive the fragile Japanese economy and thereby support the yen that has fallen heavily this year.

Another negative factor that the USD/JPY pair stubbornly turns a blind eye to this morning is tomorrow's release of US inflation statistics for August.

According to forecasts, the consumer price index on an annualized basis will decrease to 8.1% from the previous value of 8.5%.

It would be quite logical to expect that the weakening of inflationary pressure for the second consecutive month will force the Fed to reduce the degree of aggressiveness in relation to interest rates.

Despite a possible decline in inflation, prices still remain well above the 2% target.

Based on this, the markets continue to believe that the US central bank will raise rates by 75 bps in September. The probability of such a step is now estimated at 85%.

Traders' unwavering confidence in the Fed's determination is a key driver for the dollar, especially against the Japanese yen.

Most analysts believe that the USD/JPY asset could again demonstrate an impressive rally in the coming days, as moment X is just around the corner.

The US central bank's meeting on monetary policy issues, at which the decision on interest rates will be announced, will be held on September 20-21.

As the event approaches, hawkish expectations about the Fed's course should intensify even more. This will push the dollar to new heights, and the yen - to the next anti-records.

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US stocks closed higher, Dow Jones up 0.71%​​​​​​​

At the close in the New York Stock Exchange, the Dow Jones rose 0.71%, the S&P 500 index rose 1.06%, the NASDAQ Composite index rose 1.27%.

The leading performer among the components of the Dow Jones index today was Apple Inc, which gained 6.06 points or 3.85% to close at 163.43. Quotes of American Express Company rose by 4.01 points (2.53%), closing the session at 162.45. Salesforce Inc rose 3.04 points or 1.87% to close at 165.63.

The biggest losers were Amgen Inc, which shed 10.07 points or 4.07% to end the session at 237.62. Home Depot Inc was up 2.23 points (0.74%) to close at 297.54, while Johnson & Johnson was down 0.07 points (0.04%) to end at 165. .64.

Leading gainers among the S&P 500 index components in today's trading were DXC Technology Co, which rose 5.98% to hit 28.36, APA Corporation, which gained 5.01% to close at 40.00, and shares of Fortinet Inc, which rose 4.20% to end the session at 55.84.

The biggest losers were The Mosaic Company, which shed 6.76% to close at 52.44. Shares of Amgen Inc lost 4.07% to end the session at 237.62. Quotes of CF Industries Holdings Inc decreased in price by 4.05% to 99.48.

Leading gainers among the components of the NASDAQ Composite in today's trading were Neurobo Pharmaceuticals Inc, which rose 101.30% to hit 0.56, InMed Pharmaceuticals Inc, which gained 70.42% to close at 18.78, and also shares of Ventyx Biosciences Inc, which rose 64.98% to end the session at 38.11.

The biggest losers were Tuesday Morning Corp, which shed 31.19% to close at 0.19. Shares of WeTrade Group Inc lost 30.19% and ended the session at 1.11. Akari Therapeutics PLC was down 27.88% to 0.75.

On the New York Stock Exchange, the number of securities that rose in price (2,360) exceeded the number of those that closed in the red (764), while quotes of 160 shares remained virtually unchanged. On the NASDAQ stock exchange, 2431 companies rose in price, 1384 fell, and 259 remained at the level of the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, rose 4.74% to 23.87.

Gold futures for December delivery added 0.43%, or 7.45, to $1.00 a troy ounce. In other commodities, WTI crude for October delivery rose 1.36%, or 1.18, to $87.97 a barrel. Brent oil futures for November delivery rose 1.44%, or 1.34, to $94.18 a barrel.

Meanwhile, on the Forex market, EUR/USD rose 0.81% to hit 1.01, while USD/JPY edged up 0.21% to hit 142.82.

Futures on the USD index fell 0.60% to 108.08.

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Hot forecast for EUR/USD on 14/09/2022

Inflation in the United States of course slowed down, but not to 8.1%, but to 8.3%. At the same time, in monthly terms, it increased by 0.1%, while it was expected to decline by 0.2%. In addition, the core inflation rate, instead of remaining unchanged, accelerated from 5.9% to 6.3%. Monthly data on the core inflation rate showed an increase of 0.6%, while the forecast was 0.4%. After that, everyone immediately started talking about the fact that in just a week the Federal Reserve would raise the refinancing rate by 100 basis points. And the single currency literally fell below parity in the blink of an eye.

Inflation (United States):

The situation is aggravated by the fact that until next Wednesday, when the meeting of the Federal Open Market Committee takes place, representatives of the Fed will not make any official statements. They can't even comment on the situation with inflation. Internal rules forbid it. In other words, market participants will be able to focus only on macroeconomic statistics and its interpretation by various media. Data on producer prices will be released today, the growth rate of which seems to be slowing down from 9.8% to 8.9%. If these forecasts are confirmed, then it will be possible to assume that inflation will still gradually slow down, and then a rebound is possible, and the euro's return above parity. But if the producer price index declines even a little less, then the market will panic again, and the dollar will further strengthen its positions.

Producer Price Index (United States):

The EURUSD currency pair fell over 200 points in the course of speculative operations during the past day. This movement led to the return of quotes below the parity level.

Technical instruments RSI H1 during the intensive weakening of the local euro fell below 22. This signal indicated a high level of oversold in short-term time periods. RSI H4 and D1 are moving in the lower area of the 30/50 indicator, which corresponds to a downward trend.

The MA moving lines on Alligator H4 changed direction from top to bottom, this was caused by sharp price changes a day earlier.

Expectations and prospects

The overheating of euro short positions led to a technical rollback, which is considered a common phenomenon in the market in case of inertial movement. A gradual recovery of the euro exchange rate is possible, but only in case prices are stable above the parity level. Under this scenario, growth in the direction of 1.0050-1.0120 is possible.

An alternative scenario for the development of the market considers the continuation of the downward cycle, in which the technical signal of oversold will be ignored by traders. In this case, keeping the price below 0.9950 will eventually lead to a new low of the downward trend.

Comprehensive indicator analysis in the short-term and intraday periods indicate a downward cycle, due to the inertial price movement. In the medium term, technical instruments have a sell signal, which corresponds to a downward trend.

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USD/JPY: is black swan event possible?

USD/JPY traders are awaiting the policy meetings of the Federal Reserve and the Bank of Japan this week. For many market players, the outcome of these meetings is obvious. However, some analysts do not rule out an unexpected turn of events.

Market expectations
Last week, the US dollar found strong support in US CPI data for August.

According to the report, inflation in the US decreased to 8.3% in August from 8.5% in July, falling short of expectations.

Inflation in the US remains above the Fed's target level of 2% and continues to be persistent, increasing expectations of more aggressive Fed monetary tightening.

The markets are currently pricing in an 81% probability of a 75 basis points hike. Some market players even believe the Federal Reserve could increase interest rates by 100 bps at its next meeting on September 20-21.

Both scenarios would fuel the US dollar's upward momentum against other major currencies, particularly against the Japanese yen.

Since the beginning of 2022, the yen decreased by 20% against the dollar due to a growing monetary policy gap between the Bank of Japan and the Federal Reserve.

While Fed policymakers are actively fighting inflation by rapidly hiking interest rates, their Japanese counterparts keep interest rates at very low levels.

Many traders now expect the BOJ to maintain their ultradovish policy course this week.

Recent decisions by the Bank of Japan suggest the regulator remains committed to its dovish course. Last week, the BOJ increased bond purchases twice to keep yields at their low level.

The BOJ's policy meeting is concurrent with the Fed meeting in the US. If decisions of both central banks match market expectations, it would send USD/JPY skywards once again.

Both events could give redoubled support to the instrument in the next few days. Many analysts predict significant upward movement for the pair in the short term.

Currency strategists at the Goldman Sachs see the yen fall to 155 against the dollar. An outlook by Rabobank predicts that JPY could slide down to 150, while RBC Capital Markets forecast a decline to 147. HSBC Holdings predicts that the yen could decrease to 145 against the US dollar.

What could go differently
Many analysts warn that USD/JPY would be highly volatile this week.

There are numerous factors listed above that could push the US dollar up. However, a Japanese yen rally should not be ruled out.

The most obvious driver for the Japanese yen is a currency intervention. Last week, high-ranking Japanese policymakers have repeatedly raised the topic of a possible currency intervention.

If the yen once again approaches the key mark of 145 before or after policy meetings of the Fed and the BOJ, this could trigger an intervention by the Japanese government.

A less obvious scenario that could halt the uptrend of USD/JPY would involve the Bank of Japan giving up its current stance.

So far, few believe that the Bank of Japan could amend its policy, but their number is steadily increasing. According to reports by Reuters, swap rates betting on a shift in policy have sharply increased over the past several days as the regulator stopped referring to inflation as "temporary".

The Bank of Japan stopped labeling inflation as "temporary" in its transcripts and minutes of the policy meetings in July.

That month, Japanese core CPI hit 2.4%, the highest level in more than 7 years.

Inflation in Japan has exceeded its target level of 2% for a fourth consecutive month.

Furthermore, most BOJ policymakers expect core consumer prices to rise to 3% in October, Reuters reported.

This inflation surge could be driven by rising food prices. According to a survey by private research firm Teikoku Databank, about 80% of Japanese food companies plan to raise prices next month.

This price hike would affect more than 20,000 food items, which are expected to go up by 14% on average.

As a result, many BOJ policymakers have revised their inflation outlooks upwards, Reuters reported. It remains to be seen when the Bank of Japan will express its concern over price growth.

Some experts believe the first signs of such a shift could happen at the next BOJ policy meeting.

If the Bank of Japan begins to lose its sticky deflationary mindset and acknowledges that price growth is an issue that must be resolved, this would be regarded as the first hawkish signal by the market.

Such an event would pose a threat to USD/JPY rally.

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Hot forecast for EUR/USD on 22/09/2022

Of course, the growing tension and confrontation in Europe, caused by the decision to hold referendums on joining the Russian Federation of four more regions, as well as the partial mobilization announced yesterday by Vladimir Putin, put pressure on the single European currency. And not only on it, but on almost all financial instruments. In fact, there is now a massive flight of capital to the United States, which leads to even greater strengthening of the dollar. The Federal Reserve's decision to raise the refinancing rate by 75 basis points, and the subsequent statement by Fed Chairman Jerome Powell about the justification for further tightening of monetary policy, only strengthens this process. Yes, Powell acknowledged the fact that inflation is slowing down, but noted that this is happening much more slowly than expected. Therefore, it is necessary to continue to raise interest rates. From this follows the conclusion that during the next meeting of the Federal Open Market Committee, the refinancing rate will again be raised by 75 basis points.

Refinance rate (United States):

Nevertheless, we should not forget about the excessive overbought dollar. So for its further growth, the market needs to release steam, in the form of a noticeable rebound, or a local correction. It is quite possible that this is what will happen today. The reason will be the Bank of England's decision on the refinancing rate, which can be raised by 50 basis points. Such results of the central bank's meeting can certainly push the pound to grow, and given the market's need for a rebound, it will pull the single currency along with it.

Refinancing rate (UK):

The EURUSD currency pair, after walking along the 0.9900 level for 3.5 weeks, managed to stay below it in the daily period. This difficult step led to the prolongation of the long-term downward trend, where the quote was again at the levels of July 2002.

The RSI H4 technical instrument, due to the intense downward movement of the price, turned out to be below the level of 30, which indicates a signal about the oversold euro.

The MA moving lines on Alligator H4 and D1 are directed downwards, which corresponds to the trend direction.

Expectations and prospects

In this situation, there is an overheating of short positions in the euro, which from the point of view of technical analysis can lead to a price pullback. In this case, a reverse move to the previously passed 0.9900 level is possible.

A comprehensive indicator analysis in the short term indicates a long position due to a pullback emerging in the market. Indicators in the intraday and medium-term periods are focused on a downward trend.

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Tips for beginner traders in EUR/USD and GBP/USD on September 23, 2022

Details of the economic calendar for September 22
The Bank of England, as expected, raised the rate by 50 basis points to 2.25%. At the same time, the regulator lowered its inflation forecast. According to their expectations, it may reach 11%, and inflation will peak in October.

The market reaction was zero, because the rate increase by 50 bps has already been taken into account in the quotes. The pound sterling began to weaken.

During the American trading session, weekly data on jobless claims in the United States were published, which recorded a decrease in their total volume. This is positive news for the US labor market.

Statistics details:

The volume of continuing claims for benefits fell from 1.401 million to 1.379 million.

The volume of initial claims for benefits rose from 208,000 to 213,000.

What is pushing the market?
The first is the results of the September Fed meeting, where the regulator clearly indicated that the main goal is to curb inflation, and it is ready to further tighten monetary policy.

The second factor is the Russia-Ukraine situation, where, at the moment, there is a large flow of information that puts speculators into action.

Analysis of trading charts from September 22
The EURUSD currency pair, in the stage of a pullback from the low of the downward trend, locally returned to the previously passed level of 0.9900, where the price rebounded with a reverse move.

The GBPUSD currency pair, after a short pullback, which was caused by a strong overheating of short positions, again moved to the decline. This movement indicates the prevailing downward sentiment among market participants who are in a stage of inertia.

Economic calendar for September 23
Today, a preliminary estimate on business activity indices in Europe, the United Kingdom and the United States is expected to be published. Indices, except for the USA, are expected to decrease. Thus, the dollar may well receive support in the market.

Time targeting:

EU business activity indices – 08:00 UTC

UK business activity indices – 08:30 UTC

US business activity indices – 13:45 UTC

Trading plan for EUR/USD on September 23
With the opening of European platforms, a new round of depreciation of the euro emerged, which led to the price holding below 0.9800. As a result, the speculative-inertial move continues to form, which allows the rate to decline to the subsequent control value of 0.9650, where the lower border of the flat 0.9650/1.0000 passed earlier in history.

It should be noted that the market is already experiencing overheating of euro short positions, which allows for a new technical pullback.

Trading plan for GBP/USD on September 23
The pound sterling, following the euro, continued to decline, which resulted to the breakdown of the level of 1.1200. A stable hold of the price below this level allows the subsequent weakening of the British currency towards the psychological mark of 1.1000. Also, do not forget about the overheating of short positions and possible technical pullbacks.

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Tips for beginner traders in EUR/USD and GBP/USD on September 26, 2022​​​​​​​

Details of the economic calendar for September 23
Last week ended with the publication of preliminary data on business activity indices in Europe, the United Kingdom and the United States. The indices came out badly, except for the US.

Eurozone manufacturing PMI fell from 49.6 to 48.5 points, while services PMI fell from 49.8 to 48.9 points.

UK manufacturing PMI rose from 47.3 to 48.5 points, while services PMI recorded a decline from 50.9 to 49.2 points. The composite index fell from 49.6 to 48.4 points.

In the United States, the picture is reversed, with the manufacturing PMI up from 51.5 to 51.8. Services PMI rose from 43.7 to 49.2 points.

The publication of an anti-crisis plan to rescue the UK economy was considered the key event on Friday. The largest tax cut in 50 years, the removal of the 45% surcharge for the highest paid workers, and a sharp reduction in taxes on dividends are expected. Not only that, but the plan includes a long-term freeze on household electricity rates, which experts estimate will cost around £60bn over the six months starting in October.

All these actions are reminiscent of all-in tactics, where huge borrowings will be needed to cover the budget deficit.

This news brought down the value of the British currency by about 8% against the US dollar. Simultaneously with the fall of the pound sterling, the British stock market also collapsed.

This pivotal decision has raised doubts in economic and political circles about the future sustainability of the UK economy and concerns about whether the UK's new economic approach is sustainable.

Media

"The UK is behaving a bit like an emerging market turning itself into a submerging market," former U.S. Treasury Secretary Larry Summers told Bloomberg TV. "Britain will be remembered for having pursued the worst macroeconomic policies of any major country in a long time."

Analysis of trading charts from September 23
Since Friday, the euro has lost more than 250 points in value against the US dollar. As a result, the quote peaked at 0.9553, last seen in June 2002.

The GBPUSD currency pair did not just collapse by almost 1,000 points (about 8.5%), the quote also broke through all possible levels and updated the lows. History has never seen such low price values.

The cause and effect of the fall is described above.

Economic calendar for September 26
Today, the macroeconomic calendar is empty, the publication of important statistical data is not expected. It is worth noting that the tense information background persists, and market participants will focus on it.

Trading plan for EUR/USD on September 26
At the moment, the formation of a technical pullback is observed on the trading chart, which, under current circumstances, is considered justified in the market due to overheating of short positions in the euro. It is worth noting that the speculative mood prevails in the market, which sets in motion an inertial course. Thus, it is impossible to exclude from the possible scenario the subsequent depreciation of the euro after the pullback, where technical signals will be ignored.

Trading plan for GBP/USD on September 26
The minimum price value that has arisen since the opening of a new trading week is 1.0345. There was a technical pullback relative to it, approximately by 3.8% (400 points), which, like the euro, is justified on the market due to the catastrophic overheating of short positions in the pound sterling. In this situation, despite the historical values, the market retains a high interest in the downward cycle. Speculators, on the occasion of inertia, can still continue to decline, ignoring technical signals. In this case, we can see the price approaching parity—1.0000.

The situation could improve if the BoE postpones planned bond sales and the Treasury is forced to announce a medium-term fiscal consolidation plan to restore market confidence.

In this case, the pullback may turn into a full-scale correction, restoring the exchange rate of the British currency.

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Tips for beginner traders in EUR/USD and GBP/USD on September 27, 2022

Details of the economic calendar for September 26
The macroeconomic calendar was empty; no important statistics were published. Investors and speculators worked out the information flow of the past week.

The UK Treasury yesterday commented on everything that is happening in the country's economy, the main theses:

- The medium-term financial plan will be presented on November 23.

- The budget plan will set out additional details, including ensuring that the share of UK debt to GDP falls in the medium term.

At the same time, the Bank of England made its comments:

- We closely monitor the market for significant revaluation of financial assets;

- We will not hesitate to raise the interest rate to bring inflation back to the target level of 2.0%.

According to media reports, traders are waiting for an unscheduled rate hike by the Bank of England amid the collapse of the national currency. Perhaps this was the reason for such a significant pullback. There is no confirmation of rumors regarding an unscheduled rate hike. If the regulator does not take any drastic action, the pound will continue to decline.

Analysis of trading charts from September 26
The EUR/USD currency pair opened a new trading week with an update of the low of the downward trend. As a result, the quote reached the levels of June 2002, at 0.9553, relative to which the stage of technical pullback occurred.

The GBP/USD currency pair has set several records at once. The absolute low was updated, the quote overcame the level of 1985, eventually reaching the value of 1.0345. The scale of the pound's collapse from last Friday to the beginning of Monday's trading amounted to almost 1,000 points, while the pullback caused by the fatal overheating of short positions on the pound was about 550 points.

Economic calendar for September 27
Today, data on orders for durable goods in the United States will be published, which may decrease by 0.9%. This is a fairly strong reduction, which foreshadows a noticeable decline in consumer activity, which is the locomotive of the American economy. As a result, these negative data, if confirmed, can put pressure on dollar positions.

Also, U.S. Federal Reserve Chairman Jerome Powell and ECB President Christine Lagarde are scheduled to give a speech. It is worth listening to what they will say, although everything has already been said before.

Time targeting:

Fed Chairman Jerome Powell Speech – 11:30 UTC

ECB President Christine Lagarde Speech – 11:30 UTC

U.S. Durable Goods Orders (August) – 12:30 UTC

Trading plan for EUR/USD on September 27
At the moment, there is a characteristic stagnation, where the pullback stage has slowed down its formation despite the continuing technical signal about the oversold euro. In order for the pullback to be prolonged and become the starting point for a full-size correction, the quote first needs to stay above the value of 0.9700 for at least a four-hour period.

At the same time, the downward scenario will become relevant again as soon as the current low is updated.

Trading plan for GBP/USD on September 27
In this situation, there is still a speculative rush on the market, which allows new price jumps. In order to prolong the current pullback, the quote needs to stay above the high of the previous day at 1.0928. At the same time, the scenario of further decline will be considered by traders if the price holds below 1.0630.

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Tips for beginner traders in EUR/USD and GBP/USD on September 28, 2022

Details of the economic calendar for September 27
Orders for durable goods in the United States decreased by 0.2% during the period of August. This is not the best indicator, but they expected a reduction of 0.9%. The divergence of expectations served as a stimulus for the growth of dollar positions. At the same time, data on new home sales in the US were also published, which recorded a strong growth of 28.8% in August.

In addition to macroeconomic statistics, there were quite a lot of comments from the Fed, where everyone unanimously talks about the risks associated with inflation.

Chicago Fed President Charles Evans:

- The average forecast for the interest rate at the end of the year is between 4.25%–4.5% and 4.6% by the end of next year.

- For us, task number 1 is to bring inflation under control.

- The tightening of monetary policy will continue for some time.

- 4.5% unemployment in the United States is still a good level.

- At some point in time there will be a need to reduce the rate of interest rate increases. But now it needs to be further improved.

- This year, our forecasts for an objective increase in interest rates by another 100–125 basis points.

- We see long-term inflation expectations at acceptable levels.

- I expect that the level of inflation will noticeably decrease within two years.

- I expect a slight increase in GDP this year.

Former New York Fed President William Dudley:

- The Fed has made it clear that it intends to fight inflation.

- During the September meeting, the regulator clearly indicated that they are ready to raise the interest rate in order to return inflation to an acceptable level.

- Based on the forecasts of the Fed, GDP growth is expected in the coming years.

- It looks like there is no clear consensus among the Fed representatives on how long they will continue to fight inflation.

St. Louis Fed President James Bullard:

- We have serious problems with inflation in the country.

- The credibility of the inflation targeting regime is under threat.

- The labor market is very strong, which gives us the opportunity to fully focus on inflation.

- We must correctly and timely respond to inflation.

- At subsequent meetings, we certainly must continue to raise the interest rate.

- The possible maximum interest rate is about 4.5%.

- We'll probably have to stick with the high stakes for a while.

Minneapolis Fed President Neel Kashkari:

- We believe that the markets understand what the Fed is doing.

- Representatives of the Fed are united and committed to reducing inflation.

- We are moving at a fast pace, it is dangerous.

- The Fed is working to bring inflation back to 2%. We need to keep raising interest rates.

- We need to further tighten monetary policy to see evidence that we are succeeding in reducing inflation, and move on to slow down.

- I'm not sure that the current monetary policy is tight enough.

Philadelphia Fed President Patrick Harker:

- We are working to achieve an acceptable level of inflation in the country.

- The housing market is a key segment in the growth of inflation

- Inflation in the country is very high in many categories

San Francisco Fed President Mary Daly:

- Our goal is to return inflation to the level of 2.0%.

- The level of inflation is very high, we must properly assess the current situation.

Conclusion based on the comments of the Fed representatives
Based on the above material, a clear "hawkish" approach is visible. The regulator intends to fight high inflation by all possible means, which they point out in their statements. For this reason, we see a further decline in the US stock market, as well as an increase in the value of the dollar against other currencies.

Analysis of trading charts from September 27
The EUR/USD currency pair resumed its decline after a short pullback. As a result, the local low of the downward cycle at 0.9553 was updated, which indicates the prolongation of the main trend.

The GBP/USD currency pair ignores the fact that it is treading water at historical lows. In fact, the technical signal of oversold is covered by a high rush for short positions on the part of speculators.

Economic calendar for September 28
Today the macroeconomic calendar is empty, all hope is for the information flow, where speeches by the Fed and ECB representatives are expected again.

Trading plan for EUR/USD on September 28
Stable price retention below 0.9550 will lead to a subsequent decline. In this case, the technical signal about overheating of short positions can be ignored by market participants. A possible prospect of a move is a decline towards the lows of 2001 and 2000.

An alternative scenario of market development is considered by traders in the form of another price rebound from the 0.9550 value area, as it happened at the beginning of the trading week.

Trading plan for GBP/USD on September 28
In this situation, keeping the price below the 1.0600/1.0630 area in a four-hour period may well lead to a subsequent decline towards the recent local low. It is worth noting that with such overheating of short positions, spontaneous consolidations may occur, which, in turn, will lead to a technical pullback.

Until the quote is stable below the control area, the risk of the subsequent formation of the amplitude of 1.0630/1.0930 remains.

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USD/JPY: When will Groundhog Day end?

The USD/JPY pair continues to tread in the 144-145 range, in which it has been stuck since the beginning of the week. Consolidation is pretty boring for both bulls and bears, but there is no trigger on the horizon yet.

This year, the Japanese currency has fallen in price relative to its American counterpart by more than 20%. The reason for the weakening of the yen was the strong monetary divergence between the US and Japan.

Last week, the dollar-yen pair set another high-profile record. After the Federal Reserve raised rates again, and the Bank of Japan left the indicator unchanged, the quote jumped to a new 24-year high at 145.90.

The sharp fall of the yen forced the Japanese government to intervene in support of its national currency for the first time since 1998. As a result of the intervention, the USD/JPY pair went into a steep peak.

However, the asset did not stay as a loser for long. It only took a couple of days for it to get back on track leading to the main goal for today – level 145.

Since the beginning of this week, the dollar-yen pair has already come close to the cherished mark several times, but each time it rolled back.

According to analysts, the main deterrent for dollar bulls at the moment is the risk of repeated currency intervention.

Given the huge number of warnings from the Japanese authorities, traders still prefer not to get into trouble. However, the situation may change dramatically if a particularly powerful trump card in favor of the dollar appears on the market.

You may ask: isn't it here now? Indeed, the dollar received strong support from the Fed last week. The US central bank not only raised rates, but also made it clear that it intends to tighten its monetary policy in the future.

This week, American politicians have further intensified hawkish rhetoric, which contributed to the explosive growth of the dollar. The greenback has reached a new 20-year high, showing impressive dynamics in almost all directions, but not paired with the yen.

The psychologically important 145 barrier still remains impregnable for the USD/JPY asset. This suggests that the market has already taken into account the further growth of discrepancies in the monetary policy of the Fed and the BOJ.

Now traders need specifics: how big the gap in US and Japanese interest rates can become.

If in the near future American officials again talk about raising the indicator by 100 bps, perhaps this will be the very impetus for the dollar, which will move it from the dead point.

– Of course, the Japanese Ministry of Finance is aware of the current vulnerability of the yen. Probably, the authorities will continue to intimidate traders with interventions to deter speculators, Rabobank analysts warn. – Nevertheless, we are still guided in our 3-month forecast for the USD/JPY pair to the level of 147.

As for the short-term dynamics of the asset, do not expect miracles in the coming days. Most experts believe that the dollar-yen pair will remain in the zone of broad consolidation.

The technical picture for the USD/JPY
200-day exponential moving average at 141.20 scales higher. This indicates that the long-term trend is still stable.

At the same time, the relative strength index (RSI) fluctuates in the range of 40.00-60.00, which indicates that the movement continues within the current range.

For a decisive bearish reversal, the asset needs to fall below the previous week's low at around 140.35.

Dollar bulls may push the pair higher after overcoming the previous week's high at 145.90.

This may lead the quote to the August 1998 high at 147.67. And its breakthrough will send the dollar even further upward – to psychological resistance in the area of 150.00.

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Technical Analysis of GBP/USD for October 3, 2022

Exchange Rates analysis
Technical Market Outlook:

The GBP/USD pair has bounced 9.11% from the lowest level since 1985 located at 1.0352 and is approaching the technical resistance located at 1.1210. The next technical resistance is located at 1.1410 and only a sustained breakout above this level would change the outlook to bullish. Please notice, the level of 1.1410 is the target for the wave 5 as well, so a corrective cycle might occur after this level is hit. On the other hand, the next target for bears is located at the parity level of 1.0000, so please keep an eye on this level. The intraday technical support is seen at the level of 1.0929. The momentum remains strong and positive, so the short-term outlook is bullish.

Weekly Pivot Points:

WR3 - 1.15812

WR2 - 1.13861

WR1 - 1.12966

Weekly Pivot - 1.1191

WS1 - 1.11015

WS2 - 1.09959

WS3 - 1.08008

Trading Outlook:

The bears are still in charge of Cable market and the next target for them is the parity level. The level of 1.0351 has not been seen since 1985, so the down trend is strong, however, the market is extremely oversold on longer time frames already. On the other hand, in order to terminate the down trend, bulls need to break above the level of 1.2275 (swing high from August 10th).

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Tips for beginner traders in EUR/USD and GBP/USD on October 4, 2022

Details of the economic calendar for October 3
Data on the European manufacturing sector came out worse than the preliminary estimate. The index fell during the period of September from 49.6 to 48.4, despite the expected decline to 48.5 points.

In the United Kingdom, manufacturing PMI for September rose from 47.3 to 48.4 but was predicted to rise to 48.5 points.

Meanwhile, the United States manufacturing PMI rose to 52.0 from 51.5, with forecast growth of 51.8.

There was no market reaction to the statistical data for the reason that all the attention of traders was focused on the information and news flow.

So the leverage for speculators was the rumor that the UK intends to cancel the plan to reduce the tax rate from 45% to 40%. This rumor was subsequently confirmed by UK Finance Minister Kwasi Kwarteng via Twitter.

"We get it, and we have listened," he wrote.

Based on this information, there was speculative interest in the position of the pound sterling, which locally jumped in value by 180 points, pulling the euro along with it.

Analysis of trading charts from October 3
The EURUSD currency pair, during the corrective movement, reached the resistance level of 0.9850, relative to which there was a reduction in the volume of long positions on the euro. As a result, there was a rebound in the market, which eventually turned into stagnation within the 0.9750/0.9850 range.

The GBP/USD currency pair continued to form a corrective move from the local low of the downward trend. As a result, in about a week, the British currency recovered its value by 10%, which is more than 1,000 points.

Economic calendar for October 4
Today, the euro may receive support from buyers as producer prices in the EU may accelerate from 37.9% to 43.6%. That is, with such data, inflation in Europe will continue to grow, which will lead to further tightening of the ECB's monetary policy. That is, interest rates will continue to rise.

During the American trading session, data on the Job Openings and Labor Turnover Survey (JOLTS) for August in the United States will be published, which is expected to decline. This is a negative factor in the labor market.

Time targeting:

EU Producer Price Index (Aug) – 09:00 UTC

US JOLTS Job Openings (Aug) – 14:00 UTC

Trading plan for EUR/USD on October 4
With the opening of European platforms, a breakdown of the upper limit of stagnation occurred. This step led to the prolongation of the corrective move in the market. A stable hold of the price above 0.9850 may eventually lead to a move towards parity.

Trading plan for GBP/USD on October 4
Despite such impressive price changes, which herald a technical overbought signal, the pound still has an upside margin. For this reason, holding the price above the level of 1.1410 in a four-hour period may lead to a subsequent increase in the volume of long positions. This process will lead to the prolongation of the current cycle.

If the level area of 1.1410 has a proper impact on sellers, then the first thing that will occur is a slowdown, relative to which a reverse price movement will be considered.

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Tips for beginner traders in EUR/USD and GBP/USD on October 5, 2022

Exchange Rates analysis
Details of the economic calendar for October 4
Producer prices in the EU accelerated more than expected, from 38.0% to 43.3%, that is, these data indicate that the limit of inflation growth in the eurozone has not yet been reached. Thus, the ECB has plenty of incentive to further tighten monetary policy. In this case, interest rates will continue to rise, which may support the European currency.

During the American trading session, data on the Job Openings and Labor Turnover Survey (JOLTS) in the United States were published, where negative indicators for the labor market are recorded. The number of vacancies in the US in August hit a 14-month low, falling by 1.8 million from a record high in March. This is a characteristic call for the Fed that the labor market is under threat. All this may lead to a slowdown in the pace of rate increases, waiting for the ADP report and the report of the US Department of Labor.

Analysis of trading charts from October 4
The EURUSD currency pair accelerated its upward movement, as a result of which the quote reached the expected parity level (1.0000). The scale of the euro's strengthening from the local low of the downward trend amounted to a little more than 450 points.

The GBPUSD currency pair has overcome the resistance level of 1.1410 during a rapid corrective movement from the local low of the downward trend. The move indicates a strong desire by speculators to continue rising despite the fact that the pound sterling has already gained more than 1,100 points in the 7 trading day period.

Economic calendar for October 5
Today, business activity data in the services sector and the composite index in Europe, the United Kingdom, and the United States are expected. It should be taken into account that these are the final data, and if they coincide or practically coincide with the preliminary estimate, then the reaction on the market should not be expected.

During the American trading session, in addition to the PMI index, the ADP report on employment in the United States will be published, which may rise by 200,000.

The ADP report is often viewed by traders as a leading indicator of the US Department of Labor report.

Time targeting:

EU Services PMI (Sept) – 08:00 UTC

UK Services PMI (Sep) – 08:30 UTC

ADP report – 12:15 UTC

US Services PMI (Sep) – 13:45 UTC

Trading plan for EUR/USD on October 5
At the moment, parity is considered by traders as a strong resistance level. Thus, a price rebound scenario is allowed, which will lead to a partial recovery of dollar positions relative to the recent correction.

The upward cycle prolongation scenario will be used if the price holds above 1.0050 in a four-hour period.

Trading plan for GBP/USD on October 5
In this situation, there is an overheating of long positions on the pound, which fully allows for a scenario of stagnation or pullback. In this case, the return of the price below 1.1400 may temporarily weaken the exchange rate of the British currency, strengthening short positions on it.

At the same time, there is still speculative interest in the market, which allows a prolongation of the correction if the quote overcomes 1.1525. Under this scenario, the subsequent growth of the pound sterling towards the level of 1.1750 is possible.

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Tips for beginner traders in EUR/USD and GBP/USD on October 7, 2022

Exchange Rates analysis
Details of the economic calendar for October 6
The rate of decline in retail sales in the EU accelerated from -1.2% to -2.0%, which at first glance is better than forecasts that indicated a decline to -2.2%. It is worth noting that the previous data was revised for the worse from -0.9% to -1.2%. In any case, there is a rather impressive decline in consumer activity in the EU, which is a negative factor for the economy.

During the American trading session, weekly data on jobless claims in the United States were published, which recorded growth. This is a negative factor for the US labor market.

Statistics details:

The volume of continuing claims for benefits rose from 1.346 million to 1.361 million.

The volume of initial claims for benefits rose from 190,000 to 219,000.

Analysis of trading charts from October 6
The EURUSD currency pair has corrected quite strongly from the parity level. In just 48 hours, the rate fell by more than 200 points, as a result, the 0.9850 variable support level was passed. Such a rapid decline could well lead to an overheating of euro short positions in the short term.

The GBP/USD currency pair has partially lost what it gained during the recovery period. In two trading days, there has been an active decline, as a result of which the quote fell by more than 300 points. The area of 1.1410/1.1525, relative to which a reverse movement has occurred, serves as resistance.

Economic calendar for October 7
The main event of the outgoing week is considered to be the report of the United States Department of Labor, which is likely to have a strong impact on the market and speculators.

The unemployment rate is forecast to remain unchanged at 3.7%, while 290,000 new jobs could be created outside of agriculture. This is quite a lot, which can create prerequisites for a further reduction in unemployment. Everything indicates that the US dollar may still begin to strengthen, but we should not forget that the US currency is overbought, and everyone understands this very well. Thus, it may turn out that the report will come out well, but its indicators will be compared with the previous ones, where there was an increase in employment by 315,000. As a result, this factor will indicate a loss in the dynamics of the labor market recovery.

Time targeting:

US Department of Labor Report – 12:30 UTC

Trading plan for EUR/USD on October 7
The downward scenario is considered by traders as an inertial one, where technical signals about the local oversold euro will be ignored. In this case, keeping the price below 0.9750 may well stimulate speculators to action.

As for the upward scenario, it will be considered by traders if the price returns above the level of 0.9850.

Trading plan for GBP/USD on October 7
In this situation, the subsequent increase in the volume of dollar positions may occur when the price is kept below 1.1080, which will lead to a gradual decline to the values of 1.1020 and 1.0900.

The upward scenario will be taken into account if the quote holds above 1.1230 in a four-hour period.

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Tips for beginner traders in EUR/USD and GBP/USD on October 10, 2022

Details of the economic calendar for October 7
The main event of last Friday was considered to be the report of the United States Department of Labor, which surprised market participants. The unemployment rate was forecast to remain unchanged at 3.7%. However, US unemployment fell to 3.5%, which was a catalyst for demand for the dollar.

Non-farm Payrolls came out slightly below the forecast, but above the consensus of 263,000.

A strong labor market can become the trump card of the Fed in the tightening of monetary policy.

Analysis of trading charts from October 7
The EURUSD currency pair is moving on a downward trajectory from the parity level, as a result of which the quote dropped by about 270 points in a matter of days. In fact, there is a gradual process of restoring dollar positions relative to the recent correction from local trend lows.

Since the middle of last week, the GBPUSD currency pair has entered a phase of active decline. The pound sterling loses about 3.5% in value, which is more than 400 points of a downward move. The price area 1.1410/1.1525 is considered as resistance, against which a change in trading interests occurred.

Economic calendar for October 10
Monday is usually accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kingdom, and the United States are not expected.

In this regard, investors and traders will focus on the labor market data published last Friday, and monitor new incoming information.

Trading plan for EUR/USD on October 10
Despite the scale of the weakening of the euro, sellers are still in the market. For this reason, keeping the price below 0.9700 may well lead to a subsequent increase in the volume of short positions.

An alternative scenario considers a temporary stagnation relative to the current values, where long positions will be considered if the price returns above the value of 0.9750.

Trading plan for GBP/USD on October 10
At the moment, the quote has approached quite close to the level of 1.1000, where earlier in history there was already a reduction in the volume of short positions in its area. Thus, a price rebound cannot be excluded from the possible scenario, which will lead to a partial recovery of long positions on the pound.

As for the downside scenario, in order to prolong the current cycle, the quote needs to stay below the level of 1.1000 for at least a four-hour period.

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Tips for beginner traders in EUR/USD and GBP/USD on October 11, 2022

Details of the economic calendar for October 10
Monday, as usual, is accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kingdom, and the United States were not published.

In this regard, investors and traders have been focused on monitoring the information flow.

The main financial topics discussed in the media:

• The Bank of England is doubling down on potential bond buybacks as the contingency plan draws to a close.

• Fed officials Charles Evans and Lael Brainard continue to point to high inflation. At the same time, they mentioned in their speech that soon it will be necessary to limit the tightening of the monetary policy.

Analysis of trading charts from October 10
The EURUSD currency pair follows a downward trajectory from the parity level, which has recently played the role of resistance. Dollar positions have recovered by more than half relative to the recent correction.

The GBPUSD currency pair has formed a downward trend from the 1.1410/1.1525 area. As a result, sellers have already managed to weaken the pound by more than 450 points. Relative to the previous day, the quote conditionally stood in one place, having a lateral amplitude within 100 points. On the one hand, the scale of 100 points may seem large, but within two weeks this is the lowest activity, which could play the role of the accumulation of trading forces.

Economic calendar for October 11
Today, with the opening of the European session, data on the labor market in the UK was published. The unemployment rate fell from 3.6% to 3.5%, while employment in the country decreased by 109,000, which was expected to grow by 12,000. An additional factor that caused misunderstanding among investors is that the data for employment was for July, and unemployment was for August. With current figures, everything points to the fact that next month the unemployment data may be revised for the worse.

Trading plan for EUR/USD on October 11
The downward cycle has already led to the weakening of the euro by more than 300 points since the middle of last week. This price move indicates a technical signal that the euro is oversold in the short term. Based on this, a pullback scenario with respect to the current downward cycle cannot be ruled out. The level 0.9650 serves as a support on the way of sellers.

As for the strengthening of the downward cycle, for this scenario, it is necessary to stay below the support level for at least a four-hour period. In this case, speculators will ignore technical oversold signals, and the quote will move towards the base of the downward trend.

Trading plan for GBP/USD on October 11
In this situation, the stagnation was formed near the support level of 1.1000. Thus, for a downward scenario, the quote needs to stay below this level for at least a four-hour period. In this case, there will be a subsequent stage of recovery of dollar positions.

As for the upward scenario, the quote needs to stay above 1.1120 for it to be considered. With this outcome, a move towards 1.1220 is possible.

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EUR/USD: the dollar is brave, but secretly afraid of excessive "overheating"

Exchange Rates analysis
The US currency is steadily moving along the price spiral this week. However, experts fear that the current rise of the dollar may slow down amid the Federal Reserve's excessively aggressive monetary policy and the release of the results of the September meeting of the US central bank.

According to analysts, the greenback is getting more expensive amid another decrease in risk appetite in global markets. Investors are once again turning to safe haven assets, primarily gold and the dollar. The current situation contributes to the growth of the latter, although experts consider this increase to be unstable.

Currency strategists associate the USD growth recorded during five consecutive trading sessions with expectations about further tightening of the monetary policy by the Fed. After the release of encouraging statistics on the US labor market, market participants are convinced that the central bank will "let go of the reins" on the issue of tightening monetary policy as soon as possible. At the same time, more than 80% of experts expect the Fed rate to rise by 75 bps, and only 15% of them believe that this figure will not exceed 50 bps.

At the moment, traders and investors are focused on the minutes of the Fed's September meeting, which will be published on Wednesday, October 12. Market participants are waiting for new hints from the central bank about the future course of monetary policy, preliminary forecasts of the current situation and assessment of economic activity.

Statistical data on annual inflation in the United States will be released on Thursday, October 13. According to preliminary forecasts, in September, consumer price growth in America slowed to 8.1% from the previous 8.3%. Recall that since the beginning of 2022, this indicator has not fallen below 7.5%. Against this background, the Fed raised the key rate five consecutive times in order to combat galloping inflation. Experts and market participants fear that a new round of tightening of the monetary policy will provoke a recession. According to analysts, the markets secretly hope that the Fed will be able to stop the hawkish flywheel of monetary policy launched this year, but this is unlikely. There are no prerequisites for such a turn of events, experts believe.

Against this background, the US currency receives a powerful "boost" from the growth of profitability and the mass flight of investors into safe assets. As a result, the EUR/USD pair moved into a consolidation phase after a recent fall, reaching the 0.9700 mark. The current situation also helped the euro a bit, which remained stable against its American competitor. On Wednesday morning, October 12, the EUR/USD pair was trading at 0.9727, trying to win back the previous losses.

ING Bank's currency strategists are confident that in the near future the EUR/USD pair will drop to September lows and reach 0.9540. At the same time, by the end of 2022, the pair can test the level of 0.9200, the bank believes. According to other forecasts, the EUR/USD pair will continue to weaken in the first quarter of 2023. Analysts do not rule out a breakthrough above the parity level by the middle of next year.

The active strengthening of the greenback amid the tightening of the Fed's monetary policy will affect the global economy, JP Morgan bank is confident. According to Bob Michele, chief investment officer at JP Morgan Asset Management, a "relentless rally" in the USD will provoke turmoil in the global market. A strong dollar is a time bomb for the derivatives market, the investment director of JPMorgan Asset Management believes. The next round of USD strengthening will become a catalyst for the next global crisis, Michele emphasizes.

Further aggressive rate hikes by the Fed contribute to the "overheating" of the market and the US currency, the analyst believes. Against this background, the central bank, in an effort to overcome inflation, will raise the key rate to 4.75% and leave it at this level until it approaches the 2% target. The central bank will not stop and will not interrupt the tightening cycle, says Michele. The reversal of the current Fed rate is possible only as a result of fundamental changes in the economy.

Recall that this year the US central bank raised the interest rate by 75 bps three times in a row. According to recent statements by Fed policymakers, a fourth increase is possible next month. Earlier, representatives of the central bank noted that the rate hike will continue and it will overcome the existing barrier of 3-3.25%. At the same time, the US monetary authorities diligently avoid the topic of recession, believing that the economy will cope with it.

Earlier, US President Joe Biden announced the possibility of a "minor economic recession" in the country. However, it will not have a significant impact on the national economy, the head of state is sure. Earlier, Janet Yellen, the US Treasury Secretary, stressed that the country's financial markets are stable enough and nothing threatens them, despite the high volatility amid an increase in the Fed's interest rates.

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Loretta Mester: Fed sees no progress on inflation​​​​​​​

As I mentioned in yesterday's article, the Fed's key rate decisions are in the spotlight. If earlier some traders expected a shift to a softer stance, now everyone is betting on further tightening. The regulator is likely to raise the interest rate at least 3 more times at its meetings. Some analysts reckon the Fed may continue to hike rates in 2023. At the start of this year, the Fed planned to raise the benchmark rate to 3.5%. Now, many Fed officials expressed the need to hike the key rate to 4.5%. If inflation does not begin to decline at the pace set by the central bank, the watchdog may switch to aggressive tightening.

The Fed's top priority is to tame inflation to 2%. However, the central bank admits that it may take years. Notably, inflation is not only an economic issue but also a political one. If Joe Biden's administration fails to slow down soaring consumer prices, the Democrats may lose their majority in the Senate and Congress. This is why Joe Biden and the Democratic Party need to push inflation down as soon as possible. The Fed is an independent organization. Yet, it should also achieve some positive shifts in the fight against inflation as confidence in the central bank has declined sharply during the pandemic and in the years after the pandemic.

The inflation report is due tomorrow. Analysts do not expect a noticeable slowdown. The reading is likely to decline by 0.1-0.2% on an annual basis. Yesterday, Cleveland Fed President Loretta Mester said that the Fed is still unable to cap galloping inflation. "Unacceptably high and persistent inflation remains the key challenge facing the US economy. Despite some moderation on the demand side of the economy and nascent signs of improvement in supply-side conditions, there has been no progress on inflation," Mester said. When inflation comes down, the Fed will hold interest rates at high levels for some time to assess the cumulative impact of what the Fed has done. "Monetary policy is moving into restrictive territory and will need to be there for some time in order to put inflation on a sustained downward path to our 2% goal," she said, adding "I do not anticipate any cuts in the fed funds target range next year."

In my opinion, the Fed is ready to raise the interest rate even above 4.5%. If this scenario comes true, demand for the US currency may climb even more. The US dollar is steadily growing amid monetary tightening. So, it may rise even higher amid sharper rate hikes. If traders have already priced in the likelihood of the rate increase to 4.5%, they may factor in a bigger rate increase. If investors have ignored two ECB rate hikes and seven Fed rate hikes, then they may continue to do so in the coming months. I believe that the US currency is likely to reach new highs. In this case, the current wave markup of the euro/dollar pair is correct. However, the wave markup of the pound/dollar pair needs adjustments with the construction of a downward trend section.

I believe that there is a construction of a downward trend section now but it may end at any moment. The instrument could complete another upward correction wave. So, I advise selling with the target level located near 0.9397, the Fibonacci level of 423.6%. The MACD indicator is pointed downward. It is better to be cautious as it is unclear how long the euro may decline.

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Analysis and trading tips for GBP/USD on October 14

Analysis of transactions in the GBP / USD pair

The price test of 1.1100 happened when the MACD line was far above zero, so the upside potential was limited. No other signals appeared for the rest of the day.

GBP/USD rose on Thursday because the September data on US CPI indicated a slowdown in inflation. As for today, the quarterly bulletin of the Bank of England is due to be released, but it is unlikely to harm the pound. The only thing that could affect it is the decision of the central bank regarding bond purchases. If the Bank of England does not extend its program of buying bonds, pound will sharply lose ground against dollar. Then, in the afternoon, data on US retail sales will be released, and this could force the Fed to raise rates further, provided that the figure indicates the persistence of high inflation. Consumer sentiment and inflation expectations from the University of Michigan will likely be ignored, as will speeches from FOMC members Lisa Cook and Christopher Waller.

For long positions:

Buy pound when the quote reaches 1.1329 (green line on the chart) and take profit at the price of 1.1407 (thicker green line on the chart). Growth will occur as long as the Bank of England continues its program of buying bonds. But remember that when buying, the MACD line should be above zero or is starting to rise from it.

Pound can also be bought at 1.1283, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.1329 and 1.1407.

For short positions:

Sell pound when the quote reaches 1.1283 (red line on the chart) and take profit at the price of 1.1195. Pressure will return if upcoming US reports exceed expectations. But take note that when selling, the MACD line should be below zero or is starting to move down from it.

Pound can also be sold at 1.1329, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.1283 and 1.1195.

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The British Finance Minister has been dismissed, and the Defense Minister is next in line.

Exchange Rates analysis
The political crisis in the UK is gaining momentum, which cannot but put pressure on the British pound. After the instrument has moved away from its low by more than 1000 basis points, the British pound is in danger again. But this time, political problems have also been added to the economic problems. On Friday, it became known that British Finance Minister Kwasi Kwarteng was dismissed. He spent only 38 days in his position. The reason for the resignation was the shock in the UK's financial markets caused by tax amendments to the legislation. These amendments have not even been adopted yet, and it is unknown whether they will be adopted. They concerned several tax rates, which, according to the British government, should be lowered to reduce the pressure from rising energy prices on households and businesses. However, the tax reduction plan was criticized by economists, and it immediately became known that its implementation would lead to a huge budget deficit.

Even the conservatives themselves spoke out against this plan, so the Liz Truss government had to urgently make a statement that the plan was still "raw" and needed improvements. It has already become known that the maximum tax rate of 45% will not be canceled, and the proposed changes may also be canceled for other taxes. Since someone had to "take over" responsibility for the shock in the financial and currency markets, most likely, this role was performed by Kwasi Kwarteng, who personally developed this plan. The media noted the importance of this event because Kwarteng was not just the Minister of Finance but also a close friend and colleague of Truss. Former Foreign Minister Jeremy Hunt may become the new finance minister.

However, this is not all the upheaval in Parliament. Yesterday, it became known that Defense Secretary Ben Wallace may resign if Liz Truss reneges on her promise to increase defense spending. Earlier, during the election campaign, Truss promised to increase defense spending to 2.5% of GDP by 2026 and 3% of GDP by 2030. It is reported that this promise prompted Wallace to support the candidacy of Truss and not Rishi Sunak, who refrained from such statements. Jeremy Hunt, who may now take up his new position, has already stated that spending on many items will have to be cut amid the developing recession and the energy crisis in Europe. At this time, there was talk about the possible departure of Wallace, who believed that the defense budget needed to be increased.

It is also reported that NATO recommended that all member countries of the union increase their defense budgets to 2.5% of GDP, and the UK was supposed to be one of the first to do so. The Bank of England somehow restored stability in the financial markets through an emergency program of buying bonds for 65 billion pounds. Still, political problems remain very serious, and the recession and the energy crisis may continue to pressure the pound and the UK economy.

The wave pattern of the pound/dollar instrument implies the construction of a new upward trend segment. Thus, now I advise buying a tool for MACD reversals "up" with targets located above the peak of wave 1. Buy and sell should be careful since it is unclear which wave markings (euro or pound) will require adjustments, and the news background may negatively affect both the euro and the pound. Corrective wave 2 may already be completed.

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Tips for beginner traders in EUR/USD and GBP/USD on October 18, 2022

Details of the economic calendar of October 17
Monday was usually accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kindom, and the United States were not published.

In this regard, investors and traders monitored the incoming information and news flow.

The main financial topics discussed in the media:

The new British Chancellor of the Exchequer, Jeremy Hunt, said that Liz Truss's previously announced plans to cut taxes and increase subsidies will not be implemented. It is expected that this will allow the authorities to save about £32 billion.

This news flow is pushing the pound up, and due to the positive correlation, the euro is also growing.

Analysis of trading charts from October 17
The EURUSD currency pair has updated the high of the past week during the upward movement. As a result, a technical signal arose about a change in trading interests, which led to an increase in the volume of long positions in the euro.

The GBPUSD currency pair resumed its upward cycle, as a result of which the quote once again touched the resistance area of 1.1410/1.1525. The third consecutive convergence of the price with the area of resistance indicates a high desire of traders to keep the upward cycle in the market.

Economic calendar for October 18
Today, data on industrial production in the United States will be published, where the growth rate may slow down from 3.7% to 3.4%. These statistics may put pressure on dollar positions.

Time targeting:

US industrial production –13:15 UTC

Trading plan for GBP/USD on October 18
Stable price retention above the value of 0.9850 in the future may open the way towards the parity level. Otherwise, stagnation within the current value may lead to a price rebound in the direction of the variable level of 0.9700.

Trading plan for GBP/USD on October 18
From a technical point of view, the resistance area is still putting pressure on buyers, but this could change if the price holds above 1.1525 in a four-hour period. In this scenario, the volume of long positions may increase in the market, which will lead to a subsequent increase in the value of the pound sterling.

Until then, the scenario of a price rebound from the resistance area cannot be ruled out.

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Gold: When will the downward trend reverse?

Gold has lost almost a fifth of its value from its March highs, and to regain that lost luster it must do the impossible—beat the Forex king. This, of course, is about the American dollar, which sweeps away everything in its path. A host of problems in economies outside the US and an aggressive Fed allowed the USD index to climb to a 20-year high. The ascent continues, which pushes the XAUUSD quotes down.

For the precious metal to bottom, the dollar must peak. In the past, this has happened when the global economy outside the US has outpaced the US or the Fed has injected colossal amounts of cheap liquidity into financial markets.

The Fed is determined. It is willing to sacrifice its own labor market and economy to break the back of high inflation. The futures market and FOMC forecasts suggest that the federal funds rate will rise to 4.6%. However, given the core CPI's stubborn reluctance to slow down, one would expect the ceiling on borrowing costs to be even higher. Barclays predicts growth to 5–5.25%. If this happens, the USD index will continue to rally, and gold will fall into the abyss.

Dynamics of gold and USD index

The armed conflict in Ukraine, snap elections in Italy, the energy crisis in Europe, turmoil in the financial markets of Britain, and currency interventions in Japan. The list of shocks has not been so rich for a long time. But high inflation and geopolitical risks, as a rule, create a tailwind for gold. Indeed, in March, it jumped above $2,000 per ounce amid the war in Eastern Europe, but then, without options, it ceded the status of the main safe haven asset to the US dollar. And is still in its shadow.

What can break the downward trend in XAUUSD? Most likely, a recession in the American economy. In this scenario, the Fed will either slow down the process of tightening monetary policy or reverse it. According to Goldman Sachs, a dovish reversal or transition from raising the rate to lowering it will drive up the price of the precious metal by 18–34%. In my opinion, by the time this happens, there will be many moons in the sky.

Kotak Mahindra Bank believes that one of the factors that could slow the carnage in the gold market is increased demand for the physical asset from the largest buyers in the face of India and China. They account for about 50% of the world's precious metal imports. At the same time, the wedding season and the Lunar New Year will raise interest in gold. In my opinion, hardly. When prices fall, it moves from West to East. This is a common process that convinces the stability of the downward trend in XAUUSD.

Technically, on the daily chart, the inability of the gold bulls to latch onto the $1,670 an ounce fair value is indicative of their weakness. I recommend keeping the focus on selling the precious metal towards the pivot points at $1,620 and $1,580.

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Tips for beginner traders in EUR/USD and GBP/USD on October 20, 2022

Details of the economic calendar of October 19
UK inflation rose again to a record 10.1% in September. The consumer price index returned to this year's July level when a 40-year record for annual inflation was set.

The British currency reacted quite calmly to these data. The quote was gradually decreasing, which fits into the technical picture of the price rebound from the resistance area.

In the European Union, inflation data slightly differed from the preliminary estimate, which indicated an increase in consumer prices to the level of 10%. As a result, inflation accelerated from 9.1% to 9.9%.

Even though the indicator above is slightly lower, inflation is still very high. Thus, the ECB has all the arguments for a further increase in interest rates.

Analysis of trading charts from October 19
The EURUSD currency pair failed to stay above the benchmark value of 0.9850. Instead, a stagnation was formed, which eventually led to a downward momentum, lowering the quote below the 0.9800 mark.

The GBPUSD currency pair came close to the price gap at the beginning of the trading week during the downward movement from the lower boundary of the resistance area 1.1410/1.1525. In this case, the gap serves as a support, which led to a reduction in the volume of short positions.

Economic calendar for October 20
Today, weekly data on US jobless claims will be published, where figures are expected to rise. This is a negative factor for the US labor market.

Statistics details:

The volume of continuing claims for benefits may rise from 1.368 million to 1.375 million.

The volume of initial claims for benefits may rise from 228,000 to 230,000.

Time targeting:

US Jobless Claims - 12:30 UTC

Trading plan for EUR/USD on October 20
The 0.9750 mark serves as a variable pivot point. To prolong the downward cycle, the quote needs to stay below this value. This move will lead to a depreciation of the euro at least to the level of 0.9700.

An alternative scenario for the development of the market will be considered by traders if the price returns above 0.9800. In this case, euro buyers will have a second chance to hold the price above the control value of 0.9850.

Trading plan for GBP/USD on October 20
For a technical signal about the prolongation of the downward cycle to appear, the quote needs to stay below 1.1150. In this case, the sellers will open the way in the direction of 1.1000.

As for the upward scenario, the current stagnation within the price gap may eventually lead to a price rebound. In this case, a reverse move to the resistance area 1.1410/1.1525 cannot be ruled out.

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Tips for beginner traders in EUR/USD and GBP/USD on October 21, 2022

Details of the economic calendar of October 20
Weekly data on jobless claims in the United States reflected a slight increase in the overall figure.

Statistics details:

The volume of continuing claims for benefits rose from 1.364 million to 1.385 million.

The volume of initial claims for benefits fell from 226,000 to 214,000.

What are they talking about in the media?

The main news of the past day is the statement of Liz Truss that she is leaving the post of Prime Minister of Great Britain. An interesting fact is that Truss's premiership was the shortest in British history, with only 45 days.

The reason for her resignation was the discontent and dissension caused by her radical program of tax cuts and increased spending. This plan drew a sea of criticism from all economic and political circles.

How does the market react to her departure?

The pound sterling slightly appreciated in value. There were no cardinal changes in the market due to vague prospects.

Analysis of trading charts from October 20
The EURUSD currency pair once again rebounded from the control value of 0.9850. As a result, the quote returned to where the trading day on Thursday began. The value of 0.9750 serves as a support.

The GBPUSD currency pair, despite the impressive information flow, is moderately active. This suggests a characteristic uncertainty among market participants. As before, the value of 1.1150 serves as a support.

Economic calendar for October 21
At the opening of the European session, data on retail sales in the UK were published, which fell from -5.4% to -6.9%, with a forecast of -4.8%.

The reaction of the pound sterling to the negative statistics was appropriate—it continued to decline.

Trading plan for EUR/USD on October 21
In this situation, traders are guided by two main values at this stage—holding the price below 0.9750 in a downward scenario and 0.9885 in an upward market development.

It is worth noting that due to the strong information and news flow in the UK, market speculation may arise, where synchronous price jumps will occur through a positive correlation with the pound sterling.

Trading plan for GBP/USD on October 21
In this situation, keeping the price below 1.1150 will increase the chances of sellers for further decline in the direction of 1.1000. It is worth noting that the market is still in confusion. For this reason, chaotic price jumps are possible.

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FX interventions to stop USD rally?

The US dollar and the euro opened the week amid a mixed fundamental background. The euro is still under pressure from geopolitical tensions and the energy crisis, while the greenback risks getting into a so-called intervention loop.

According to analysts at Nordea Bank, currency interventions carried out in the global market "may dampen the strengthening of USD in the short to medium term." For your reference, FX interventions are done by the countries that seek to prop up their currencies against the US dollar. However, this scenario is very unlikely as most countries do not have "an endless amount of USD at disposal to sell."

Nordea Bank is sure that such interventions will fail when the supply of US dollars in these countries runs dry. FX interventions involve selling US Treasuries which adds upward pressure on key rates and leads to a stronger US dollar. Experts warn that this intervention loop may turn out to be negative for the greenback as it could lead to "dollar overshooting." Yet, even this potential failure of USD will not support the euro as it is likely to face a new sell-off wave in the near future. This is quite logical as EUR/USD has been trading within the downtrend since late September 2022. The pair is currently staying in the range of 0.9500 –1.0000. As the geopolitical and economic situation in the EU is getting worse, the euro is set to decline to the lower boundary of this range at 0.9500.

At the moment, the euro/dollar pair looks stable although the euro is still depreciating against the dollar. Early on Monday, October 24, EUR/USD was hovering near 0.9839, trying to maintain the balance. The triangle pattern formed after the breakout of the resistance at 1.0000 may become the main catalyst that will push the pair up to the level of 1.0250.

The greenback opened this week with another advance that has become typical for the currency. At the same time, records showed that the number of long positions opened by large market players decreased by the end of the previous week after a 3-week rally. However, the number of long positions opened by hedgers remained unchanged. This indicates persistent market uncertainty and low risk sentiment among market participants.

Experts stress that financial conditions have been worsening for several weeks now. However, the limit of monetary tightening has not been reached yet. Therefore, the Fed will have to pursue its policy of aggressive rate hikes. Against this backdrop, the stock market tumbled. All measures taken by the Fed are aimed at combating inflation. Most investors expect the US regulator to raise the rate further. It is estimated that the Fed's rate will peak at 5% by May 2023. If so, financial conditions will naturally deteriorate, analysts warn.

According to some forecasts, US inflation may reach 4% to 5% in the next 4-8 months. Then, a slowdown may follow. But even so, the US central bank is unlikely to ease its policy. Instead, it could slow down the pace of rate increase. There is an opinion that inflation in the US is caused by transitory factors in contrast to other countries. The situation is believed to improve soon. If this is true then the Fed may focus on economic growth and lower the rate. So, there is a chance that by 2024, the key rate will decline to 4.5–5%.

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GBP/USD. The dollar will soar by the end of the week. It's time for the pound to cool down

The pound has been evaluating political news in a positive light since the morning. How will the mood of traders of the British currency develop in the near future and is it worth counting on the growth of the exchange rate in the future?

Today, investors are assessing the news about the appearance of a new British prime minister. Rishi Sunak was elected head of the ruling Conservative Party of Great Britain, and will also take the post of prime minister of the country.

England has surpassed itself in political twists and turns. Sunak will be Britain's third prime minister this year. In July, Boris Johnson announced his intention to resign. Liz Truss, who was elected in his place, was able to stay in the prime minister's chair for 44 days and also resigned due to an avalanche of criticism against her.

Many see the new prime minister as a source of stability. Perhaps there really is some truth in this, when compared with the chaotic rule of the Truss, during which serious volatility was observed in the markets. Time will tell what kind of ruler Rishi Sunak will be, but for now market players are breathing a sigh of relief and are in a cautiously positive frame of mind.

Today, the GBP/USD pair rose to 1.1293 from the previous closing level of 1.1275.

As expected, the pound may continue to rise in the short term, but it risks failing during the week. Economic data is ahead, and they are likely to show an even greater divergence from the US economy for the worse.

While the market has welcomed the recent developments surrounding the election of a new prime minister, they alone can do little to improve Britain's economic prospects. The GBP/USD pair may continue to rise, but estimates regarding the extent of the rate hike are already declining.

If the 1.1500-1.1700 range becomes a reality in the very near future, this does not mean that the quote will fly further and higher. Such a scenario is more like a decent short entry point. The target range for the end of the year is still 1.0800-1.1200.

Britain released a disappointing PMI on Monday. Indices of activity in the manufacturing sector and the service sector collapsed, falling below market expectations.

The composite index in October was 47.2, which is two points lower than in September. Its value has become the lowest in the last two years. In addition, the business activity indicator has been below 50 points for three consecutive months.

The reason for the sharp decline in the index in October is called political instability in the country, which caused turmoil in the financial markets.

Anyway, the current situation points to the recession that has formed in the country. A reduction in economic growth may occur as early as the third quarter, and in the fourth negative trends will only intensify.

The prospects of the pound, among other things, depend on the positioning of the US dollar and its further strength.

Will the decline in the dollar index last until the end of the week? Much will depend on how traders react to the upcoming economic reports in connection with the forecast of the Federal Reserve's policy. The focus is on the GDP report for the third quarter and the employment cost index for the same period. Data on wages and inflation will strengthen the hawkish attitude of the Fed.

One of the most significant risks for the pound this week will be the US GDP report. It can show that America is emerging from a technical recession, while the UK is entering an active phase of recession. Divergence in economic prospects will undermine the pound's recovery.

A serious obstacle is the core PCE price index's release this Friday, the Fed's preferred inflation indicator. The inflation rate is expected to increase from 4.9% year-on-year to 5.2%.

If so, it will be more than enough to guarantee the Fed's hawkish attitude, which has helped the dollar reach new heights against many currencies in the weeks since the bank set course to raise the benchmark interest rate to 4.5% by the end of the year and 4.75% at the beginning of the next.

In general, the dollar index is forecast to rise to 114.00 this week.

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Tips for beginner traders in EUR/USD and GBP/USD on October 26, 2022

Details of the economic calendar of October 25
The macroeconomic calendar was empty, thus statistical data in Europe, the United Kingdom, and the United States were not published.

For this reason, investors and traders paid special attention to the information flow, where Rishi Sunak officially took office as Prime Minister of Great Britain.

The main theses of the speech of the new Prime Minister:

- The effects of the pandemic on the economy remain.

- We will put economic stability at the center of the agenda.

- There will be difficult decisions;

- We will build an economy that will take full advantage of Brexit.

- I'm not scared, I understand that I must restore trust.

The British financial sector welcomed the new prime minister; the pound sterling was actively strengthening in value, pulling up the euro.

Analysis of trading charts from October 25
The EURUSD currency pair completed fluctuations within the intermediate level of 0.9850. As a result, an inertial upward move appeared on the market, which brought the euro rate close to the parity level.

During the past day, the euro exchange rate strengthened at the peak by about 1%, which is about 100 points.

The GBPUSD currency pair, during an intensive upward movement, has overcome the lower border of the resistance area of 1.1410/1.1525. This move indicates a high hype for long positions in the pound sterling by market participants.

During the past day, the pound sterling appreciated at the peak by about 2%, which is about 200 points.

Economic calendar for October 26
Today, the macroeconomic calendar is half empty, only the data on new home sales in the US is expected. September sales may fall sharply, which is a negative factor for the country's economy, which may put pressure on dollar positions.

Time targeting:

US new home sales – 14:00 UTC

Trading plan for EUR/USD on October 26
After an upward rally, the quote temporarily formed a stagnation that lasted throughout the Pacific and Asian sessions. This consolidation led to the accumulation of trading forces, which resulted in a new speculative surge in activity.

As for the direction of movement, everything here will depend on how market participants behave within the parity level. In this situation, it would be reasonable to see a rebound due to the technical signal of the euro being overbought in the short term.

If the parity level is broken, and the quote is firmly held above it in the daily period, then there is a high probability of a subsequent upward move. In this case, we can see a gradual recovery of the euro.

Trading plan for GBP/USD on October 26
At the opening of the European session, buyers of the pound sterling again broke into the market, which led to a new upward impulse. As a result, the quote rose above the resistance area, which may indicate the possibility of prolongation of the current ascending cycle from the low of the downward trend.

It should be noted that the technical signal of the prolongation will be confirmed only after the stable holding of the price above the level of 1.1525 in the daily period.

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USD/JPY: USD to come out on top again

The currency market seems to have turned upside down. The US dollar, which has remained a king on Forex this year, suddenly began to lose ground. The yen, which is considered the main outsider this year, took advantage of the greenback's weakness which. It rose significantly.

Why USD loses ground

On Thursday night, the US dollar saw a large-scale sell-off. The US dollar index dived by 1.1%, reaching the monthly low of 109.56.

The greenback dropped across the board due to increased expectations of less aggressive tightening by the Fed and more hawkish stances of the ECB and the Bank of England.

In light of the recent weak US economic reports, traders have revised their outlooks for the Fed's monetary policy.

Investors expect the regulator to raise the interest rate by 75 basis points at the next meeting. However, they believe that the regulator will hardly undertake the same rate increase in December.

Aggressive tightening launched by the Fed to tame soaring inflation has adversely affected the economy. The world's largest economy is starting to show signs of slowing down.

It may force the Fed to shift to less aggressive rate hikes. If this scenario comes true, it will be rather bearish for the US dollar.

This year, the main driver for a rally was the monetary tightening. As the Fed has hiked rates more aggressively than other central banks, the greenback has skyrocketed to multi-year highs against its rivals.

It has grown the most versus the yen amid the divergence in monetary policies of the Fed and the BoJ. Since the beginning of the year, the yen has fallen by more than 20%, logging the worst performance among all the currencies.

The yen has become an outsider due to the Bank of Japan's commitment to a dovish stance. The regulator maintains its ultra-loose stance, while other major central banks are hiking rates.

After expectations of a slowdown in monetary tightening by the Fed have increased, the yen managed to climb.

The yen has been growing for two consecutive sessions. This morning, the Japanese currency extended gains.

At the time of writing the article, the USD/JPY pair fell by 0.5%, trading around 145.6. This is almost 5% below the high of 152 reached last week.

USD likely to rebound

Now, the dollar/yen pair is rapidly recovering after recent sell-offs. It has already approached a 32-year low.

However, many analysts believe that the current rally of the JPY will be short-lived as the US dollar could assert strength amid strong US economic data.

The US GDP report for the third quarter is due today. The indicator is projected to advance by 2.4% following a decrease of 0.6% in the previous quarter.

If this scenario comes true, market participants will have to revise their forecasts for the Fed's further plans for monetary policy, abandoning hopes for a softer stance.

The US dollar is sure to regain ground, while the yen will resume a downward movement.

On top of that, the JPY may decline even more after the results of the BoJ meeting. This event has been the main driver for the yen this week

Given a domestic demand shock in Japan, many analysts believe that the Bank of Japan will maintain its ultra-loose monetary policy to spur economic growth.

"The Bank of Japan will likely keep its main policy levers unchanged, yet again. Core inflation well above the 2% target and set to hit 3% isn't enough to prompt the BOJ to reduce monetary easing. Stronger wage growth is desired first," Bloomberg emphasizes.

The BoJ may keep the interest rate in negative territory, while the ECB may raise the key rate by 75 basis points today. The Fed will do the same next week. This is why the yen may again lose luster with investors.

In the short term, it may resume a sharp decline. If the yen collapses to critical levels again, the Bank of Japan will have to intervene once again.

Over the past month, the Japanese government has intervened in the forex exchange market three times. One intervention was officially announced. Analysts are sure that there have been two more. However, the Ministry of Finance did not announce them.

All interventions had a short-lived effect. The greenback recovered quickly thanks to strong fundamental factors, which boosted bullish bias.

Bulls are confident that the pair will climb again despite any intervention. The main thing is that the Fed adheres to its hawkish stance. If so, the US dollar will definitely resume an upward movement.

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Trading plan for EURUSD on October 31, 2022

Technical outlook:
EURUSD dropped through the 0.9914 lows intraday on Monday before finding support and reversing sharply to 0.9945. The single currency pair is seen to be trading close to 0.9935 at this point in writing as the bulls prepare to resume higher towards the 1.0170-1.0200 area. The currency pair is testing the backside of the past resistance trend line around 0.9910-20, which now serves as support.

EURUSD might have one more rally left to terminate its counter-trend rally, which began from 0.9535 earlier. The proposed target prices are towards 1.0200 and 1.0350, which are also lined up with resistance levels as marked on the daily chart. Immediate support is at 0.9700 on the daily chart and we can expect higher prices from here until it remains intact.

EURUSD is currently working on its recent upswing between 0.9700 and 1.0093. Prices are finding support just above the 0.9900 mark and could resume higher from here. Strong intraday support is seen at about 0.9850 as it is also the Fibonacci 0.618 retracement of the above upswing. We are looking higher from here in the near term.

Trading idea:
Potential rally through 1.0200 and higher against 0.9500

Good luck!

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Euro sadness is growing: macro data makes you sad. And the dollar is no stranger to: either retreat, or win

The US currency has once again bypassed the European one, which is seriously puzzled by a new batch of news about inflation. At the same time, the dollar draws confidence in the Federal Reserve's actions, which allows the completion of the current cycle of rate hikes.

The greenback significantly strengthened at the beginning of this week, restoring some of the positions lost over the past month. This was largely facilitated by the expectation of another interest rate hike from the Fed, whose two-day meeting is scheduled for November 1-2. According to preliminary calculations, on Wednesday, November 2, the central bank will raise the key rate by 75 bps, to 3.75-4.00%. This will be the fourth step on the Fed's part in raising rates.

However, many analysts and market participants doubt the continuation of the Fed's harsh rhetoric. According to experts, after the fourth rate hike by 75 bps, the central bank will take a less aggressive position on this issue. Michael Wilson, currency strategist at Morgan Stanley, is sure of this. He believes that the Fed's rate hike cycle is nearing completion. In support of his words, Wilson cites the inversion of the yield curve of ten-year and three-month US Treasury bonds. Recall that this is one of the key indicators indicating the need for a reversal of the central bank's tight monetary policy to a softer one.

However, some experts do not share the optimism of the Morgan Stanley representative. Currency strategists at UBS Global Wealth Management are confident that a reversal in the Fed's policy is unlikely, since the inflation rate in the US remains high. Against this background, the central bank will have to raise the rate until inflation recedes, the bank emphasizes.

The current situation puts pressure on the dollar, which, despite the current tension, is gradually strengthening. Against this background, the EUR/USD pair has been declining for the third consecutive day, continuing to struggle with the pull of the downward trend. On the morning of Tuesday, November 1, the EUR/USD pair was cruising near 0.9911. This is a difficult situation for the euro since it has to resist negative macro data.

Recall that reports on inflation in the eurozone were published on the evening of Monday, October 31, which again demonstrated its sharp rise. As a result, the inflation rate in the region soared to a new historical high, and the euro bloc economy lost its growth momentum. According to analysts, consumer prices in the EU rose by 10.7% in October 2022 compared to October 2021, exceeding forecasts. In the third quarter of this year, the volume of production in the eurozone decreased to 0.2% compared to the same period last year.

According to experts, the current situation is aggravated by a sharp increase in the European Central Bank's interest rates. At the same time, many analysts believe that the central bank should continue to actively fight inflation, which includes raising rates. It is possible that after the recent rate hike, the ECB will raise it again by 75 bps at the next meeting, which is scheduled for December 15. However, such a scenario is still in question, as well as a possible pause in the process of raising rates by the Fed.

Some analysts do not expect dovish decisions from the US central bank, although the current situation requires revision. According to experts, the aggressive tightening of the monetary policy contributes to the early onset of a recession in the United States, as well as a large-scale drop in treasury state bonds and stocks over the past few years. Take note that as rates rose and the economic downturn that followed the tightening of the monetary policy, the markets were gripped by a crisis. It was followed by an increase in the number of defaults, which seriously hit investors. In the current situation, the leading central banks will have to solve the issues that provoked such problems.

The current situation significantly affected the dynamics of the EUR/USD pair, provoking a correction at the end of September. However, the pair is gradually returning to a relatively stable course. According to experts, a new round of risk appetite in the markets will save the EUR/USD pair from further decline. At the same time, experts expect a New Year rally on the US stock market and the growth of risky assets in the near future.

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GBP/USD: dollar and pound in the ring. Waiting for the last knockout?

The British currency has cheerfully started November, but experts fear that its ardor will fade in the near future. The prerequisites for this are economic instability in the UK and the long-term strengthening of the US currency, which is not going to give up its position.

Sterling ended October on a negative note, losing 1% shortly before the decisive meeting of the Federal Reserve, which will end on Wednesday, November 2. According to its results, an additional increase in the interest rate by 75 bps is expected. The implementation of such a scenario will be the first step for the Fed to slow down the pace of rate hikes starting in December 2022, economists believe.

The past month was a time of recovery for the pound, experts believe. Against this background, the GBP/USD pair gained 3%, simultaneously reaching an impressive 1.1646. In many ways, this improvement is due to the curtailment of the economic policy of Liz Truss, the former prime minister of Great Britain, and her resignation. However, it was not only the rejection of the "mini-budget" that helped GBP get out of the price hole. The expectation of positive changes in the Fed's policy played a significant role. In addition, at the end of October, the US currency weakened.

At the beginning of the last month of autumn, the pound behaved cautiously, occasionally trying to rise. On Wednesday morning, November 2, the GBP/USD pair was trading at 1.1513, significantly retreating from the previous high positions. This was facilitated by the strengthening of the greenback, which continues its victorious march in the global market.

According to currency strategists at Bank of America (BofA), in the short and medium term, the dollar will still be the leader. Analysts are confident in the dollar's dominance. However, the implementation of such a scenario can dramatically limit the recent recovery of the pound. A similar development is likely with the next increase in the Fed's interest rate, according to BofA.

By the end of 2022, the market expects an additional rise in the Fed rate (the total volume of these increases is 135 bps). At the same time, by the first quarter of 2023, the peak of the federal funds rate will be 5%, BofA is confident. The bank believes that the Fed's decision in November will provide significant support to the greenback. According to John Skeen, currency strategist at Bank of America, at the moment the US currency is at 40-year highs. At the same time, "the strength of the dollar will remain at such levels at the beginning of 2023," the expert emphasizes.

The current sterling losses are due to the release of positive macroeconomic data from the United States, which provided significant support to the greenback, but pushed the pound and the euro into the abyss. According to reports, business activity in the US manufacturing sector (PMI) soared to 50.4 points in October (against the expected 49.9 points), and the ISM business activity index in the manufacturing sector rose to 50.2 points, exceeding the projected 50 points. Before the release of the reports, the GBP lost almost 100 points, falling sharply to 1.1550. In the future, sterling lost almost all the positions won earlier and fell into a downward spiral, reaching 1.1455. Later, the British currency managed to recover, but the consequences of such a "knockout" received from the dollar seriously affected the further dynamics of the GBP.

However, UOB currency strategists remain positive about the GBP/USD pair, believing that the pound will stand until the 1.1440 level is broken. If this stronghold falls, then sterling will be in a price hole for a long time. However, this is unlikely now, the UOB emphasizes. Earlier, analysts predicted the pound's growth to 1.1700, but the chances of this are melting every day.

According to experts, in the coming weeks, the euro and the pound will remain under pressure against the USD. Nevertheless, market participants do not lose hope for the pound's recovery in the long term. Many large hedge funds have raised their bets on the pound's growth, although asset managers have reduced their short positions against the GBP. However, the majority of market participants, taking into account the positive changes in the UK fiscal policy, support the position of hedge funds. At the same time, many analysts believe that optimism about the pound is justified.

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USD slides down after Fed interest rate hike

The US currency reacted negatively to another Fed funds rate increase following the FOMC meeting. USD slumped significantly, losing many of its earlier gains. However, market players and analysts believe that the US dollar is strong enough to recoup its losses.

USD decreased late on Wednesday after the Federal Reserve increased the interest rate by 75 basis points. Fed policymakers stated that future rate hikes, which are aimed at decreasing galloping inflation, could be smaller than the previous ones.

Analysts noted that the market regarded this statement as quite dovish. Investors assumed that the regulator will slow down the pace of rate hikes in the current situation. Many analysts believe that the Fed would increase the rate by only 50 bps in December.

While some market players expected the Fed to slow down monetary tightening significantly, these expectations were dispelled by Fed chairman Jerome Powell. At the press conference following the meeting he said that the Federal Reserve does not plan to slow down the pace of rate hikes. "It is very premature to be thinking about pausing," Powell added. The Fed chairman said the regulator will present a new summary of interest rate trajectory projections.

Furthermore, Powell pointed out the steady rise of the US dollar and called it "a challenge" for many countries. Expectations of an excessively high rate hike strongly pressured USD. Early on Thursday, November 3, EUR/USD traded near 0.9825. Earlier, the pair rose to 0.9832, but retreated slightly afterwards.

Market players hoped the Fed would slow down interest rate hikes this year and ultimately end the tightening cycle in the first quarter of 2023. However, the Fed's actions did not match their expectations. A 50 bps rate increase in December is the only likely policy adjustment the regulator can do.

Rising employment in the US became a key indicator signalling that the Fed would not soften their stance. According to the latest data by ADP, the US economy added 239,000 new jobs in October, well above 192,000 new jobs reported in September. The Federal Reserve uses such data to determine the level of inflation and interest rate adjustments. Strong US labor market data gives the Fed more room for maneuver, allowing the regulator to tighten its monetary policy more aggressively to fight soaring inflation.

Amid such developments, experts note that the US dollar rally can potentially continue in 2023, fuelled by concerns over a global recession and the hawkish Fed. FX strategists at Capital Economics believe that the Fed's tightening cycle is close to an end. The research firm's chief economist Jonas Goltermann predicts that the US dollar will continue to climb in the first half of 2023.

Goltermann believes that if interest rates reach their peak, it will not be an obstacle for a USD rally in the future. The economist said falling risk appetite in the global markets and rising demand for safe haven assets have given support to the US dollar. According to Goltermann, the US currency went up during earlier tightening cycles.

Earlier outlooks by some analysts saw the Fed increase interest rates up to 5% in 2023. Bloomberg predicts that the effective Fed funds rate could hit a peak of 5.1% by May 2023. Market players expect the key interest rate to decrease afterwards in the first or second quarters of the year.

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EUR/USD: USD likely to rise higher; EUR weak due to risk-off sentiment​​​​​​​

The US dollar has kicked off the new week with a rapid increase. The euro, on the contrary, was unable to rebound. The greenback is gaining momentum despite a short-term drop last week.

On Monday morning, it advanced significantly against the euro. Its growth was facilitated by positive US macro stats published at the end of last week and the latest economic reports from China. By the end of October, the Chinese authorities announced an unexpected contraction in imports and exports. After the release of disappointing data from China, fears about a looming recession increased in markets, fueling demand for safe-haven assets, including the US dollar.

As the risk-on sentiment decreased, the US dollar won luster win investors again. The US dollar, the most popular safe-haven asset, rose the most. Its further growth may be stimulated by the US inflation report for October, which is due on Thursday, October 10. According to preliminary estimates, inflation is expected to slow down to 8%, logging the fourth decline in the indicator.

Analysts are confident that the Fed mainly takes into account inflation figures when making monetary policy decisions. Since early 2022, the Fed has raised the key rate six times to curb galloping inflation. It has started to slow down thanks to monetary tightening. However, after moving away from an all-time high of 9.1%, inflation still remains above the 2% target level.

Inflation will hardly drop considerably because of high wages in the United States. According to the Nonfarm Payrolls report for October, the economy added 261,000 new jobs, exceeding the previous forecast readings. At the same time, last month the unemployment rate rose to 3.7% from 3.5%. Economists at Capital Economics said that given the wage growth, it would be hard to push inflation to the 2% target. For this reason, the Fed is likely to stick to aggressive tightening.

The greenback was somewhat stuck in the narrow range due to market uncertainty. Judging by the data on the US dollar index (USDX), last week large traders significantly reduced their long positions on USD. If this trend persists, the US currency may lose momentum. However, many analysts are betting on a further rally of the greenback. On November 7, the EUR/USD pair was trading at 0.9962, showing steady growth. However, UBS analysts stress that in March 2023, the pair may fall to 0.9600. It is quite curious given that now there are plenty of fundamental factors for a rise to 1.0000 and above.

Alan Greenspan, the former Fed Chairman, expects a buoyant rally of the US dollar in 2023. Such a scenario is possible even if the regulator makes smaller rate hikes. If inflation peaks in early 2023, the US currency will continue to grow, Greenspan stressed.

This year, the US dollar has been rising mainly amid more aggressive tightening compared to other central banks. Many USD rivals, in particular the euro and the pound sterling, have reached multi-year lows due to the divergence in monetary policy. In addition, the Fed is actively shrinking its balance sheet, boosting the US dollar in the long term.

Analysts at UBS assume that next year the greenback is likely to retain its upside potential. At the moment, it is too early to talk about the end of the rally as inflation remains high. UBS believes that the central bank will continue to aggressively raise rates until a steady decrease in inflation. In the fourth quarter of 2022, the greenback is projected to grow and in the first quarter of 2023, it may reach new highs. This might be the first step towards the possible slowdown of the Fed's tightening hike cycle, analysts believe.

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Tips for beginner traders in EUR/USD and GBP/USD on November 9, 2022

Details of the economic calendar from November 8
The midterm elections to the US Congress are in the center of everyone's attention. During which the House of Representatives and a third of the Senate will be re-elected. The first polling stations closed in a number of districts of Indiana and Kentucky at 23:00 UTC, and the last at 05:00 UTC - stations in Alaska and Hawaii stopped accepting ballots.

Ballot counting is still ongoing. As a result, 435 members of the House of Representatives and a third of its Senate will be elected. In addition, the governors of 36 states and three US overseas territories are elected.

As I wrote in the previous article, the victory of the Republicans will lead to heavy clashes in promoting legislative initiatives of the White House. As a result, characteristic uncertainty and even investors' fears may arise, which will lead to the sale of the US dollar.

Analysis of trading charts from November 8
The EUR/USD currency pair continues to show an upward trend in the market. A short stagnation within the parity level was replaced by a subsequent inertial move, which let the quote approach the local high of October.

The GBP/USD currency pair managed to maintain the upward cycle previously set in the market during the impulse jump. As a result, the quote remained above the 1.1525 mark. The scale of the strengthening of the pound sterling from November 4 to November 8 is about 400 points.

Economic calendar for November 9
Today, the macroeconomic calendar is empty, and it would not be of interest to traders because all their attention is focused on counting ballots.

Thus, investors and traders will monitor the information and news flow coming to the media and act on the market in relation to it.

Trading plan for EUR/USD on November 9
In this situation, the value of 1.0100 is considered a variable resistance level. In order for there to be a subsequent increase in the volume of long positions, the quote needs to stay above this value for at least a four-hour period. In this case, both the current upward cycle and the corrective move from the bottom of the downward trend will be prolonged.

At the same time, traders are considering the scenario of a price rebound from 1.0100. In this case, the inertial move may be interrupted, and the quote will return to the parity level limit.

Trading plan for GBP/USD on November 9
A stable holding of the price above 1.1525 may lead to a prolongation of the upward cycle. Under this scenario, it is possible to update the local high of October, which, in turn, will open the way in the direction of the resistance level 1.1750.

As for the downward scenario, it will again be considered by traders in case the price returns to the boundaries of the area of interaction of trading forces 1.1410/1.1525.

What is shown in the trading charts?
A candlestick chart view is graphical rectangles of white and black light, with sticks on top and bottom. When analyzing each candle in detail, you will see its characteristics of a relative period: the opening price, closing price, and maximum and minimum prices.

Horizontal levels are price coordinates, relative to which a stop or a price reversal may occur. These levels are called support and resistance in the market.

Circles and rectangles are highlighted examples where the price of the story unfolded. This color selection indicates horizontal lines that may put pressure on the quote in the future.

The up/down arrows are the reference points of the possible price direction in the future.

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Hot forecast for EUR/USD on 10/11/2022

The first thing you should pay attention to is that since the beginning of the week, the dollar has fallen sharply in price, and the rebound was asking for it. Moreover, it was only the political factor that put pressure on it, in the form of uncertainty about the results of the midterm elections. So as soon as it became clear that the Democrats were apparently gaining control of the Senate, the US currency immediately began to actively rise in price. Although the counting of votes is still ongoing, and less than half of the ballots have been counted at some polling stations. Nevertheless, so far everything is going to the fact that the Democrats take the Senate, while the Republicans take the House of Representatives. The main driver of the dollar's weakening was the assumption that the Republican Party would win a crushing victory and gain control of both chambers of Congress.

There is a high probability that the dollar will be able to further strengthen its position today. The reason for this may be the US inflation report. And although the growth rate of consumer prices is likely to slow down from 8.2% to 8.1%, this still means that the Federal Reserve will continue to raise interest rates. Firstly, inflation remains at an extremely high level. Secondly, on a monthly basis, consumer prices should increase by 0.5%, whereas a month earlier they increased by 0.4%. In other words, prices continue not only to grow, but there are signs of even a possible acceleration of this process. Consequently, the US central bank will continue to pursue an extremely tight monetary policy.

Inflation (United States):

The EURUSD currency pair bounced precisely from the area of the local high in October. As a result, there was a pullback in the direction of the parity level.

During the price rebound, the RSI H4 indicator came out of the overbought zone. This is a fairly good technical signal about the regrouping of trading forces. It is worth noting that the indicator has not gone below the average line of 50, which indicates the bullish mood in the market.

The moving MA lines on Alligator H4 and D1 are directed upwards, which corresponds to an ascending cycle.

Expectations and prospects

In this situation, the parity level serves as a support in the market. Thus, it is possible to strengthen long positions. We expect the euro to rise only if the price stays above October's local high in a four-hour period.

As for the downward scenario, in order to consider it, the quote must first stay below the 0.9950 mark. This price move may restart short positions.

Comprehensive indicator analysis in the short-term and intraday periods has a sell signal due to the recent price rebound. In the medium term, the signal from the indicator is focused on an upward corrective move from the low of the trend.

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Hot forecast for GBP/USD on 11/11/2022

Inflation, or rather the reassessment of the Federal Reserve's succeeding actions, turned out to be much more important for the market than the results of the midterm elections in the United States. Moreover, the counting of votes is still ongoing. So as soon as it became known that the growth rate of consumer prices in the United States slowed from 8.2% to 7.7%, a real rally began in almost all markets. The only exception was probably the oil market. But the pound jumped by more than three hundred points. After all, if inflation slows down much faster than forecasts, and the most desperate optimists expected it to fall to 8.0%, then the Fed has no reason to further tighten monetary policy. In other words, the US central bank may well start lowering interest rates next year. It was this change in expectations that caused the dollar to fall sharply.

Inflation (United States):

But the movement turned out to be so impressive that a rebound, or even a local correction, would only take a matter of time. And it is quite possible that today's preliminary data on UK GDP will just be an excellent reason for this. Indeed, according to forecasts, the economic growth rate of the United Kingdom should slow down from 4.4% to 2.3%.

GDP growth Rate (UK):

The pound has strengthened in value by more than 350 points against the US dollar. This strong inertial move led to a control tracking of the price with subsequent resistance levels of 1.1750.

The RSI H1 technical instrument entered the overbought zone during such an intense price move, which corresponds to a convergence with the resistance level. RSI D1 is moving confidently in the upper area of the 50/70 indicator, which indicates ongoing upward interest in the market.

The MA moving lines on Alligator H4 and D1 are directed upwards, this signal corresponds to the general mood of market participants.

Expectations and prospects

In this situation, the technical signal about the overbought pound still takes place on the market. For this reason, traders are considering the scenario of a price pullback from the resistance level of 1.1750.

As for the subsequent upward cycle, market participants will consider it in case the price stays stable above the 1.1750 level. With this development, the overbought signal will be ignored by traders.

Complex indicator analysis in the short, intraday and medium-term periods has a buy signal due to the upward cycle.

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Tips for beginner traders in EUR/USD and GBP/USD on November 14, 2022

Details of the economic calendar of November 11
The macroeconomic calendar focused only on statistics from the UK, which came out better than expected. The final estimate of GDP for the 3rd quarter reflected a slowdown in the economy from 4.40% to 2.40%, with forecast of 2.10%. Meanwhile, the rate of decline in industrial production is slowing down from -4.3% to -3.1%, although forecast assumed that the indicators would remain at the same level.

As a result, the pound sterling, overbought in recent days, continues to hold its positions in the market.

As for the US ballot count, the preliminary totals are:

House of Representatives: Democrats 204 - Republicans 212. Control requires 218 seats out of 435.

Senate: Democrats 50 - Republicans 49. Control requires 51 seats out of 100.

The data is not final, the ballots are still being counted.

Analysis of trading charts from November 11
The EUR/USD currency pair appreciated more than 450 points during the past week. This strong inertial move led to the update of the corrective cycle from the low of the downward trend. As a result, the euro reached the subsequent resistance level of 1.0350.

The GBP/USD currency pair gained more than 550 points during the past week. This unprecedented inertial move overcame the local autumn highs. As a result, the corrective movement from the low of the downward trend was prolonged, where the overall scale of the strengthening of the pound sterling is about 14.5%, which is about 1500 points.

Economic calendar for November 14
The new trading week starts with data on the industrial production of the European Union, whose growth rate may accelerate from 2.5% to 3.3%. This is a positive factor for the EU economy, which can stimulate the euro.

Trading plan for EUR/USD on November 14
In view of the clear signal that the euro is oversold, a price rebound from the 1.0350 resistance level is allowed. In this case, sellers will receive local support in the market, and buyers will be able to regroup their positions.

Traders will consider the subsequent upward movement if the price holds above the level of 1.0350, at least in a four-hour period. In this case, we will receive a technical signal about the prolongation of the ascending cycle.

Trading plan for GBP/USD on November 14
The new trading week was opened with a downward GAP, where the overbought pound sterling entered the stage of a technical pullback. The previously passed 1.1750 resistance level now serves as support, where the quote returned during the pullback.

Presumably, the upward inertial mood still takes place in the market. For this reason, a price return above 1.1855 could restart long positions. As for the current pullback, for its prolongation and transition to the correction mode, it is necessary to be consistently below the level of 1.1750.

What is shown in the trading charts?
A candlestick chart view is graphical rectangles of white and black light, with sticks on top and bottom. When analyzing each candle in detail, you will see its characteristics of a relative period: the opening price, closing price, and maximum and minimum prices.

Horizontal levels are price coordinates, relative to which a stop or a price reversal may occur. These levels are called support and resistance in the market.

Circles and rectangles are highlighted examples where the price of the story unfolded. This color selection indicates horizontal lines that may put pressure on the quote in the future.

The up/down arrows are the reference points of the possible price direction in the future.

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USD/JPY. The yen ignores the record inflation report and follows the dollar

The dollar-yen pair earlier this week updated a three-month price low, reaching 137.70. However, the USD/JPY bears failed to settle in the area of the 137th figure - dollar bulls stopped the downward momentum and turned the pair 180 degrees.

In general, the trajectory of the pair's movement correlates with the trajectory of the US dollar index. Once again, we are convinced that the yen is not an independent player against the greenback. The Japanese currency certainly has its trump card, but it rather serves as a "stop tap". We are talking about a currency intervention, the risk of which increases along with the USD/JPY rate. In this context, we can say that the Japanese government controls the upper limit of the price range within which the pair is traded. According to most analysts, this limit is in the area of the 150.00 mark: exceeding this target is fraught with consequences. As for the lower limit of the conditional price range, everything depends on the "well-being" of the US currency. USD/JPY bears are forced to follow the greenback, which determines the end point of any downward surge. The yen has no arguments of its own to strengthen – primarily due to the divergence of the Federal Reserve and the Bank of Japan rates.

The events of the last days serve as evidence of this. They eloquently illustrated the stated disposition, the essence of which boils down to an uncomplicated conclusion: the downtrend ends exactly where the dollar recovery begins.

As you know, the US currency significantly sank throughout the market after the release of the latest data on the growth of inflation in the United States. The market started talking about the fact that the Fed will slow down the pace of monetary policy tightening at the next meeting, which will be held in December. A little later, these assumptions were confirmed by many representatives of the Fed: according to them, the central bank can afford to reduce the speed, while maintaining the final goal at the same level (that is, above the 5.0% mark).

At first, traders mostly focused their attention directly on the fact of slowing down the pace of tightening of the monetary policy. But then they "listened" to the signals from the Fed representatives, who made it clear that no one was going to curtail the hawkish course – only the speed of achieving the goal slows down. In particular, Christopher Waller, a member of the Board of Governors, said that the markets should now pay attention to the "end point" of the rate hike, and not to the pace of its achievement. At the same time, he noted that the end point is probably "still very far away." Some of his colleagues also stated that, firstly, inflation in the United States is still at too high a level; secondly, it is impossible to make any long-term organizational conclusions based on only one report.

Such messages eased the pressure on the dollar, and, accordingly, cooled the ardor of bears of the USD/JPY pair. Turning to the upside, the pair gradually began to gain momentum, rising by 250 points in two days. At the same time, traders ignore Japanese statistics, even when it comes to the inflation report.

Key data on the growth of inflation in Japan was published during the Asian session on Friday. The report reflected a record growth of key indicators. For example, the overall consumer price index rose by 3.7% in October, which is the strongest growth rate of the indicator since 1982. The core CPI, which does not include fresh food, but includes energy prices (petroleum products), also updated the 40-year record. The consumer price index, excluding food and energy prices, jumped 2.5% year-on-year in October.

All components of the above report came out in the green zone, significantly exceeding the forecast levels. It is worth noting that inflation has been exceeding the BOJ's 2% target for seven months, but at the same time BOJ Governor Haruhiko Kuroda continues to "hold the line", maintaining a soft monetary policy. This, in fact, explains such a phlegmatic reaction of USD/JPY traders to the report published today. Market participants reasonably doubt that Kuroda will toughen his rhetoric in response to the published figures.

Thus, the fate of the USD/JPY downward trend depends solely on the behavior of the US currency, which is gradually beginning to "come to its senses". After all, even taking into account the slowdown in the rate hike, the Fed continues to act as an ally of the greenback, and even more so in tandem with another, which cannot count on the support of the BOJ. In my opinion, the rhetoric of the Fed representatives will only tighten ahead of the December meeting (at least in the context of determining the upper limit of the current cycle), while Kuroda will once again ignore the inflation report, declaring the preservation of the accommodative policy.

All this suggests that the USD/JPY pair may demonstrate a more confident growth in the near future – at least to the Tenkan-sen line on the daily chart, which corresponds to the 142.40 mark. If we talk about the medium term, the main target here is 145.50: at this price point, the upper line of the Bollinger Bands indicator coincides with the upper limit of the Kumo cloud on the D1 timeframe.

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The Fed writes between the lines. The dollar is lost in speculation. No clear strategy or desire to play with the markets

The dollar index is showing signs of recovery. Perhaps it will show even stronger signs in the coming sessions. However, traders will refrain from making bold attempts to push the dollar higher before the release of the Federal Reserve minutes. The fact that we are facing a short week may also play a role here. The United States will be celebrating its Thanksgiving holiday on Thursday, which will lead to lower activity in markets and limited reaction to market data and other news.

Wednesday will be an important trading day. A series of macroeconomic data will be released on this day, as well as the minutes. There might be a flurry of activity before holidays and weekends. It is possible that there will be a delayed reaction to all of this as early as next week. In the meantime, markets are evaluating or rather quietly studying the fresh opinions of the Fed members on the central bank's further steps.

The main question is whether the central bank will eventually shorten the time period during which it is not expected to pause in policy tightening. No matter what the Fed members say, investors are hoping for less aggressive measures and an early transition to dovish rhetoric. They will be looking for signals for such a scenario in all publications, statements and other news reports.

News from the Fed

The speech of the head of the San Francisco Fed, Mary Daly, was quite long. The members of the central bank don't seem to have a definite line on what they plan to do next. Now is the time when they are thinking and discussing their next steps.

Citing new research from her regional bank, Daly said that "the level of financial tightening in the economy is much higher than what the (federal) funds says." Financial markets are acting as if it is about 6%.

Markets have priced in QE parameters that far exceed those outlined by the Fed. In this regard, Daly noted that "it will be important to remain conscious of this gap between the federal funds rate and the tightening in the financial markets. Ignoring it raises the chances of tightening too much."

Anyway, the Fed still has a lot of work to do to steer monetary policy in the right direction to curb inflation. Those were probably the key words.

Daly, speaking to reporters, made no secret of the fact that she has yet to decide which rate hike she will support at the December FOMC meeting. We need to look at new economic data before making a decision.

The central bank representative also warned against using the market funds rate of 6% as a benchmark for determining the actual policy.

"I use the proxy rate as a point of reference, not as an indication that we should stop early," Daly summarized.

In economic forecasts released in September, the central bank's policy makers outlined an average target rate of 4% for the next year. Most officials have since assumed that, given the dynamics of inflation and the continuing strength of the labor market, they may want to go higher. Daly did not rule out the possibility of an increase to 5.25%.

At the same time, everyone understands and knows that raising rates too sharply will cause great damage to the economy, so the possibility of reducing the size of individual rate hikes is being discussed in parallel. In addition, recent data showing signs that inflation may slow down has given officials some room for such a maneuver.

Daly said in her formal remarks that the next stage for the Fed will be "in many ways more difficult". She added that officials will need to be "mindful" of their choices and its consequences. Too much adjustment can lead to an unnecessarily painful recession. At the same time, "adjusting too little will leave inflation too high".

The dollar reflects

BNP Paribas has provided a number of new interesting research for dollar bulls. According to analysts' calculations, the bottom of the stock market in the current bear market has not yet been reached.

After analyzing 100 years of crashes, BNP Paribas finds market bottoms typically require a capitulation event – which is associated with a coordinated spike in volatility, skew, and convexity.

"We have not yet seen this, suggesting that the bottom is not yet in," says Calvin Tse, Head of US Macro research, at BNP Paribas. "Recessionary bear markets historically have often ended with a capitulation. We are calling for a capitulation in equities next year."

Therefore, if the bottom of the stock market has not yet been reached, then neither is the dollar's peak.

The dollar is countercyclical and rises in bad market conditions as investors seek cash as protection against asset depreciation. If the BNP Paribas economists' assessment has merit, then those who advocate for a stronger dollar could win.

Meanwhile, the dollar index rose for the third consecutive session and is trading near the key barrier at 108.00. Although, the bulls' grip eased somewhat.

The uptrend meets obstacles in the way. However, if it breaks through the 109.18 resistance and then the 109.70 level, it could encourage the exchange rate to rise in the short term.

Today's dollar losses could be due to the fact that investors are cautiously awaiting the latest Fed meeting's minutes, which could affect the U.S. rate forecast. Traders also analyzed various comments from Fed officials and found them largely soft. Central Bank officials are still sticking to their version of lower inflation, but doubts are certainly present.

Meanwhile, the dollar index jumped 1% on Monday due to the worsening Covid situation in China. This factor is known to have a short-term effect.

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USD unable to regain momentum; GBP to face strong resistance level

Next week, the trajectory of some pairs may change dramatically. The US dollar is also expected to resume an upward movement. If so, it will increase pressure on its rivals. Fed policymakers could also provide more comments on future plans for monetary policy. Some Fed members could even speak in favor of the fifth consecutive rate increase by 75 basis points at the December meeting.

Yesterday, the pound sterling rose above 1.2000 for the first time since August. Such a sharp increase occurred amid the falling US dollar before Thanksgiving Day and fundamental factors. As trading floors in the US are closed, the pound sterling will be able to climb higher in the coming sessions.

Why has the pound sterling started steady growth? Is there a likelihood of a rise in the greenback next week?

GBP maintains bull run

The British currency jumped against the US dollar, the euro, and other major currencies on Wednesday and Thursday, following the news about a surge in the UK's government debt.

The GBP/USD pair was trading around a high of 1.2110.

Falling government bond yields are signaling confidence in the improving economic conditions in the UK.

As a reminder, Treasury yields grew considerably after the announcement of the September mini-budget of former Prime Minister Liz Truss. Investors demanded higher interest premiums to purchase UK debt.

Following a jump in government bond yields, the cost of borrowing increased drastically. It led to the destabilization of the UK financial sector and worsened the economic downturn. The pound sterling reacted with a nosedive.

The current decline in Treasury yields indicates an improvement in the UK's economic prospects.

The GBP/USD pair grew by 16% after the political woes in late September.

After several months of volatility and lows, the pound sterling may finally recover. Naturally, not all problems have disappeared completely but it is easier to assess risks at the current levels, analysts HSBC pointed out.

In their latest forecast, they predicted a rally during 2023.

As for growth yesterday, it was facilitated by some internal factors. The economic reports turned out to be better than expected. The PMI Indices for November increased after a long time of contraction.

There is no denying that the country is in a recession but traders are well aware of it. Therefore, the market reaction is likely to be quite strong to positive reports. In other words, traders will pay more attention to upbeat reports, ignoring bad ones.

Besides, traders are no longer concerned about another bearish factor that has been weighing on the British currency for some time. The UK Supreme Court ruled that the Scottish government cannot hold a referendum for independence without the UK government's approval.

This news also supported the pound sterling today.

USD not ready to give up

On Wednesday, the greenback saw a big sell-off. It dropped lower after the release of the economic reports. The Manufacturing PMI Index slid below 50. The labor market seems to be losing steam as well. Analysts were not surprised.

Economists at Pantheon Macroeconomics believe that the number of initial jobless claims has been gradually rising for some time as firms are facing challenges due to the Fed's aggressive tightening.

The Manufacturing and Services PMI Indices fell at the fastest pace since August and the 2008 financial crisis. Recessions in both sectors have become deeper.

Meanwhile, new home sales soared by 632,000 in October after a downwardly revised figure of 588,000. It was the first increase in three months. The US dollar managed to recover slightly amid this report. However, this data is quite controversial given a decrease in mortgage demand.

The University of Michigan's inflation expectations has declined this month. The Fed is sure to take notice of this survey. The greenback may start a short-term rally.

As seen, the US economic reports are rather controversial. It is hard to get a clear picture of the economic situation.

ING economists are concerned that a 7% fall in the US dollar against its rivals and a drop in the 10-year government bond yield has led to a significant weakening of financial conditions. The result is the exact opposite of what the central bank is trying to achieve.

It would not be surprising if the Fed's rhetoric becomes even more hawkish next week.

One year ahead inflation expectations decreased to 4.9% from 5%. At the same time, the figures remain at a level more than twice exceeding the Fed's target of 2%. Five years ahead inflation expectations also remained above the target.

Inflation expectations will hardly force the Fed to change its hawkish stance. Investors may again abandon their expatiations of a softer stance next week after studying the November meeting minutes and returning to the market after the holiday.

Traders are likely to pay attention to how many Fed policymakers are backing further aggressive tightening. At the press conference, Fed Chair Jerome Powell said that officials could raise interest rates even higher than 4.5-4.75% than initially projected in September.

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GBP/USD. End of the "Scottish issue"

The GBP/USD pair tested the 21st figure on Thursday - for the first time since the beginning of August. This is mainly due to the dollar getting weaker, as it stopped moving upward across the market. U.S. trading floors were closed yesterday (Thanksgiving Day in America), and the minutes of the November FOMC meeting, published the day before, were interpreted against the dollar. Such a fundamental background made it possible for GBP/USD bulls to hit a new multi-month high, marking 1.2152.

Take note that the bulls were getting closer to the area of 20 figures during the last two weeks. After almost a week-long flat in the range of 1.1800-1.1950, the bulls decided to make a swift upward move, which enabled them not only to cross the level of 1.2000, but to also probe the area of the 21st figure. Do remember that the pound's growth was caused not only by the dollar getting weaker, but because it also had political overtones.

The fact is that this week the British Supreme Court rejected the Scottish referendum bid for independence. According to the court's verdict, the Scottish government cannot initiate a second referendum without the UK Parliament's approval.

In other words, the Supreme Court put an end to a long-playing story that has emerged (making GBP/USD traders nervous) and then disappeared into oblivion. Therefore, this court ruling is strategically important for the British currency. The pound got rid of a threat that had been hanging over it for several years, threatening to collapse. After all, if the Supreme Court verdict had been the opposite, next year the UK could have experienced events comparable to those of 2016, when the historic referendum on Brexit was held.

As mentioned, the so-called "Scottish issue" has been hyped from time to time in the global press, going beyond local discussions in the local media. The last time this topic was actively discussed was at the end of last year, when the problems associated with the Coronavirus receded into the background. Back in September 2021, Scottish Prime Minister Nicola Sturgeon confirmed at the Scottish National Party conference that she was planning to hold a second independence referendum before the end of 2023. She stressed that these plans, put on pause because of the pandemic, are "unchanged."

Recall that in the 2014 Scottish independence referendum, 45% of those who voted "for" and 55% voted "against." That is, the majority voted for union with Great Britain. This plebiscite was held two years before another - historic - referendum, where the majority of British residents (though by a slim margin) voted for secession from the European Union. The Scots, in turn, were unequivocal: nearly 70% of the region's population voted against Brexit. After that "separatist" sentiments intensified in the region. According to experts, Scotland is now essentially divided 50/50 on independence. But analysts don't rule out a possibility that many politically neutral residents of Scotland can mobilize if necessary and use the chance that fell out. After all, it would obviously present itself to them next time in several decades. That is why sociologists have repeatedly warned that at the "X hour", when hypothetical plans for a new referendum take shape, the scales will tip in favor of the region's independence.

But to the disappointment of supporters of Scottish independence, the Supreme Court did not allow the local authorities to organize a second vote without an approval from the British Parliament.

Downing Street has already rushed to say that the Cabinet will not allow another plebiscite. According to the government, this is a "once in a generation" event. It is obvious that the Conservatives, who control the House of Commons (and will control it at least until 2024) will not allow the Scottish nationalists to realize the idea of another referendum. Therefore, this issue can be considered closed: for the foreseeable future, all slogans and calls for Scottish independence will have no effect on the pair.

However, despite the importance and significance of the Supreme Court ruling, the pair's fate now depends on the dollar's behavior. The "Scottish issue" usually flares up brightly, but fades quickly. And it looks like this time it will fade today and for a long time. Next week traders of dollar pairs will focus on the Federal Reserve representatives' rhetoric. The market's tumultuous reaction to the minutes of the November FOMC meeting suggests that the dollar continues to "rule" the currency pairs of the major group. Traders in the second round played back the news that the U.S. central bank will slow down the pace of monetary policy tightening as early as December. But at the same time, the question of what level of the rate the central bank will stop at in the current cycle is still a matter of debate. And this discussion, the degree of "hawkishness" of which will be determined by members of the Fed, will allow GBP/USD traders to determine the vector of price movement.

In my opinion, the Fed's minutes will fade into the background at the beginning of next week (Fed representatives have already announced all the theses of this document). The focus will be on U.S. statistics (Nonfarm) and comments of the Fed members. If they reiterate that it is not the speed of rate hikes that matters but the end of the current cycle, then the dollar may come out on top again. The probability of this scenario is quite high, given the earlier statements of Fed Chairman Jerome Powell and many of his hawkish wing colleagues.

Bulls on GBP/USD, who are taking advantage of the moment (shortened trading session on Friday, low liquidity), may try to cross the resistance level of 1.2150 (the upper line of the Bollinger Bands on the D1 timeframe) again. However, taking into account the current fundamental background, it is better to wait for the upward momentum to end, and by next week, you should consider short positions with the first target being 1.1940 (the Tenkan-sen line on D1) and the main target at 1.1700 (the middle line of Bollinger Bands on the same timeframe).

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Trading Signal for GBP/USD on November 28-29, 2022: buy above 1.2025 (21 SMA - GAP)

Early in the European, session the British pound (GBP/USD) is trading around 1.2043. The currency pair is going through a slight technical bounce, having reached a low of around 1.2025.

According to the 4-hour chart, we can see that the British pound has formed a bearish GAP around 1.2089 which was Friday's close. If GBP/USD bounces above the 21 SMA located at 1.2020, it could cover the gap and could reach the top of the downtrend channel around 1.2096.

In case the British pound breaks above the downtrend channel formed on November 23 and settles above 1.2097, it will be a clear signal to resume buying and the price could reach +2/8 Murray located at 1.2207.

Conversely, if GBP/USD breaks below the psychological 1.20 level, it could fall rapidly towards 1.1962 (+1/8 Murray) and could even reach the area between the support of 8/8 Murray (1.1718) and 200 EMA (1.1649).

The eagle indicator is trading above a downtrend channel. A technical correction is expected in the next few hours and then the pair will resume its bullish cycle. Therefore, the British pound is expected to trade above the psychological 1.20 level, which will be a signal to continue buying.

The strength of the US dollar (USDX), observed in the last hours of trading on Friday, was boosted by risk aversion, causing a reversal in GBP/USD. The British pound is likely to make a strong technical correction in the coming days due to overbought levels on the daily chart.

According to the daily chart, we can see that the British pound has a 200 EMA located at 1.21. As long as GBP/USD trades below this level, any technical bounce will be seen as a clear signal to sell, with short-term targets around 1.1697.

Our trading plan in the next few hours is to buy the British pound above 1.2035, with targets at 1.2096 and 1.2207 (+2/8 Murray). On the other hand, if the pound falls below the psychological level of 1.20, it will be a signal to sell with targets at 1.1650.

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EUR/USD. The euro has two problems - Lagarde and China

Another attempt to attack the 4th figure ended in failure. On Monday, EUR/USD bulls hit a five-month price high at 1.0498. However, the pair did not stay at this level for long - the price fell during the US session and finished the trading day at 1.0340. If the impulsive growth was unreasonable and unusual (despite the news from China), then the downward momentum was provoked by quite a specific person - European Central Bank President Christine Lagarde.

Lagarde delivered her semi-annual report to members of the European Parliament Committee on Economic and Monetary Affairs. The theme of the report was directly related to monetary policy, so the speech triggered increased volatility in the pair. And it was not in favor of the euro. It's notable that Lagarde voiced quite contradictory rhetoric. There were different ways to evaluate her speech, both in its favor and against. In the end, traders chose the second option: as a result, the euro weakened not only against the greenback, but also in many cross-pairs.

So, on the one hand, Lagarde said that the ECB will continue to raise rates, despite the slowdown in business activity in the eurozone. She acknowledged that high levels of uncertainty, tighter financial conditions, and declining global demand are putting pressure on economic growth in the European Union. But the record growth of inflation in the eurozone, according to her, is forcing the ECB to move on. Lagarde expressed doubt that the consumer price index in the eurozone has reached its peak values. She noted that the cost of wholesale energy supplies continues to rise (which is the main driver of headline inflation), so a slowdown in CPI growth in November seems extremely unlikely.

Lagarde said that she "would be surprised" if inflation reached its peak in October.

Certainly, the talking points are hawkish. In other circumstances, EUR/USD bulls would have taken advantage of the situation and rushed upwards, building on their success (i.e. in our case they would have settled in the area of the 5th figure).

If it were not for one "but".

The fact is that Lagarde made it clear in the European Parliament that slowing down the pace of interest rate increases in December is still a matter of debate. In doing so she took a neutral position in the corresponding dispute of many ECB representatives. Mario Centeno, Philip Lane, Francois Villeroy de Galo and Klaas Knot, among others, spoke publicly in favor of a lower rate of monetary policy tightening. Whereas the hawkish wing of the central bank, such as Robert Holzmann, Isabelle Schnabel and Joachim Nagel, came out in favor of a 75-point rate hike in December. Lagarde stayed "above the fray." According to her, the central bank will make an appropriate decision based on many factors: "...it will be based on our updated outlook, the persistence of the shocks, the reaction of wages and inflation expectations, and on our assessment of the transmission of our policy stance". Based on a comprehensive analysis of these factors, the ECB will decide how far rates should be raised and how fast.

Such statements sobered up the EUR/USD bulls and then the price rolled back and headed to the daily lows, to the area of the third figure. Even in the first half of Monday, the ball was on the side of euro-dollar pair bulls, which took advantage of the weakening of the greenback and the strengthening of the hawkish mood regarding the ECB's further actions. But the diplomatic wording of Lagarde, which allows for various scenarios (both dovish and hawkish) did not allow the bulls to consolidate their success. The bears took the initiative and pulled the price back to its previous positions.

On top of that, in the afternoon, the market finally reacted to events in China, which unfolded too dynamically and unexpectedly.

First, the number of coronavirus cases in China is surging. Last Thursday, Beijing reported 31,000 new infections, noting that this was the strongest daily rate of increase in the history of the pandemic. But a little later, it turned out that PRC anti-records are updated almost daily. For example, the number of diseases has already exceeded the 40,000 mark on Monday. COVID outbreak in China is fraught with another wave of lockdowns. Strict quarantine has already been imposed in many cities across the country, with millions of people locked in their homes. Enterprises and firms have moved their employees to remote work schedules (where this is possible due to the nature of their work). China is known to have a "zero tolerance" policy for the Coronavirus, so it is not surprising that the authorities reacted to the situation with the utmost severity. And this circumstance gave rise to a second problem: Anti-Coronavirus protests broke out in China.

At the moment, it is difficult to talk about the prospects of the protest movement. In most cases, people are protesting against the "zero Covid" policy, which, in their opinion, does not bring results, but hits hard on the pocket. However, in some cases, demands for the resignation of Chinese leader Xi Jinping are also heard among the demonstrators. In any case, these protests are already considered the largest in China for the last 33 years, since the 1989 protests (the events on Tiananmen Square).

Judging by the dynamics of the dollar index, traders are wary of the unfolding events. The situation is, in a sense, a stalemate: on one side of the coin - possible turbulence in the markets due to the protests, on the other side of the coin - negative consequences from large-scale lockdowns in major cities of China.

Thus, the current fundamental background is clearly not favorable for the euro's upward movement (first of all, if we speak about a stable development, but not an impulsive breakthrough). Therefore, it is better to either take a wait-and-see position or consider short positions. The main bearish target is still at 1.0210 (the middle line of the indicator Bollinger Bands on the daily chart). Crossing this target will pave the way for the bears to reach the parity level.

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