Today market outlook

[Zeologic]

USDCAD hovers ahead of BOC interest rates

USDCAD price hovers near 1.38500 resistance ahead of today's BOC interest rate announcement. Yesterday the price drew a small body bearish candlestick with a high of 1.38370 and a low of 1.38129 indicating a low volatility market. The bullish sentiment seems to be fading somewhat ahead of the BOC rate call.

The BOC is predicted to cut interest rates by 50 bp from the previous 4.25% to 3.75%. Looking at Canadian inflation data in 2024 from the declining first and second quarters gives hope that the expected 50 bp rate cut may become actual. CPI inflation in the first quarter showed 2.8 and fell in the second quarter by 2.7. Meanwhile, the Chain price index for GDP data rose from 3.5 in the first quarter to 3.9 in the second quarter.

On the other hand, the uncertainty of the US election still raises questions about who will be the winner. Although Trump may emerge as the winner, market sentiment is still nervous.

Today investors will focus more on the BOC's monetary and interest rate reports which can have a direct impact if the actual data differs greatly from expectations.

[Zeologic]

EURGBP rises ahead of PMI data release

Yesterday's EURGBP price rose drawing a long body bullish candlestick and there was a shadow at the bottom of the candle. The price formed a low of 0.83028 and a high of 0.83441 and moved up near the middle band line.

The pair faces challenges due to market rumors that the ECB will cut interest rates again in December. The rumors emerged after Reuters reported on Wednesday that European Central Bank (ECB) policymakers had begun debating whether interest rates would need to fall below neutral levels during the current easing cycle. Currently, the ECB interest rate is 3.40%, which has decreased from the previous 3.65%.

Sterling also faces headwinds following falling consumer and producer inflation rates, along with weak labor market data in the UK, which boosted hopes of the Bank of England cutting interest rates by 25 bp in November. The BoE interest rate is currently still at 5.00%.

Investors today will focus on several important news events from BOE Governor Andrew Bailey's speech which could provide clues to a hawkish or dovish statement. Apart from that, investors will also focus on PMI data from several European countries, the US and the UK.

[Zeologic]

USDJPY declines when DXY falls

Yesterday's upward trend in USDJPY paused and the price drop drew a bearish candlestick with a high of 152,822 and a low of 151,809. Even though it dropped, it still formed a lower high. The decline in USDJPY prices is in line with the decline in the dollar index (DXY ) from 104,455 to 104,012.

Bullish sentiment for the USDJPY pair has started since mid-September 2024 after the price touched a low of 139,572, gradually the price tends to rise with higher highs and lower highs. The rising trend in the Japanese Yen exchange rate has given rise to speculation about the possibility of the central bank carrying out currency intervention. This is implied by comments from Finance Minister Kato who stated, that we are seeing rapid and unilateral movements in the forex market and will monitor it with a strong sense of urgency including keeping an eye on speculative trading.

On the other hand, the BOJ may not raise interest rates after slightly dovish guidance from Governor Kazuo Ueda who stated that when there is great uncertainty, you usually want to proceed cautiously and gradually. The statement implies that BoJ needs more time to gain confidence that inflation can sustainably reach its 2% target.

Meanwhile, the Fed is predicted to continue the path of reducing interest rates at a moderate pace. According to the CME group's FedWatch tool, the probability of a 50 bp cut is up 95.5%, while the probability of interest rates remaining unchanged is only 4.5%.

Today there is no high-impact news related to the USDJPY pair, but Friday's market may experience a little turmoil before market closing.

[Zeologic]

There was a gap in USDJPY at market opening, the Japanese election was the reason

USDJPY price at market opening opened much higher than last week's close with one candlestick jumping with a gap above the previous candlestick. Even the USDJPY gap appears on the daily timeframe.

Last week's closing price was USDJPY at 152.291, while Monday's opening price was at 153.166 on the FXOpen platform. One of the reasons for the weakening of the Japanese Yen against the US Dollar was the Japanese election on October 27 last Sunday. Preliminary results show that the Liberal Democratic Party (LDP) failed to obtain a majority of votes. If the vote results do not change, this would be the LPD's first defeat in 15 years and a blow for Prime Minister Shigeru Ishiba who has only been in office for one month.

On the other hand, the data report released Thursday showed a contraction in business activity as gross as manufacturing, and also a decline in the core inflation rate below the BoJ's target of 2% has dampened expectations of further interest rate increases in 2024, also putting pressure on the JPY. Tokyo's headline Consumer Price Index (CPI) rose 1.8% YoY in October compared with 2.2% in the previous month. Meanwhile, Core CPI, which excludes fresh food prices, grew 1.8% in October, down from 2% in the previous month but slightly above market expectations of 1.7%.

Meanwhile, speculation of less aggressive Fed easing supports USD buyers and pressures JPY. The Fed is expected to lower interest rates at its November meeting. According to the CME group's Fedwatch tool today, the probability of the Fed cutting interest rates by 25-50 bp is 97.7% and a decrease of 0-25 bp is only 2.3%. This forecast allows the Fed to cut interest rates by 50 basis points at its next meeting.

[Zeologic]

Gold's price steady still moving within the previous range

Gold prices on Monday drew a small bullish candle after a bearish gap occurred on Monday morning at market opening. The gap is faintly visible on the daily timeframe, but clear on the hourly timeframe. The gap occurs because the open price at $2735 is lower than the closing price of the previous candle at $2746. Gold has now formed a low of $2724 and a high of $2745.

Gold's bullish trend on Monday weakened amid reports of weak Chinese demand. data released by the China Gold Association (CGA) shows a decline in demand from the world's largest consumer of Gold in the first three quarters of 2024, compared with the same period last year. Total consumption was 742 tonnes between January and September, which was 11.18% lower than the same period last year. Gold jewelry consumption in China fell 27.53%, to 400 tonnes when compared with the same period in 2023. Gold used in industrial processes reached 59 tonnes, down 2.78%.

On the other hand, precious metals are still supported by safe-haven flows amidst the Middle East conflict which is still ongoing with uncertainty as to when it will end. After Israel launched a retaliatory attack on Iran, Iran's leaders responded by retaliating against the attack, allowing the conflict to continue.

Furthermore, uncertainty over the outcome of the US Election and expectations of the Fed cutting interest rates in November also support the attractiveness of gold as an asset that does not give yields.

In general, gold is negatively correlated with USD, today investors are focusing on several high-impact news, CB consumer confidence, and JOLTS Job Openings.

[Zeologic]

AUUSD extends losses ahead of Australian inflation data

AUDUSD price yesterday drew a bearish candlestick extending the bearish sentiment of the previous day. Price drew a bearish candle with a slight shadow at the bottom of the candle with a low of 0.65445 and a high of 0.65850 closing at 0.65597.

The reason behind the decline in AUDUSD prices is the strengthening of the USD which puts more pressure on risk assets, including the AUD. Apart from that, uncertainty about the effectiveness of China's stimulus continues to contribute to the Australian Dollar.

The RBA interest rate is now at 4.35%, Governor Michele Bullock's dovish statement may leave interest rates unchanged in the near term. Current market sentiment reflects a 50% probability of a 25 basis point rate cut by the end of the year.

On the other hand, expectations of the Fed's interest rate cut may provide support to the AUDUSD pair.

Today investors will focus on Australian CPI data which may have a short-term influence. CPI in this quarter is expected to fall 0.3% from the previous 1.0%. Meanwhile, year-on-year CPI is expected to fall 2.3% from the previous 2.7%.

[Zeologic]

Silver prices fall when gold rises

In Wednesday's trading, Silver drew a bearish candlestick with a shadow at the bottom of the candle. The price formed a low of 33,404, a high of 34,517, the price closed at 33,749. Wednesday's low was lower than Tuesday's low despite afterward buyer pressure.

On the other hand, the Gold price continued its rise and drew a bullish candlestick with a small body, forming a low of $2770 and a high of $2789. Gold and Silver tend to have a positive correlation, but there seems to be a demand anomaly between the two at the moment, even though in the long term, they still tend to be in the same direction.

The anomaly in Gold and Silver prices may be due to consolidation in China's solar industry and slower growth, which will hamper Silver in the short term.

Meanwhile, investors will wait for the Fed's policy which is predicted to cut interest rates in November. According to the Fedwatch tool, the possibility of the Fed cutting interest rates by 25-50 bp is 95.6%, and the forecast for unchanged interest rates is only 4.4%.

Today investors are also waiting for China's economic data, Manufacturing PMI is forecast at 49.8, the same as the previous revision. And US economic data, the Employment Cost Index, is predicted at 0.9%, the same as the previous revision.

[Zeologic]

CHF strengthened when USD depreciated ahead of NFP data

USDCHF drew a bearish candle on Thursday with a low of 0.86323 dropping from a high of 0.86659. Even though USDCHF fell, overall it was still within the price range of the previous week. The CHF currency is considered a safe-haven currency because of Switzerland's status as a country with a strong and stable economy and also its neutral political stance in global conflicts so investors tend to buy the CHF currency to hedge.

Yesterday's US PCE data showed a value of 0.3%, the same as expected, 0.3% higher than the previous revision of 0.2%. Meanwhile, the US Employment Cost Index data was 0.8% lower than expected, 0.9% from the previous revision of also 0.9%. Unemployment Claims data showed 216k smaller than the expected 229k from the previous revision of 228k.

According to the CME group's Fedwatch tool, the Fed's target rate possibilities at the next November 7 meeting, the Fed a cut of 25-50 bp is 94.2%, while the possibility of interest rates remaining unchanged is only 5.8%.

Today investors will focus on NFP data which is expected to fall by 106k from the previous data revision of 254k. Large differences in actual data and forecasts may cause volatility in the short term.