Daily Market Updates
03 Nov 2022

 EUR/USD added to the weekly leg lower and breached below the 0.9900 mark with certain conviction on Wednesday, always in response to the sharp U-turn inthe dollar, which was particularly exacerbated following Powell’s press conference after the Federal Reserve raised the Fed Funds Target Range by 75 bps to 3.75%-4.00%.
 
From the Fed’s statement, the Committee said that ongoing interest rate hikes will be necessary to achieve a sufficiently restrictive policy stance aimed at bringing inflation down to the bank’s target. In addition, the future rate hikes will be determined by the cumulative tightening, policy lags and economic and financial developments. Furthermore, the decision on rates was unanimous, while members highlighted the readiness to change policy as needed.
 
The initial strong climb in the pair, however, was eventually trimmed as the dollar managed to recoup most of its daily losses in response to Powell’s presser. Indeed, the intense sell-off in the greenback sponsored an initial deep decline in the USD Index (DXY) further south of the 111.00 yardstick, although this acute drop was later faded pari passu with Chief Powell’s press conference, and especially after he poured cold water over expectations of a pause in the Fed’s normalization process by stating that it is ”very premature to be thinking about pausing”.
 
Still with Powell’s press conference, he reiterated the need for a longer restrictive policy stance, as inflation remains elevated and the labour market remains very tight, with a high wage growth. Powell also added that the economy has slowed significantly from last year. He reiterated that at some point it will be appropriate to slow the pace of the rate hikes (this could be debated in the next couple of meetings) and that decisions on rates will remain on a meeting-by-meeting basis, adding that the ultimate level of rates will be higher than previously estimated.
 
In the wake of the FOMC event, US yields advanced moderately and extended the so far weekly recovery helped by the hawkish tilt at Powell’s presser.
 
Other than the FOMC gathering, the US docket showed MBA Mortgage Applications contracted 0.5% in the week to October 28 and the ADP Employment Change rose by 239K in October (from 192K revised).
 
Data wise in Germany, the trade surplus rose to €3.7B in September, the final S&P Global Manufacturing PMI deflated to 45.1 in October and the labour market report saw the Unemployment Change rise by 8K people and the Unemployment Rate hold steady at 5.5%. In the broader Euroland, final figures showed the S&P Global Manufacturing PMI retreated to 46.4 during last month.
 
Extra gains in EUR/USD are now expected to challenge the 100-day SMA at 1.0064 prior to the October peak at 1.0093 (October 27). North from here aligns the September high at 1.0197 (September 12) ahead of the August top at 1.0368 (August 10) and the critical 200-day SMA, today at 1.0481. On the flip side, immediate contention emerges at the weekly low at 0.9852 (November 1) before another weekly low at 0.9704 (October 21) and the October low at 0.9631 (October 13). The loss of the latter should put a potential drop to the 2022 low at 0.9535 (September 28) back on the investors’ radar. The daily RSI ticked a tad higher to the vicinity of 51.
 
Resistance levels: 0.9975 0.9998 1.0093 (4H chart)
 
Support levels: 0.9826 0.9806 0.9704 (4H chart)

The Fed-induced gains in the dollar and higher US yields across the curve were not enough to curb the negative session in USD/JPY on Wednesday, which regained the area beyond 147.00 the figure soon after bottoming out near 145.60.
 
In fact, the dollar accelerated its recovery after Fed’s Powell suggested that the ultimate level of rates will be higher than initially envisaged and that it is premature to think about pausing the hiking cycle.
 
Earlier in the session, the publication of the BoJ Minutes was the sole release in the Japanese calendar and saw some members concerned about the impact of monetary tightening on the global markets. In addition, members agreed that the domestic economy is improving while some participants noted the negative effects of a weak yen on households, small businesses and non-manufacturers.
 
In case bulls regain the upper hand, USD/JPY should meet the initial barrier at the weekly peak at 148.84 (October 31). Above this area, there are no resistance levels of note until the 2022 high at 151.94 (October 21) prior to the June 1990 peak at 155.80 (June 25). On the other hand, initial contention aligns at the weekly low at 145.10 (October 27) before the October low at 143.52 (October 5) and another weekly low at 140.34 (September 22). The proximity of the 100-day SMA (140.05) also underpins the latter ahead of the weekly low at 135.80 (August 23) and another weekly low at 131.73 (August 11). The daily RSI lost ground and breached 56.
 
Resistance levels: 148.38 148.84 149.45 (4H chart)
 
Support levels: 145.66 145.10 144.63 (4H chart)

GBP/USD tumbled to multi-session lows and challenged the 1.1400 neighbourhood on Wednesday, always in response to the acute bounce in the greenback in the wake of the FOMC event.
 
Indeed, the dollar kept the bid bias unchanged following the FOMC gathering and helped by the firm tone from Chief Powell at his press conference, where he reinforced the case for the continuation of the current tight stance.
 
The UK docket was empty on Thursday, leaving all the attention to the BoE MPC meeting on Thursday, where consensus expects the “Old Lady” to hike the key policy rate by 75 bps.
 
Next on the upside for GBP/USD remains the October high at 1.1645 (October 27) prior to the 100-day SMA at 1.1712, which is closely followed by the September top at 1.1738 (September 13). Beyond the latter, cable could revisit the weekly peak at 1.1900 (August 26) before the psychological 1.2000 mark and the August high at 1.2293 (August 1). By contrast, there is an interim support at the 55-day SMA at 1.1401 prior to the weekly low at 1.1059 (October 21) and seconded by the October low at 1.0923 (October 12). The daily RSI remained weak and broke below 52.
 
Resistance levels: 1.1566 1.1623 1.1645 (4H chart)
                                            
Support levels: 1.1399 1.1257 1.1240 (4H chart)

The abrupt change of direction in the greenback forced AUD/USD to give away initial gains to the vicinity of 0.6500 the figure and quickly return to the negative territory on Wednesday.
 
Indeed, the dollar reversed the initial strong pullback and motivated the USD Index (DXY) to regain the 111.00 mark and beyond following the FOMC event and hawkish remarks from Chair Powell at his press conference.
 
Furthermore, the generalized bullish mood in the commodity complex failed to support the initial upside in the pair.
 
In the Australian data space, flash figures saw Building Permits contract 5.8% MoM in September, while Home Loans dropped 9.3% MoM and Investment Lending for Homes contracted 6.0% all during the same month.
 
AUD/USD appears to have moved into a consolidative phase so far this week. Against that, the breakout of the range bound theme faces the immediate hurdle at the weekly top at 0.6522 (October 27) just before the October peak at 0.6547 (October 3). North from here emerge the 55- and 100-day SMAs at 0.6584 and 0.6734, respectively, ahead of the September high at 0.6916 (September 13) and the psychological 0.7000 mark. On the downside, the next support of note should turn up not before the 2022 low at 0.6169 (October 13) ahead of the psychological 0.6000 mark and prior to the April 2020 low at 0.5980 (April 3). The daily RSI grinded lower and approached the 45 zone.
 
Resistance levels: 0.6492 0.6522 0.6547 (4H chart)
 
Support levels: 0.6348 0.6303 0.6272 (4H chart)

Gold prices rose to the $1,670 region, or weekly peaks, before coming under pressure and giving away that earlier advance amidst the dollar rebound and the march higher in US yields across the curve.
 
Indeed, the resumption of the uptrend in the dollar and yields motivated the yellow metal to set aside the previous daily advance, all after the Fed delivered the widely anticipated 75 bps rate hike and Chief Powell’s message falling on the hawkish side.
 
The weekly top at $1,675 (October 26) remains the next hurdle of significance for gold ahead of the minor level at $1,682 (October 13), which at the same time appears bolstered by the temporary 55-day SMA at $1,685. The surpass of this level could prompt the September peak at $1,735 (September 12) to re-emerge on the horizon ahead of the $1,765 level (August 25) and the critical $1,800 yardstick. On the contrary, the 2022 low at $1,614 (September 28) offers decent contention before the round level at $1,600 and the April 2020 low at $1,572 (April 1).
 
Resistance levels: $1,669 $1,675 $1,714 (4H chart)
                                                              
Support levels: $1,636 $1,630 $1,617 (4H chart)

WTI prices added to the weekly recovery and briefly surpassed the key barrier at the $90.00 mark per barrel on Wednesday.
 
The second daily advance in the commodity was underpinned by another weekly draw in US crude oil supplies – as reported by the EIA – as well as fresh geopolitical concerns stemming from a new bout of effervescence between Saudi Arabia and Iran.
 
Back to the EIA, US crude oil inventories shrank 3.115M barrels in the week to October 28, while supplies at Cushing increased by 1.267M barrels, gasoline stockpiles dropped 1.257M barrels and distillate stocks went up 0.427M barrels.
 
Another uptick in prices of the WTI now leaves the door open to a probable test of the October top at $93.62 (October 10) ahead of the weekly peak at $97.65 (August 30) and prior to the key 200-day SMA at $98.37. The latter is deemed as the last defense before an assault of the psychological $100.00 mark per barrel. Inversely, the weekly low at $82.10 (October 18) emerges as the immediate support in case sellers regain control of the market ahead of the key $80.00 mark and the minor support at $79.16 (September 30). South from here turns up the September low at $76.28 (September 26) prior to the 2022 low at $74.30 (January 3).
 
Resistance levels: $90.34 $93.62 $97.65 (4H chart)
                                                                                                                              
Support levels: $85.29 $82.62 $82.06 (4H chart)

US equities traded on the defensive on Wednesday, with the Dow Jones deflating 1.06% to 32,303, the S&P500 losing 2.03% to 3,777 and the tech-heavy Nasdaq Composite retreating 2.40% to 10,628
 
Indeed, US stocks added to the weekly pullback following another 75 bps rate hike by the Federal Reserve at its monthly meeting, while Chief Powell’s message at his press conference sounded pretty balanced and failed to unveil any clues regarding a potential pivot in the monetary policy. Powell, however, deemed as premature any attempt of pausing the current tightening cycle, at a time when acknowledged that the ultimate level of rates will be higher than previously expected.
 
Dow Jones is expected to meet the next important hurdle and challenge the weekly high at 32,975 (November 1) seconded by the minor barrier at the 33,364 level (August 26) and the August top at 34,281 (August 16). The breakout of this level should put the April peak at 35,492 back on the investors’ radar. Next on the downside, in the meantime, temporary levels appear at the 100- and 55-day SMAs at 31,396 and 31,137, respectively, ahead of the 30,206 level (October 21). Further down comes the 2022 low at 28,660 (October 13) ahead of the October 2020 low at 26,143 (October 30). The daily RSI hovered eased further and breached the 65 level.
 
Top Performers: Boeing, Dow, Goldman Sachs
 
Worst Performers: Salesforce Inc, Walt Disney, Apple
                        
Resistance levels: 32,975 33,364 34,281 (4H chart)                   
                                                                                                                                                       
Support levels: 31,397 30,206 29,614 (4H chart)