This article was submitted by Michael Stark, market analyst at Exness.
The prevailing trends from last week have generally continued in the new week, with most cyclical instruments like shares and commodities moving down and the dollar continuing to gain. This preview of weekly data looks at GBPUSD and XAUUSD ahead of the critical release on Thursday, American annual inflation.
The main event in monetary policy last week was the Reserve Bank of Australia’s lower than expected hike to 2.6% as noted in last week’s preview. The Reserve Bank of New Zealand hiked its cash rate half a percent to 3.5% last Wednesday. European markets have generally been nervous about the Bank of England’s ongoing intervention in British bonds, while this week a triple hike by the Fed on 2 November is still priced in, but that might change around Thursday’s releases.
The most important event on the economic calendar this week is definitely American annual inflation, core and none-core, being released at 12:30 GMT on Thursday. Most markets will probably be quite volatile around then because that’s the last very major data to be considered by the Fed ahead of the meeting on 2 November.
Traders are also looking ahead to the FOMC’s latest minutes plus British GDP and balance of trade, all on Wednesday. Meanwhile the offshore yuan is likely to move on Friday in the early morning around Chinese inflation and balance of trade.
Cable, daily
The pound resumed its losses in the second half of last week amid a generally stronger dollar and nervousness around the Bank of England’s ongoing intervention in bond markets. The BoE has bought around £5 billion worth of bonds so far and seems to be having some effect in stabilising yields. Probably the main factor driving the dollar up in recent days though is last Friday’s stronger than expected NFP, with unemployment in particular in the USA unexpectedly declining last month.
TA would traditionally suggest an ongoing movement lower with there being no overbought signals from either the slow stochastic or Bollinger Bands and a fairly clear rejection around $1.15. The medium-term target might be 27 September’s closing low slightly above $1.07. However, the liveliness and duration of the dollar’s uptrend so far this year might drive profit-taking around Thursday’s key data, so trading the direction of the actual release instead of entering now (except to scalp) might make sense.
Gold’s losses intensified yesterday after last week’s positive job report from the USA and as the dollar and Treasury yields moved up. Recent comments by the Fed’s vice chair Lael Brainard were unremarkable as she stressed the importance of monitoring the effect of previous tightening and studying data. Meanwhile the likelihood of 4.5-4.75% by the end of the year has increased significantly since last week, now around 27%.
As for cable above the price is likely to continue lower based purely on TA with the recent bounce traditionally giving new sellers a good opportunity to join absent an oversold signal and after a failed test of the upper boundary of the channel. Conversely, the lower line of the channel around $1,580 seems to be much too aggressive a target unless Thursday’s data are genuinely surprising. On the contrary, the current movement lower seems to be mostly technical, so it might be possible to see a move back towards $1,700 in the runup to US CPI unless the Fed’s minutes seem particularly aggressive.
Key data this week
Bold indicates the most important releases for this symbol.
Wednesday 12 October
18:00 GMT: minutes of the Federal Open Market Committee
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
