Market Analysis

EURUSD

Prediction: Decline

Fundamental Analysis:

The EUR/USD pair is experiencing downward pressure around 1.1035 during early trading on Friday in Asia, driven by a stronger U.S. dollar. Market sentiment remains cautious ahead of key U.S. economic data, especially employment figures, which are overshadowing the optimism surrounding China’s recent stimulus efforts to boost its post-pandemic economy.

While expectations for additional Federal Reserve easing in November and December are intact, substantial rate cuts appear less likely. Fed Chair Jerome Powell has expressed a preference for a modest 25-basis-point reduction, and Richmond Fed President Thomas Barkin emphasized that it may take longer than anticipated to bring inflation back to the 2% target.

On the European side, the European Central Bank (ECB) has taken a more dovish stance as inflationary pressures continue to influence its policy direction. Eurozone inflation saw a 1.8% rise in September, signaling potential rate cuts in the near future. Looking ahead, if the Federal Reserve continues its easing cycle, it could narrow the policy gap with the ECB, potentially lending support to the EUR/USD pair.

Speculative sentiment shows non-commercial traders increasing Euro long positions to a two-week high, with EUR/USD maintaining an upward trend, trading close to the upper levels of the 1.1100 range.

Technical Analysis:

Further declines in EUR/USD could result in a test of the 1.1000 support level. A break below this could open the door to the weekly lows of 1.0949 and 1.0881. On the upside, resistance begins at the 2024 high of 1.1214, followed by the 2023 peak of 1.1275 and the psychological level at 1.1300.

The pair's upward trend is expected to hold as long as it remains above the key 200-day simple moving average (SMA) at 1.0874. However, the four-hour chart reveals a strengthening bearish trend, with initial resistance seen at the 200-SMA around 1.1106, followed by 1.1143 and 1.1214. Key support levels are located at 1.1007, 1.1001, and 1.0949, while the relative strength index (RSI) has slipped to approximately 34, signaling growing bearish momentum.

XAUUSD

Prediction: Uptrend Expected

Fundamental Analysis:

Gold prices are currently consolidating as traders await the upcoming U.S. Nonfarm Payroll (NFP) report, which could determine the next significant move for the metal. Ongoing geopolitical tensions in the Middle East continue to bolster safe-haven demand, providing support for gold prices.

Recently, gold dipped into the $2,640 range per troy ounce, staying below the previous week's record high of $2,685. Sellers currently hold the advantage as expectations for aggressive Federal Reserve rate cuts have diminished, reducing the appeal of gold, a non-interest-bearing asset.

Despite this, downside risk remains limited. Concerns over Middle East instability and a broader decline in global interest rates support safe-haven inflows, maintaining gold's attractiveness.

Shifting expectations regarding U.S. interest rates are capping gold’s upward movement. The probability of a 50-basis-point rate cut by the Fed in November has dropped significantly—from over 60% to around 30%—due to stronger-than-expected U.S. jobs data, suggesting a resilient economy. As a result, the U.S. dollar has regained strength, putting additional pressure on gold, which is priced in USD. The upcoming NFP report will be critical in gauging the labor market and potentially influencing gold’s direction.

Technical Analysis:

Gold is currently trading sideways on the 4-hour chart, fluctuating between last week’s all-time high of $2,685 and a recent low of approximately $2,625. The short-term trend remains unclear, and the price is likely to stay range-bound until a breakout occurs beyond these levels.

A break above Tuesday’s high of $2,673 could signal a continuation of the previous upward trend, with prices potentially targeting $2,700. However, gold is currently testing the red 50-period Simple Moving Average (SMA), which could indicate increased downside pressure. If prices break below the SMA, they could fall toward trendline support at $2,630. A further decline below $2,625 may lead to support around $2,600.

Overall, gold remains in an uptrend, and once this consolidation phase ends, technical indicators suggest upward movement is likely to resume.

GBPUSD

Prediction: Decrease

Fundamental Analysis:

The GBP/USD pair has shown slight gains, reaching approximately 1.3125 and breaking a three-day losing streak during the early Asian session on Friday. However, potential upside movement may be constrained as traders await the crucial U.S. Nonfarm Payrolls data to be released later today.

On Thursday, the GBP/USD faced significant bearish pressure, dropping toward 1.3100 and marking its lowest level in three weeks. Although the near-term technical indicators suggest oversold conditions, a substantial recovery may prove challenging.

The U.S. Dollar continues to hold its strength following the Automatic Data Processing report, which indicated a private sector job increase of 143,000—well above the expected 120,000.

Comments from Bank of England Governor Andrew Bailey suggested that more aggressive rate cuts could be on the table if inflation shows improvement, which has contributed to a selloff of the Pound Sterling. Additionally, the U.S. is set to release Initial Jobless Claims and September ISM Services PMI data later today, with forecasts predicting an increase in jobless claims to 220,000. A figure at or below 200,000 could further bolster the USD, while a decline below 50 in the ISM Services PMI might raise concerns regarding a potential economic slowdown.

Technical Analysis:

The Relative Strength Index (RSI) on the 4-hour chart fell below 20 early Thursday, indicating that GBP/USD is in oversold territory. Should the pair experience a technical correction, the initial resistance level to monitor is 1.3175, followed by 1.3200, which aligns with the 200-period Simple Moving Average.

On the downside, the next support level stands at 1.3100, followed by static levels at 1.3050 and 1.3000.

USDJPY

Prediction: Bullish Trend Expected

Fundamental Analysis:

During the Asian session on Friday, USD/JPY is experiencing downward pressure, trading around 146.50. Traders appear reluctant to initiate new positions ahead of the U.S. Nonfarm Payroll report, while remarks from Japanese officials are providing support for the Yen amidst a cautious market environment. On Thursday, the Japanese Yen weakened further following comments from new Prime Minister Shigeru Ishiba, who met with Bank of Japan Governor Kazuo Ueda. Ishiba expressed that he does not see the necessity for further interest rate hikes. Additionally, Japan's Chief Cabinet Secretary Yoshimasa Hayashi clarified that Ishiba did not request any specific details about monetary policy during their discussions. Futures markets indicate a less than 50% likelihood of a 10-basis-point rate increase by December, with projections suggesting rates will only rise to 0.5% by the end of next year, up from the current 0.25%.

Technical Analysis:

Currently, USD/JPY is trading around 146.80. Analysis of the daily chart indicates that the pair is testing a breakout above an ascending channel pattern, signaling a potential strengthening of the bullish trend. The 14-day Relative Strength Index is above 50, further confirming this positive momentum.

Resistance levels are found near the upper boundary of the channel and the five-week high of 147.21, reached on September 3. A breakout above this level could pave the way for a test of the seven-week high at 149.40. Conversely, on the downside, support may be located at the nine-day Exponential Moving Average around 144.60 and the lower boundary of the channel at 143.20. A decline below this support could push USD/JPY down to 139.58, marking its lowest point since June 2023.

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