Forex News

• AUD/USD continues its struggle to make it through the critical 100-day SMA pivotal resistance.
• Geopolitical risks and hawkish Fed expectations lend support to the USD, capping spot prices.
• RBA rate hike bets act as a tailwind for the Aussie as the focus remains on the FOMC meeting.

The AUD/USD pair pulls back slightly from a fresh one-month high touched earlier this Monday, failing to decisively break out through the 100-day Simple Moving Average (SMA) pivotal resistance. Spot prices, however, hold above the 0.7000 psychological mark through the first half of the European session as traders seem hesitant to place aggressive directional bets ahead of this week's key central bank event and data risks.

The Australian consumer inflation figures are due for release on Wednesday, which will be followed by the outcome of a two-day FOMC meeting. Apart from this, the Advance US Q3 GDP report and the US Personal Consumption Expenditures (PCE) Price Index on Thursday will be scrutinized for cues about the Federal Reserve's (Fed) policy path. The outlook, in turn, will drive the US Dollar (USD) and provide some meaningful impetus to the AUD/USD pair.

In the meantime, bets that the US central bank will raise borrowing costs again by the year-end amid inflation risks stemming from volatile oil prices, along with persistent geopolitical uncertainties, might continue to act as a tailwind for the safe-haven Greenback. The downside for the AUD/USD pair, however, remains cushioned amid hawkish Reserve Bank of Australia (RBA) expectations, warranting some caution before confirming that spot prices have topped out.

From a technical perspective, the AUD/USD pair keeps a capped tone under the 100-day SMA at 0.7033, though it manages to hold above the 38.2% Fibonacci retracement of the latest downswing. Furthermore, the Moving Average Convergence Divergence (MACD) has turned mildly positive, and the Relative Strength Index (RSI) at 52.9 has edged into the upper half of its range. Momentum indicators, in turn, hint at a tentative recovery that remains constrained by the overhead resistance.

Meanwhile, a break above the 100-day SMA at 0.7033 would expose the 50.0% retracement at 0.7064, with further resistance seen at the 61.8% level at 0.7105 and the 78.6% retracement at 0.7162, before the full recovery barrier at 0.7236 comes into view. On the downside, immediate support aligns with the 38.2% retracement at 0.7024, ahead of the 23.6% level at 0.6974 and the recent cycle floor near 0.6893.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

AUD/USD daily chart

MUFG’s Derek Halpenny and Lee Hardman note the Euro has only modestly recovered after recent losses versus Pound and Japanese Yen, remaining the worst-performing G10 currency in October. Rising European natural gas prices, weaker French PMI data, and ongoing fiscal and political risks weigh on sentiment. Moody’s decision to keep France at Aa3 on negative watch offers limited support ahead of the ECB meeting.

Euro pressured by French risks

"The euro has gained modestly at the start of the new week after falling to fresh year-to-date lows against the pound and yen. It is currently the worst performing G10 currency this month undermined both rising energy prices and heightened investor concerns over fiscal and political risks in France."

"The price of natural gas in Europe has risen sharply this month by more than a third lifting it above EUR 90/MWh heading into the winter reinforcing stagflation risks for the euro area economy. So far this year the euro area economy has proven more resilient than expected to the energy price shock but the release of the euro area PMI survey at the end of last week signalled that growth momentum may be about to soften."

"We don’t expect Moody’s decision to leave their rating on hold to bring much relief for French bonds or the euro, although it may prevent further selling at the start of this week ahead of the ECB’s upcoming policy meeting."

"The ECB’s upcoming policy meeting has more potential to be a bigger market mover, although we believe it is too soon to expect the ECB to announce policy measures to support government bond markets."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

The German IFO Institute Business Climate Index improves to 90.2 in October. The sentiment data was expected to come in lower at 89.8 from 89.9 in September.

However, the IFO Current Assessment Index drops to 88.8 from the previous reading of 89.5.

Expectations Index, an early indicator of current conditions and business expectations for the next six months, accelerates to 91.6 the prior release of 90.4.

Market reaction

Some buying interest is seen in the Euro (EUR) against the US Dollar (USD) after the release of the German IFO data. As of writing, EUR/USD trades 0.1% higher to near 1.1212.

• Gold gains some positive traction, snapping a two-day losing streak to a three-month low.
• Declining US bond yields cap the attempted USD recovery and lend support to the bullion.
• XAU/USD bulls seem cautious ahead of this week’s central bank events and the key US data.

Gold (XAU/USD) stages a modest bounce from a three-month low and clings to intraday gains above the $4,000 psychological mark through the first half of Monday’s European session. The precious metal now seems to have snapped a two-day losing streak, though it lacks follow-through buying amid a bearish fundamental backdrop. Despite Federal Reserve (Fed) officials recently signaling no urgency to raise borrowing costs, traders are pricing in an 80% chance of a rate hike by year-end. Furthermore, geopolitical uncertainties underpin demand for the safe-haven US Dollar (USD), which, in turn, is seen as acting as a headwind for the commodity.

S&P Global's flash US Manufacturing Purchasing Managers' Index (PMI) rose to 56 in October, hitting a 53-month high and beating estimates for a reading of 55.6. Meanwhile, the Services PMI matched forecasts and stood at 57.9, compared to 58.8 in September, while the Composite Output Index slipped to 57.6 from a five-year high of 58.4 in the previous month. Additional details revealed that the output price index moved up to 59.8, its highest reading since August 2022, suggesting that inflation could increase further and remain persistently high in the coming months. This comes on top of inflationary concerns stemming from elevated energy prices and underpins prospects for additional Fed tightening, keeping a lid on any meaningful upside for the non-yielding Gold. .

In fact, crude oil prices jumped to the highest level since September 16 amid supply concerns driven by attacks in Saudi Arabia and tensions involving Iran. In the latest developments, the Iran-backed Houthis in Yemen vowed on Sunday that they will keep attacking Saudi Arabia's King Khalid Airport in Riyadh. Moreover, the stalled US-Iran talks keep the geopolitical risk premium firmly in play and help limit deeper losses for the safe-haven Greenback, warranting some caution before placing aggressive bullish bets on gold. Traders might also opt to move to the sidelines ahead of this week's key central bank events and important US macro releases – the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index on Thursday.

The focus, however, will be on the outcome of the two-day FOMC policy meeting on Wednesday. In the absence of updated economic projections, traders will closely scrutinize the accompanying rate statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference for more cues on the future policy path, which will influence the near-term USD price dynamics. Meanwhile, the Reserve Bank of New Zealand (RBNZ), the European Central Bank (ECB) and the Bank of Japan (BoJ) are also scheduled to announce their rate decisions this week. This might further infuse volatility around the Gold price. Nevertheless, the aforementioned fundamental backdrop warrants some caution before confirming that the XAU/USD pair has bottomed out.

XAU/USD 4-hour chart

Technical Analysis

The precious metal maintains a bearish near-term tone following last week's breakdown through a short-term trading range support near the $4,100 mark. Moreover, the recent repeated failures to conquer the 100-period Exponential Moving Average (EMA) validate the negative outlook, suggesting that the attempted recovery remains corrective within a broader downside bias.

Hence, any subsequent move up is more likely to be sold into and remain capped near the $4,100 support-turned-resistance. The next hurdle is clustered around the 100-period EMA at $4,135.95. The XAU/USD pair would need a sustained move above the said barrier for any shift to a more constructive outlook and additional gains toward reclaiming the $4,200 mark.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• USD/CHF holds Friday's gains on Monday and consolidates around 0.8250.
• Markets are on a wait-and-see stance ahead of monetary policy decisions by the Fed and other major central banks.
• The impulsive rebound from 0.8190 has eased the previous bearish pressure

The US Dollar (USD) holds Friday’s gains against the Swiss Franc (CHF) on Monday, with the USD/CHF pair standing comfortably at the 0.7250 area, and the two-week high at 0.7270 at a short distance. Markets, however, are lacking a clear bias on Monday, with investors reluctant to place large USD bets ahead of the Federal Reserve’s monetary policy decision, due later in the week.

ING analyst Christ Turner argues that “interest rate spreads have moved a little against the Dollar as the recent US tech wobble has pared back Federal Reserve tightening expectations.” However, he also observes thst “energy prices remain at their highs,” while “the arrival of a third US aircraft carrier group in the Gulf makes further escalation in the Middle East more likely than not,” a combination that, in ING's view, should help keep the Dollar underpinned despite the shift in rate market pricing.

Technical Analysis: The rebound from 0.8190 lows has eased bearish pressure

USD/CHF trades at 0.8250, retaining a mildly bullish bias after an impulsive rebound from the 0.8190 area on Friday. Momentum is constructive, with the Relative Strength Index (14) hovering just above the midline and the Moving Average Convergence Divergence (MACD) printing a modest positive reading.

Bulls, however, are likely to be tested at the October 19 and 20 high in the 0.8270 area, ahead of the October 13 and 14 lows, around 0.8315, and the year-to-date high, near 0.8400, hit in mid-October.

On the downside, the 0.8230 area has held downside attempts during Monday's Asian session, closing the path towards the mentioned 0.8191 low on Friday. A bearish reaction below here brings the September 1 peak, at 0.8156, into focus.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

ING strategist Frantisek Taborsky remains bearish on Central and Eastern European currencies after last week’s risk-off move. He flags EUR/PLN’s break above 4.400 and sees further upside as the Zloty stays the region’s weak link. A hawkish Czech National Bank should pull EUR/CZK back toward 24.250–24.300, while EUR/HUF is nearing 368 where new sellers are expected.

Zloty vulnerability and CNB support

"The significant deterioration in global sentiment last week has only intensified existing pressure on emerging market currencies, and we remain bearish on the CEE region. The calendar is light this week, with attention focused on the upcoming Fed and European Central Bank meetings."

"On Friday, EUR/PLN tested new highs since 2023 and broke through the key 4.400 level. We have long identified the zloty as the most vulnerable currency in the region, and given its rate outperformance relative to CEE peers, there is likely further upside for EUR/PLN."

"The first notable data releases will arrive on Friday, featuring October inflation figures for Poland as well as 3Q GDP data for the Czech Republic and Hungary."

"Inflation in Poland is expected to fall from 4.1% to 3.7% year-on-year, largely due to the introduction of a government price cap on fuel. GDP figures should confirm a slowdown in the Czech Republic to just under 2.0%, while showing a continued recovery in Hungary to similar levels."

"In the Czech Republic, a blackout period begins on Thursday ahead of the Czech National Bank's November meeting. We saw some initial statements last week and expect more in the coming days. We anticipate a rate hike at the November meeting, with the CNB currently preparing the market for such a move."

"Friday’s inflation data from Poland could help stabilise the market. EUR/CZK also decoupled from the interest rate differential; a hawkish CNB should help the pair return to the 24.250–24.300 range. EUR/HUF is gradually approaching 368, a level where we expect new sellers to emerge."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• US index futures trend mixed as market participants closely track the ongoing Middle East conflict and shifting oil prices.
• Traders widely anticipate a Federal Reserve rate freeze in October before a potential rate hike in December.
• Wall Street prepares for major technology earnings reports, including Amazon, Alphabet, Microsoft, and Intel.

Dow Jones futures gain by 0.32% to trade near 52,560 during European hours on Monday. S&P 500 futures rise 0.14% to trade around 7,670, while Nasdaq 100 futures decline 0.13% to trade near 29,080.

US stock futures deliver mixed results as investors closely monitor ongoing geopolitical tensions in the Middle East. Tensions briefly eased when U.S. President Donald Trump ruled out immediate military action against Iran, stating, “there will not be a strike today,” according to Al Jazeera. However, regional concerns remained high after Yemen's Houthis declared on Sunday that they will continue targeting Saudi Arabia's King Khalid Airport in Riyadh, as reported by Reuters, an announcement that arrived just hours after Saudi officials confirmed that airport flights had resumed despite repeated attacks.

In monetary policy, financial markets anticipate that the Federal Reserve will keep interest rates unchanged at its upcoming October meeting before potentially pursuing another rate hike in December. According to the CME FedWatch Tool, market pricing currently reflects a 90.6% probability of a rate pause at the October 27–28 policy meeting, alongside a 79.7% chance of a rate increase in December.

Meanwhile, Wall Street posted losses for a second consecutive week, weighted down by growing market anxiety over massive artificial intelligence spending and rising oil prices. Looking ahead, corporate attention shifts to the technology sector, where investors are preparing for key earnings reports from industry giants including Amazon, Alphabet, Microsoft, and Intel.

AI earnings test seen rivaling FOMC for market focus

Strategists at Deutsche Bank highlight artificial intelligence as a key market theme this week, arguing that upcoming US tech earnings will offer “an unusually important test of the recent concerns around the sector.” They point out that Alphabet and Microsoft report on Wednesday, with Amazon to follow on Thursday, and caution that the market’s reaction to these results and, in particular, “the latest capex plans could rival Wednesday’s FOMC for top billing.”