This week is fully-loaded with event risk but the U.S. dollar lacked follow through after the recent flow to safe haven currencies amid the Middle East escalations.
On Wednesday market participants widely expect the Federal Reserve to hold rates but traders hope to get some insight on the rates outlook from Chair Jerome Powell’s press conference. There is no new dot plot, so the only spark of volatility could come from Powell’s comments with a surprise hawkishness.
On Thursday, the Bank of England is also expected to keep rates on hold as policy makers try to help boost the ailing economy while at the same fighting inflation. Investors see the BoE as being the least aggressive next year when it comes to projected rate cuts even as the economy flirts with a recession. Therefore, anything in the Bank’s forecasts that supports the higher for longer case might offer the pound some support.
Last but not least, we have the latest U.S. Jobs Report released on Friday. October job figures are predicted to come in a lot lower than the strong 336k September print. A stronger report would add fuel to the rally in yields and thus boost the greenback.
Technically, we prepare for upcoming breakouts given the lingering uncertainties in the Middle East.
EUR/USD: Below 1.0530, the euro could test the 1.05-support again on its hold but if 1.0440 breaks again, we could see a free-fall towards 1.02. On the upside, we expect the 1.07-region to serve as a resistance.
GBP/USD: We will now wait for price breaks either below 1.2070 or above 1.2260. A next lower target will be at 1.18 whereas on the upside the next target would be 1.24.
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