U.S. Dollar Moves Higher As Consumer Sentiment Exceeds Expectations

Key Insights

• The final reading of the Michigan Consumer Sentiment report provided additional support to the U.S. dollar. 
• Germany’s inflation hit new highs. 
• The Bank of Japan left the interest rate unchanged.

U.S. Dollar Gains Some Ground Ahead Of The Weekend

U.S. Dollar Index continues its attempts to settle above the 50 EMA at 110.65 while Treasury yields are trying to rebound after the recent pullback.

Today, foreign exchange market traders had a chance to take a look at Personal Income and Personal Spending reports, which exceeded analyst expectations. Personal Income increased by 0.4% month-over-month in September, while Personal Spending improved by 0.6%.

The final reading of the Michigan Consumer Sentiment report indicated that Consumer Sentiment improved from 58.6 in September to 59.9 in October, compared to analyst consensus of 59.8. The report provided additional support to the American currency.

Pending Home Sales declined by 10.2% month-over-month in September, while analysts expected that they would decrease by 5%. High interest rates are bad for the the housing market, which will likely stay under pressure in the remaining months of the year.

EUR/USD Tests Support At 0.9950

EUR/USD settled below the 1.0000 level and is trying to settle below the support at 0.9950. Germany’s inflation reports indicated that Inflation Rate increased from 10.0% in September to 10.4% in October, compared to analyst consensus of 10%. Prices continue to rise in Europe’s leading economy due to the severe energy crisis.

In case EUR/USD manages to settle below 0.9950, it will move towards the next support level at the 50 EMA at 0.9920. A successful test of the support at the 50 EMA will push EUR/USD towards the next support level near the 20 EMA at 0.9880.

On the upside, EUR/USD needs to settle back above 0.9975 to have a chance to gain upside momentum in the near term. The next resistance level is located at 1.0000. If EUR/USD climbs above this level, it will head towards the next resistance at 1.0025.

GBP/USD Is Mostly Flat After Recent Volatility

GBP/USD is currently trying to stabilize near 1.1550. The British pound has recently enjoyed strong support as traders hoped that Rishi Sunak would improve the situation in the economy.

It looks that the initial boost has come to an end, and traders will wait for the first big moves of the new Prime Minister.

AUD/USD Retreats As Commodity Markets Pull Back

AUD/USD pulled back towards the 0.6400 level amid a broad pullback in commodity markets.

Meanwhile, NZD/USD made an attempt to settle below the 0.5800 level, while USD/CAD rebounded above 1.3600.

USD/JPY Rebounds As The BoJ Stays Dovish

USD/JPY rebounded towards 147.50 after the BoJ left the interest rate unchanged at -0.1%. The bank’s commentary was also dovish, which was bearish for the yen.

Fundamentally, the yen should remain weak due to the huge difference between interest rates in the U.S. and Japan. The key question is whether the BoJ is ready to intervene again if USD/JPY moves closer to the 150 level.

For a look at all of today’s economic events, check out our economic calendar.