Dollar Index: Bond Yields and Energy Risks Keep Dollar Supported
The dollar has benefited from higher U.S. Treasury yields, and, more recently, increasing demand for dollars as other bond markets suffer from elevated inflation concerns. Long-term U.S. Treasury yields recently rose to levels not seen since the early 2000s, as investors were concerned about escalating fiscal deficits, increasing government borrowing and energy price inflation.
The September U.S. employment report will be the key focus for this month. It is expected that the report will show that nonfarm payrolls increased by 90,000 in September from 315,000 in August. The unemployment rate is expected to remain unchanged at 4.1%. Less elevated readings on inflation in August have caused a few Fed officials to suggest a more data dependent approach and additional time to make a final decision on interest rate policy in October.
EUR: Inflation Returns as French Fiscal Stress Adds Pressure
Rising political risk in the EU and heightened inflation pose challenges to the euro. The ECB is firmly focused on containing inflation. It looks increasingly likely that the ECB could be forced to act further. Rising inflationary pressures will probably push the ECB to take more aggressive action. Yet, the ECB’s Governing Council remains unconvinced that there is a significant increase in underlying pressures. Regarding price and wage pressures, many officials believe that there is not enough evidence to support that they will persist.
French-German yield spreads have increased this month. Concerns over France’s finances are increasing, including high levels of public debt and political risk.
GBP: BoE Debate Intensifies as Fiscal Concerns Build
Strikes have disrupted the energy supply in Britain. The strike is expected to cause significant disruption to British production and further elevate inflation. Longer-term expectations are for inflation to return to target, and the Bank of England remains focused on controlling it. BoE officials have stated there will be a good case to increase interest rates.
Others have stated they are happy to wait and see if there is further evidence of second-round effects. A fiscal risk premium has increased in the UK as there is increased uncertainty ahead of the October 28 budget.
GBP/USD Price Forecast
Every new GBP/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all GBP/USD forecastsU.S. Dollar Index Technical Analysis: DXY Holds 101.76 as 101.94 Becomes the First Recovery Test
U.S. Dollar Index is currently trading at 101.87 level on 1 hour chart after pulling back from 102.22 area. Recent pullback from the highs has not broken the bullish structure. Price has been trading above both moving averages and the rising trendline. Currently, DXY is in a good position to take out the fibonacci levels and resume the uptrend.
101.94 levels is the first resistance and a break above 101.94 would target 102.22 and then 102.46 and 102.70. 101.76 would be the first support and levels below that would come in at 101.63 and 101.49.
RSI (14) has moved to the 50 line indicating the trend has stalled and not reversed. I am currently bullish on DXY as long as it holds above 101.76 and the rising trendline. A break below 101.49 would put a bearish bias on DXY. A break above 101.94 would strongly hint a move toward 102.22.
GBP/USD Technical Analysis: Sterling Bounces From 1.3180 as 1.3250 Remains the Key Recovery Test
The GBP/USD pair trades at 1.3212 on the 2-hour chart after bouncing from 1.3180. The bounce is not unexpected, but the important point to keep in mind here is that prices are still below both the moving averages as well as the descending trend line, and below them as well, which means the overall trend remains bearish.
1.3250 is the next level of resistance to consider. A break above that would bring 1.3294 and 1.3339 into play. Below the 1.3180 support level, the 1.3147 and 1.3116 levels are more important if sellers take control.
RSI is currently 30, and as long as it remains below 50, I will remain bearish on the pair. My bias will also change if the pair breaks 1.3294 to the upside. Alternatively, a breakdown 1.3180 would target the 1.3147 to 1.3116 area.
EUR/USD Technical Analysis: Euro Rebounds Above 1.1254 as 1.1278 Becomes the First Recovery Hurdle
The EUR/USD pair is trading at 1.1260 on the 2-hour chart as it rebounds from the latest decline. I see price trading below both moving averages, and still within a longer-term bearish move. The bounce, however, is improving momentum in the near-term, and I am looking for the first Fibonacci level at 1.1278 to be tested.
The next resistance would be at 1.1298, with 1.1317 above that. The support would be at 1.1254, and then 1.1215 and 1.1189.
RSI is moving up from the oversold area, but is still below the center line. This means the bullish momentum is not confirming a trend reversal, and I would expect price to continue falling, while staying below 1.1278 and 1.1298. I would see a break above 1.1317 as bullish and a break below 1.1254 as more bears coming in toward 1.1215.
