Trading Direction Is Determined by the Breakthroughs in Ranges

Summary:

The UK government's fiscal reputation has been tarnished and news that the Chancellor of the Exchequer may not present a medium-term fiscal statement at all makes the GBP more vulnerable. We suspect that the GBP rally and USD correction have gone far enough to possibly recover the 1.1700-1.1800 level from a broader perspective; however, in the short term, it will easily return to 1.1200.

SELL GBPUSD

Close Time

CLOSED

1.12616

Entry Price

1.10230

1.14400

1.26106 -0.00147 -0.11%

238.6

Pips

Profit

1.10230

1.10229

Exit Price

1.12616

Entry Price

1.14400

Fundamentals

The GBP has recently been boosted by a shift in the UK government's plans to reduce taxes (at higher income levels), while the market expects fresh signals from the Fed; this follows the latest data showing signs of wobbly U.S. growth, which will prompt the Fed to slow the pace of tightening to fight high inflation. In this case, the USD will lose strong support, driving the recent recovery of the GBP.

However, we expect the USD to strengthen further in the coming weeks. Under the hawkish policy of the Fed, the USD will continue to rise. Since previous FOMC meetings, the USD as a whole has strengthened; Therefore, if the Fed's policy line is tougher, it seems reasonable that the USD will rise further.

As for the GBP, we believe that the GBPUSD will fall to 1.05 as the market adjusts to the new policy portfolio, and fall below parity if the policy maintains the current course for longer than expected.

As the market ruled out the possibility of an emergency rate hike, the three-month forward exchange rate of the GBP has rebounded to levels near those seen before the "mini" budget was announced. Longer-term indicators still suggest that the GBP's spread over the USD will be much higher than previously expected, and the market has largely reversed this trend.

The forward rate, or spread between the forward currency and the spot currency, is a measure of the relative exchange rate expectations of different currencies. This indicator reflects the cost of holding GBP rather than USD, and vice versa.

Another way to look at this issue is the implied yield, but the implied yield reflects the same message. The GBP's 3-month implied yield is 17 basis points higher than the day before UK Chancellor of the Exchequer Kwarteng's mini-budget announcement and was 98 basis points higher last week.

Nonetheless, in the near term, the rally in the GBP is likely to continue, but its long-term upside potential is likely to be limited until political, economic and fiscal risks become clearer. In the short term, the GBPUSD will recover the 1.1700-1.1800 level, but gains beyond that depend on the overall strength of the USD.

GBPUSD: Trading Direction Is Determined by the Breakthroughs in Ranges_1

Technical Analysis

The GBPUSD is biased to the downside intraday after testing close to the 1.1500 level. With the overbought condition in the 1D timeframe, the bulls, however, will aim for the 61.8% Fibonacci retracement of the 1.2292 to 1.0351 level at 1.1551 if they can rise from the short-term bottom at 1.0351. Further gains will face strong resistance around the 55-day SMA (now at 1.1614) to limit the upside. A sustained break would further test resistance at 1.1700-1.1800.

On the downside, a break below the support of 1.1023 will reverse the uptrend to the downside and target 1.0351.

Overall, the long lower shadows of last week and last month support the outlook for further recovery in the GBPUSD, as it showed strong rejection after hitting record lows; however, fundamental developments are expected to remain a key driver. It is recommended not to go long before the price breaks the key levels.

Trading Recommendations

Trading direction: Short

Entry price: 1.1260

Target price: 1.1023

Stop loss: 1.1440

Deadline: 2022-10-19 20:00:00

Support: 1.1379, 1.1321, 1.1285, 1.1225

Resistance: 1.1500, 1.1550, 1.1590, 1.1738

Risk Warnings and Investment Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading with strategies. Following any strategies or investment methodologies is the potential for loss. The content on the site is being provided by our contributors and analysts for information purposes only. You alone are solely responsible for determining whether any trading assets, or securities, or strategy, or any other product is suitable for you based on your investment objectives and financial situation.

Cautions Should Be Paid to Take Profit as Bulls Pushes for Bearishness

Winkelmann

Summary:

In the short term, the USD fell sharply and adjusted, and the situation in Russia and Ukraine continued to escalate, while the gold price soared sharply. However, the short-term increase was too large, which did not rule out the possibility that bulls take profits at high levels one after another.

SELL XAUUSD

EXP

EXPIRED

1740.00

Entry Price

1700.00

1770.00

2013.88 -0.15 0.00%

Pips

EXPIRED

1700.00

1653.20

Exit Price

1740.00

Entry Price

1770.00

Fundamentals

Recently, the governments of Japan (BOJ), the UK, and other countries have intervened in the bond market one after another, which reflects the dissatisfaction of various countries with the strong USD, and the market has gradually digested the expectation of the Federal Reserve's radical interest rate increase, the USD and U.S. Treasury Securities yields have weakened significantly from their high levels, and the risk of an escalation of the Russian-Ukrainian situation and a global economic recession has intensified. Risk aversion and buying at the lows have given gold the opportunity to rally.

In addition, the U.S. ISM manufacturing PMI in September was significantly lower than expected, falling to 50.9 from the previous value of 52.8, the lowest since May 2020. Among them, the New Orders shrank further, and the sharp slowdown in manufacturing activity triggered worries about the economic recession next year. The scope for the U.S. job market to continue to expand is very small. The continuous increase in interest rates by the Federal Reserve is bound to cause a slowdown in employment. The market also seems to be expecting the Fed to be less hawkish, which helps the gold price to rise further.

However, the prospect of central banks raising interest rates is still the biggest obstacle to gold's rise. In particular, the Fed is very likely to raise interest rates by another 75 basis points in November. Although there are signs of cooling inflation, the potential price pressure is still too high. The Fed still has a lot of work to do. Recent hawkish speeches by Fed officials have also strengthened this point. The upward range of gold prices will be limited.

Technical Analysis

XAUUSD: Cautions Should Be Paid to Take Profit as Bulls Pushes for Bearishness_1

In the 1D timeframe, the XAUUSD's short-term rebound is strong, continuously rising up with almost no obstacles. The indicator RSI still has the tendency to further extend to the overbought zone. Although the overall bearish trend is unchanged, we shouldn't go against the trend in the short term, but wait for a further rebound for the opportunity to go short.

XAUUSD: Cautions Should Be Paid to Take Profit as Bulls Pushes for Bearishness_2

In the 4H timeframe, the strength of the bulls of XAUUSD is strong with obvious bear covering. There is still room for a certain rebound after the short-term slight adjustment. However, the short-term increase is too large, which does not rule out the possibility that the bulls will take profits at the highs one after another. Attention should be paid to the key pressure above 1740, and we can still find opportunities to go short.

It is recommended to go short with small positions near 1740 with a target set near 1700 and a stop loss above 1764.

Trading Recommendations

Trading direction: Short

Entry price: 1740.0

Target price: 1700.0

Stop loss: 1770.0

Support: 1700/1680

Resistance: 1740/1724

Risk Warnings and Investment Disclaimers

Euro Faces Important Resistance, Eyes on 1.00449

Jason

Summary:

Market expectations of a slowdown in Fed rate hikes support the euro's upside in the short term; but only in the short term, and only for the moment, as whether it can be sustained is still to be seen.

BUY EURUSD

Close Time

CLOSED

0.99107

Entry Price

1.00449

0.98424

1.09483 -0.00002 0.00%

68.3

Pips

Loss

0.98424

0.98412

Exit Price

0.99107

Entry Price

1.00449

Fundamentals

The dollar weakened sharply due to market expectations of a looser labor market and rising recession risk forcing the Fed to reconsider its aggressive monetary tightening policy. The euro thus rose nearly 200 points unilaterally with a 1.63% surge at the close. The current market focus is on the economic slowdown and falling interest rates, rather than rising interest rates because of soaring inflation; but only in the short term, and only for the moment, as whether it can be sustained is still to be seen. After all, market expectations of a Fed policy "turn" have repeatedly emerged, only to be defeated by a further acceleration in inflation. It would be a mistake to consider Australia's move (slowing rate hikes by 25 basis points) as a leading indicator for the Fed. The narrative of the Fed's hawkish peaking has been false several times, and for that expectation to be sustained, a substantial decline in inflation needs to be seen. The dollar is currently suffering from divergent market expectations, which has provided upside support to the euro in the short term.

Technical Analysis

In the 4H chart, after yesterday's round of gains, the euro is close to the top of the downward channel, and if it breaks the resistance, a new round of gains will begin. The support below are 0.99107 and 0.98283, the former is the bottom of the 1.00449 - 0.99107 oscillation range in the historical trend, and the latter is the 38.2% Fibonacci Retracement. As for indicators, Stoch, DMI, and Ichimoku all indicate that the euro is currently in a downtrend. Considering the strong market expectations of the Fed slowing down interest rate hikes in recent trading days, it is recommended to try to go long after the euro has fallen. EURUSD: Euro Faces Important Resistance, Eyes on 1.00449_1

EURUSD: Euro Faces Important Resistance, Eyes on 1.00449_1

Trading Recommendations

Trading direction: Long

Entry price: 0.99107

Target price: 1.00449

Stop loss: 0.98424

Support: 0.99107/0.98771/0.98283

Resistance: 1.0000/1.00449/1.00769

Risk Warnings and Investment Disclaimers

Market Repricing Drives Dollar Lower, but Falls Limited

Jason

Summary:

Market expectations are now shifting from previous expectations of rate hikes to anticipations of a looser labor market and rising recession risks forcing the Fed to reconsider its aggressive monetary tightening policy. The dollar is likely to be affected by such expectations in the short term, but the decline will soon lose momentum. Meanwhile, Friday's jobs report could trigger a new round of hawkish repricing.

SELL USDX

Close Time

CLOSED

110.873

Entry Price

109.926

111.400

103.253 +0.001 +0.00%

52.7

Pips

Loss

109.926

111.401

Exit Price

110.873

Entry Price

111.400

Fundamentals

From Monday and Tuesday's trends, it is clear that the market once again "jumped the gun" in front of the Fed, that is, the market expects the Fed will soon adopt a less aggressive rate hike. Factors are multiple, such as ISM data, the divergence of the content of the speeches of Loretta Mester and Lael Brainard highlights the internal division of the Fed, job openings, the risk of economic recession, and so on. To put it simply, it is market expectations of a looser labor market and the rising risk of the recession that force the Fed to reconsider its aggressive monetary tightening policy. This is clearly confirmed by the swaps market, and the market recently revised its terminal rate expectations to a level below 4.50%, after having been over 4.6%.

This is the main reason why the dollar weakened again yesterday.

So, is there enough evidence to suggest a policy turn? Not really.

And leaving aside the fact that the macro situation has not changed at all, Fed officials have been strong in their rhetoric in recent days on the intention to raise interest rates to fight inflation. The PCE, the Fed's favored inflation indicator, also moved higher again after the CPI, again showing the stickiness of inflation. The prospect of a tightening Fed policy still exists. The current situation is similar to that of the CPI in July and the non-farm payrolls in August, where once there are some good "hints", some people will wishfully bet on a narrow path in their favor. The dollar may be affected by such expectations in the short term, but this decline will soon lose momentum, and Friday's jobs report may trigger a new round of hawkish repricing.

Technical Analysis

In the 4H chart, the dollar has fallen below 111.30 and stabilized below this line, temporarily blocked by 61.8% Fibonacci Retracement (110.735). If the price cannot break this line in the short term, it will continue to extend the downtrend; Conversely, the price will probably rise in the short term. The Bull and Bear Index is 109.178, and the dollar will open a new round of decline if it falls below this line. As for the indicators, since the Stoch, DMI, and Ichimoku all show that the dollar is in an upward trend in the short term, it is suggested to go short after the rise. USDX: Market Repricing Drives Dollar Lower, but Falls Limited_1

USDX: Market Repricing Drives Dollar Lower, but Falls Limited_1

Trading Recommendations

Trading direction: Short

Entry price: 110.873

Target price: 109.926

Stop loss: 111.40

Support: 110.309/109.926/109.443

Resistance: 110.735/111.300/111.853

Risk Warnings and Investment Disclaimers

Bulls Rise Again, Beware of Pullbacks after Surging to Highs

Winkelmann

Summary:

The recent announcement that OPEC+ will cut production significantly shocked the market and boosted oil prices to soar. The bulls significantly dominate the market in the short term. However, it is still necessary to beware of the risk of a pullback.

SELL BRENT

Close Time

CLOSED

92.500

Entry Price

85.000

97.500

80.404 +0.375 +0.46%

500.0

Pips

Loss

85.000

97.524

Exit Price

92.500

Entry Price

97.500

Fundamentals

Recently, OPEC+ announced that it would cut production significantly due to the continuously falling international oil prices. The market has also been rumored to have a possible production cut of 2 million barrels per day. With the further escalation of the Russia-Ukraine conflict, more than 0.2 million people joined the Russian armed forces through partial mobilization. Meanwhile, the Nord Stream 2 pipeline is still leaking, and market fears of tight crude oil supplies have risen again. This, coupled with an unexpected drop in API crude inventories of around 1.8 million barrels and the near end of the release of US strategic oil reserves, drove oil prices soaring.

If OPEC+ cuts production significantly as expected and EIA crude oil inventories show further declines, oil prices can spike further. In addition, with the recent decline in market bets on expectations of an aggressive rate hike by the Federal Reserve (Fed), the rapid weakening of the US dollar (USD) has also supported the rally in oil prices.

However, US manufacturing activity tends to weaken, and most central banks around the world are urgently raising interest rates to combat inflation. Monetary tightening even increases the possibility of the global economy falling into recession, and production cuts by OPEC+, thereby boosting oil prices, will exert more downward pressure on the economy. In the long term, fears of falling oil demand will linger, limiting the rise in oil prices.

Technical Analysis

In the daily chart, BRENT has been oscillating to the downside for the past six months and is generally running in a descending channel. Then, the BRENT rallied strongly in the short term after reaching a support level below near 84.5. With the USD pulling back from its highs, the bulls in oil prices dominate the market in the short term.

BRENT: Bulls Rise Again, Beware of Pullbacks after Surging to Highs_2

In the 4-hour chart, BRENT continues to rise in the short term and has risen to the resistance level above near 92.0. However, the overall bearish trend has not yet been reversed. Meanwhile, the indicator RSI approaches the overbought territory. There is still a possibility of a pullback after surging to highs in the short term.

It is recommended to go short when the price rallies to near 92.0 and then stabilizes. The target is set near the support level of 85.0, with a stop-loss set above 96.3.

Trading Recommendations

Trading direction: Short

Entry price: 92.5

Target price: 85.0

Stop loss: 97.5

Support: 85.0/88.0

Resistance: 92.0/96.3

Risk Warnings and Investment Disclaimers

BTCUSDT: Bitcoin Rally Is Weak, with Risk of Breakdown

Thomas

Summary:

The recent sentiment in the cryptocurrency market has been weak, and the rally has been weak. Then, Bitcoin is at risk of breaking down.

SELL BTC-USDT

Close Time

CLOSED

20128.7

Entry Price

15000.0

23000.0

37174.1 +425.2 +1.15%

1062.5

Pips

Profit

15000.0

19066.2

Exit Price

20128.7

Entry Price

23000.0

Fundamentals

Recently, as markets gradually digested expectations of an aggressive rate hike by the Federal Reserve (Fed), coupled with the increased risk of a global recession, the bets for further sharp rate hikes by the Fed were weakened. Then, the US dollar (USD) weakened generally, and risk assets such as US stocks rallied sharply. The rally in cryptocurrencies, however, was slightly unimpressive.

The Fed's dot plot for last month's interest rate resolution expected a terminal rate of 4.6% for the Fed's current round of rate hikes. This means that significant rate hikes will continue for the coming period. The pace of interest rate hikes by other central banks has not slowed down either; then, the cryptocurrencies remain under pressure.

Sentiment in the cryptocurrency market has been weak recently, with less active trading overall. A report by cryptocurrency firm, Coinshares, showed that there was merely a small inflow of $10.3 million into the crypto market last week. This implies that investors are still hesitant and do not have much confidence towards the future.

BTCUSDT: Bitcoin Rally Is Weak, with Risk of Breakdown_1

Technical Analysis

In the 4-hour chart, BTCUSDT has recently oscillated at lows. Despite the rally, the strength and the extent are not strong. The price is located near the resistance level of 20500 at the upper level of the oscillation range at the lows. The indicator RSI has entered the overbought territory in the short term. Then, the BTCUSDT can fall further again or even break down in the future. If the price falls strongly below the 18700 level, it will open further room to the downside. The price can fall towards 15000 in the future.

It is recommended to go short at highs. You can go short when the price rallies to around 20360. The target is set around the support level of 15000, with a stop-loss above 21680.

Trading Recommendations

Trading direction: Short

Entry price: 20360

Target price: 15000

Stop loss: 23000

Support: 18700/18000

Resistance: 21680/20360

Risk Warnings and Investment Disclaimers

Go Long at the Lows in Face of Obvious Pullback Resistance

King Ten

Summary:

The USD witnessed a continuous pullback, but as long as the USD rebounds a little, the USDCNH will have a larger upward trend, which is obviously stronger at 7.04-7.05. At present, the direction of least resistance is still bullish.

BUY USDCNH

Close Time

CLOSED

7.04500

Entry Price

7.10000

7.01500

7.16390 +0.00672 +0.09%

300.0

Pips

Loss

7.01500

7.01478

Exit Price

7.04500

Entry Price

7.10000

Fundamentals

Institute for Supply Management (ISM) released the September data on October 3 (local time). The ISM Manufacturing PMI recorded a low of 50.9 ever since May 2020, which was a big drop from 52.8 in August. The New Orders Index was 47.1, and the Manufacturing Prices Paid Index was 51.7. The data continued to fall, which is also expected. However, the greatest problem in the U.S. is not the weakening of the economy. The key is to see whether inflation can continue to decline, whether this non-farm payroll will continue to turn bad, or whether the dot plot of interest rate hikes is difficult to change.

The USD gained support near 110 and showed signs of stabilization. It is recommended to wait for the non-farm payroll data while going short cautiously. For USDCNH, it should also be treated as a wide-range oscillation, but the direction of less resistance has turned upward for now.

Technical Analysis

On the candlestick chart in the 1D timeframe, the USDCNH uptrend has remained unchanged and retraced over 40% of its high. The day before, the candlestick also fluctuates near the 20-day SMA, testing the support level. Technically, the longer the trend goes, the stronger the support will be. It is recommended to go long at the lows.

USDCNH: Go Long at the Lows in Face of Obvious Pullback Resistance_1

Trading Recommendations

Trading direction: long

Entry point: 7.04500

Target: 7.10000

Stop Loss: 7.01500

Support: 7.02000, 7.00000

Resistance: 7.10000, 7.14000

Risk Warnings and Investment Disclaimers

Eva Chen

Analyst

Master of Economics, 8 years in the financial industry, CFA holder, joined HSBC (Hong Kong) Bank in 2013 after graduating from the University of California, USA in the Investment Research and Markets Department. With years of financial market experience and trading experience, having provided excellent investment advice to many brokerages, entity derivatives importers and clients in Greater China.

Ranking

Articles

835

Win Rate

69.20%

P/L Ratio

0.56

Focus on

WTI, XAUUSD, GBPUSD

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Trading Direction Is Determined by the Breakthroughs in Ranges

Fundamentals

Technical Analysis

Trading Recommendations

Cautions Should Be Paid to Take Profit as Bulls Pushes for Bearishness

Fundamentals

Technical Analysis

Trading Recommendations

Euro Faces Important Resistance, Eyes on 1.00449

Fundamentals

Technical Analysis

Trading Recommendations

Market Repricing Drives Dollar Lower, but Falls Limited

Fundamentals

Technical Analysis

Trading Recommendations

Bulls Rise Again, Beware of Pullbacks after Surging to Highs

Fundamentals

Technical Analysis

Trading Recommendations

BTCUSDT: Bitcoin Rally Is Weak, with Risk of Breakdown

Fundamentals

Technical Analysis

Trading Recommendations

Go Long at the Lows in Face of Obvious Pullback Resistance

Fundamentals

Technical Analysis

Trading Recommendations

Risk Disclosure