The US dollar remained above a one-week low against major currencies on Friday, taking a break after its highest drop in almost a month overnight, as questions remained about the future of battered property giant China Evergrande Group.
The safe-haven US dollar got hurt after Beijing stimulated the economy with new cash into the financial system on Thursday, when Evergrande declared it would make interest payments on an onshore bond.
The Japanese yen dropped to its weakest since mid-August as Treasury yields pressed to the highest since the start of July.
The hawkish comments from the Bank of England (BOE) last Thursday pushed up yields globally, a day after the US Federal Reserve said it could begin lowering its monthly bond purchases by as soon as November, and that interest rates could rise faster than expected by next year.
The fight to succeed Angela Merkel as German chancellor remains wide open ahead of a national election on Sunday, according to the latest polls. Poll predictions on Saturday point to the center-left Social Democrats (SPD) holding a small but narrowing lead over Merkel’s party, the center-right Christian Democratic Union (CDU).
A heavy economic data schedule next week with the most important for investors will be:
On Thursday, both the US and UK issue new estimates of second quarter GDP, and on Friday the Canadian GDP will be released.
Friday, the global Manufacturing PMI data for September will present a first look at the production situation as global Covid-19 cases eased into the month. The eurozone releases September inflation data ahead of August US core PCE data on Friday. Also, on Friday Chinese banks will be closed in observance of National Day.
Additionally, various Fed officials are expected to speak on Friday, including Chair Jerome Powell, who gives the opening remarks at a Fed Listens event.
Major Currencies Performance and Signals
EUR/USD
This weekend German Federal Election will possibly dictate Euro trading at the start of the week ahead. Though, a stable coalition could take months to build and that means only a limited reaction can be expected in EURUSD and the Euro crosses. We remain bearish.
FORECAST: SELL
Resistance: 1.1750, 1.1800, 1.1850,
Support: 1.1700, 1.1650, 1.1600,
GBP/USD
The GBPUSD pair is in consolidation mode at the trend extremes- risk for deeper correction below monthly open. We remain bearish.
FORECAST: SELL
Resistance: 1.3700,1.3750, 1.3800
Support: 1.3650, 1.3600, 1.3550
AUD/USD
Chinese intentions on steel production drive iron ore prices but also AUD/USD. Energy commodities are facing supply chain issues as prices squeeze higher and the RBA minutes and FOMC are ahead, can Australian bond yields rise to turn AUD? We remain bearish.
FORECAST: SELL
Resistance: 0.7300, 0.7350, 0.7400,
Support: 0.7250, 0.7200, 0.7150
USD/JPY
The USDJPY pair has now broken higher after the Fed’s more hawkish shift this week. We remain bullish for this week.
FORECAST: BUY
Resistance: 111.00, 111.50, 112.00
Support: 110.50, 110.00, 109.50
USD/CAD
The USDCAD fell to critical support as the sentiment remained mixed. Rising oil prices may further support a stronger Canadian Dollar. The USDCAD pair eyes key levels with breakout potential in either direction. We remain Neutral this week.
FORECAST: NEUTRAL
Resistance: 1.2700, 1.2750, 1.2800
Support: 1.2650, 1.2600, 1.2550
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